Islamic Finance for Sustainable Development: Its Historical Background and Potentialities in the Modern World

This paper aims to explore the potentialities of Islamic finance for sustainable development of the modern economy and the Islamic world. Recent studies and articles on Islamic finance frequently mention the impact of the current world financial crisis on Islamic finance, and conclude that Islamic finance holds comparative advantage in terms of robustness and stability against such a crisis over conventional finance and will be one of the better solutions improve the current situation of the world economy and the Islamic world. However, detailed theoretical examinations based on the economic and historical analysis have not been appropriately conducted. Therefore, this paper primarily examines the distinctive feature of Islamic finance over conventional finance by analyzing the structure of Islamic financial products which are legitimized by Sharia scholars. In the paper, it can be said that the distinctive feature of Islamic finance is described as the “embedded” system of the monetar