Global Impact of Islamic Financial Systems in the Arab World
22 Pages Posted: 4 Jul 2013
Date Written: June 30, 2013
This paper aims to highlight the global financial systems in the Arab world specifically on the Islamic finance systems; principles and prohibitions; traditions and practices; and challenges and opportunities in the Arab world. It is globally known that Islamic Finance was embraced by the Muslims in the Arab world for the purpose of lending money as their start-up capital and other personal interest. The general concept of Islamic Finance according to Shariah prohibits the fixed or acceptance of specific interest or fees which is called Riba or usury. This is contrary to the Islamic principles of the Muslims called Haraam or forbidden. This ideology was used by the Islamic banking institutions, financial institutions, and non-profit organizations within the Muslim community. It is presumed that in Islam religion forbids lending out money with an interest rate. In the Islamic rules on transactions (Fiqh al-Muamalat) was created to avoid problems. Therefore, to avoid the prohibition are simply by sharing of profit and loss (Mudharabah), safekeeping (Wadiah), a joint venture (Musharakah), cost plus (Murabahah), and leasing (ljar). In the context of Islamic Financial Systems in the Arab countries is based on the elements of Shariah Law. This means that Shariah Law originates from the teachings of the Qur’ān (sacred text of Islam) by Prophet Muhammad. The Islamic finance is based on Shariah which is often translated to Islamic law. According to Silva (2006) interpreted that Shariah provides guidelines for aspects of Muslim life, including religion, politics, economics, banking, business, and legal philosophy. Hence, this study is based on published research papers but does not include empirical investigation.
Keywords: Islamic Financial Systems, Islamic Finance, Shariah Law, Islam
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