Islamic Finance

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This is a multi-article supplemental news section coinciding with The World Islamic Banking Conference, discussing the conference, Bahrain as a global Islamic economic center, challenges facing the industry, and economic justice.

In response to the Islamic Development Bank's (IDB) strong capitalization, high liquidity, protection against credit risk, etc, Fitch has upgraded its long-term rating from A+ to AA-, and for the first time ever has assigned it a short-term rating of F1+. Fitch has identified some issues that the IDB needs to work on. There is a conflict between profitability and the bank's mission to build up sufficient reserves for development. A criticism of the IDB is that, being very liquid, it may be too conservative and not taking enough risks?

The Bank of England is expected to respond to rising house prices by raising short-term interest rates, which will have devastating consequences for borrowers. An alternative way to this is by increasing compulsory bank reserve ratios. The introduction of genuine Islamic financing would reduce inflation and the indebtedness of individuals in the economy. The current crop of Islamic home mortgages function in much the same way as mortgages in interest-based banking.

Rapid development in Islamic finance is coming at a time of limited knowledge of most of the world's population about it. This results in the harsh positions adopted by the government and regulators. The author discusses the traditional crét-bail structure in France, and how it can be adapted to make it shari`a compliant.

While it is acknowledged that Islamic banking services have been rapidly growing and are expected to grow even faster in the future, there are many difficulties in calculating the progress of Islamic banks. This is due to the small number of banks in this sector, the lack of uniform accounting standards, lack of availability of particular market data, and lack of transparency in financial information.

After the USA and UK, Germany is poised to be the next big market for Islamic banking. The likeliest first step, in light of the regulatory framework, is starting with a leasing entity. These, however, have limited opportunities available to refinance, which is the most crucial step in starting Islamic finance activities.

The JAK bank tries to create an interest-free society, and helps members free themselves from their interest-based loans. The branches disseminate information about the dangers of interest and the alternative banking system they envision. The authors describes the functioning and performance of the bank.

The author traces the origins and development of Islamic banking, the history of which he proposes can be divided into two parts; first when it existed as a theory, and second, when it developed into a reality. The current practices and deficiencies of interest-free banks are discussed, and the questions of financing and legislation elaborated upon. The difficulties of Islamic banks operating in non-