Islamic Banking Trends - the Future of Arab Banking
Since the early 1970’s, Islamic Banking practices have been gaining popularity and showing steady growth at an astounding rate of 10-15% annually in recent years, despite the world-wide economic downturn. Islamic banks base all their rules and regulations on the Sharia law of Fiqh al-Muamalat (rules of transactions).
Islamic banks are now located in over 51 countries around the world, including the United States, and there are over 300 institutions that qualify as Islamic Banking institutions. Islamic finance and investing institutions are the largest growing sector in this industry, growing at 25 % in the year 2010.
Acting in Accordance with Sharia Law in a New Age of Islamic Banking
One of the most distinguishing practices in Islamic banking is the lending of money interest-free. Sharia law prevents the charging of interest on lent money. To comply with these laws, Islamic bankers have designed many different programs that allow for the lending of money, making of bank profits and compliance with Sharia law.
Some Islamic banks found in Asia, most notably Bangladesh, participate in micro-lending programs, but some banking regulators find that this practice is not in accordance with Sharia law.
Push for Common Regulations in Arab Banking
Currently there are no rules regulating Islamic banking. While many organizations have been formed, such as the Union of Arab Banks, MENASA and the World Islamic Banking Conference, to address regulation issues, there are no set rules and regulations in place.
At a recent meeting of MENASA (Middle East North Africa South Asia) bankers a call was put forward to enact common banking regulations that will encompass all Islamic banking practices. It was stated that implementing a standardized form of processes, supervision and regulations among all Arab banks will allow for superior economic growth. It was also stated that the current economic crisis that the world is facing is even a stronger reason for these concessions.
As world banks implement more stringent regulations on banking practices and investments the Arab banking system may suffer due to its inability to be compatible amongst itself was the theme to this latest conference. Leaders agreed, but have yet to implement any industry wide changes to the system.
At this latest gathering of bankers it was stated that a failure to become a system that works well together will cause hardship in the Arab region. Economic development, infrastructure and all facets of industry could be directly affected by the inability of banks to all comply to one set of regulations.
The World Islamic Banking Conference held in Asia at the beginning of June 2010 had similar opinions voiced during their seminars. This is the first time the World Islamic Banking Conference held a conference in Asia. The WIBC holds its regular conference in Bahrain in November of each year, and has done so for the past 17 consecutive years.
The recent Union of Arab Banks conference had similar debate at their recent conference. The Union, a leader in information regarding Islamic banking practices encourages the development of a single set of laws for Islamic banking practices to ensure that Sharia law is obeyed.
The Fast Paced Future of Islamic Banking
With Islamic banking and investing growing at such an expediential rate is easy to understand why one set of regulations is necessary. It is estimated that nearly 200 billion dollars a day transact through Islamic banking, a considerable amount for such a new industry.
With an estimated 2 billion Muslims world wide it is easy to see that there is a huge potential for growth in this industry. A single set of regulations guiding this industry is a surefire way to ensure the continued growth of the industry as well as stability in the regions they serve.