MANAMA - As concerns are growing on a deepening debt crisis in the West, Islamic banking is increasingly becoming a safer and more stable alternative to conventional finance.
"When I look at the damage that an interest-based system has done to the US and Europe, I can see why God forbids riba (interest) in Islam," Mariam Khan, from Chicago, told Reuters.
The 36-year-old has never considered using Islamic banking until her husband moved the family to Dubai in 2007.
As the deepening debt crisis hit many in the West, her husband opened a family account with HSBC Amanah, the Islamic arm of international bank HSBC, believing that Islamic banking is safer and more stable than conventional finance.
"I'm not particularly conservative as a Muslim but I definitely feel safer within Islamic banking," said Khan.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Transactions by Islamic banks must be backed by real assets, not shady repackaged subprime mortgages.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Bahrain's central bank governor Rasheed Mohammed al-Maraj said last week that Islamic finance had an opportunity to attract customers from around the world due to the turmoil in mainstream capital markets.
"It should provide the industry with a sustained period of growth for the next decade," he said.
Ashar Nazim, Islamic financial services leader at consultants Ernst & Young, said the Occupy Wall Street movement in the United States showed mounting public anger about inequality in the capitalist system.
This could help Islamic institutions gain market share by emphasizing Islam's preference for an equitable distribution of wealth and dislike of excessive financial leverage, he said.
It is still unclear, however, how much of the recent growth of Islamic finance is due to its merits -- and how much is simply due to a temporary flight from conventional finance which could reverse when global markets eventually stabilize.
Islamic banking is one of the fastest growing financial sectors in the world.
The system is being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.
Reproduced with permission from OnIslam.net