Forward: the impact of Islamic banking on world financial and commercial relations

The recent popularity of Islamic banking has prompted many to wonder how Islamic banks relate to other banks, how they could cooperate with Western banks, and how they should be regulated. Some believe that Islamic finance is incompatible with banking elsewhere due to the inordinate amount of risk depositors bear in an Islamic bank and other differences that would hamper the regulation of such banks. Though Islamic finance pervaded the Islamic communities of North Africa and South Asia for centuries, those societies gradually adopted Western-style banking with the rise of Western political influence in those regions. As disillusionment with interest-based banking grew, Muslim countries witnessed a resurgence in Islamic banking. Since central banks are finding it difficult to regulate these banks, nascent Islamic financial institutions are encountering a precarious situation. With the rising acceptance of Islamic banking, the regulatory problem is an urgent one.