Its rapid evolution is particularly evident in four dimensions of its development. First, today Islamic Banking is viewed as a competitive form of financial intermediation, drawing significant participation by non-Muslims. The total assets of the Islamic financial system have surpassed $1 trillion, a five-fold increase over their magnitude just five years ago. Islamic Banking is now among the fastest growing financial segments in the world, with an estimated annual growth of 20 percent. (Iqbal, 2009)
Second, with the emergence of more diverse Islamic Banking institutions and the development of Islamic Banking markets, the scope of Islamic Banking business has been expanded to include private equity, project Banking, the origination and issuance of sukuk (bonds), and fund, asset, and wealth management activities. (Khan, 2008)
The third dimension in which there has been significant evolution is in the regulatory and legal framework of Islamic Banking, which is shaped by the distinct features of Islamic Banking transactions. This has ensured that the growth and development of Islamic Banking is accompanied by the corresponding development of this framework.
Fourth, the international dimension of Islamic Banking has rapidly gained significance as it evolves to become an increasingly important part of the international financial system and as it becomes poised to contribute to greater global financial integration. The expansion of the network of links among intermediaries and markets in various regions will contribute towards a more efficient allocation of financial resources across borders and thus contribute to enhancing global growth prospects.
The consequence of the crisis could be that as Gulf sovereign funds become more important, Islamic banking could play an increasing role in global Banking, its expansion relatively unaffected by the financial crisis. (Khan, 2008)This, of course, does not mean that Shariah compliant Banking can suddenly present itself as a comprehensive alternative to capitalism. Instead, the current shift in perspective in the west ought to be viewed as an opportunity for Islamic financial institutions to have joint investments with governments and other Banking sources, including multilaterals, in funding the public works program to help generate economic activity.
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