Latest reports on global financial trends show that Islamic banking has emerged as an efficient tool for curbing poverty and sustainable development.
Islamic finance relies on four pillars: institutional framework and public policy oriented to the objectives of sustainable development; prudent governance and accountable leadership; promotion of the economy and entrepreneurship based on risk sharing; and financial and social inclusion, promoting development, growth, and shared prosperity.
The joint report by the World Bank and Islamic Development Bank underscores its shared prosperity aspect and contribution to building ethical values.
The Islamic banking sector has seen huge growth in the last two decades, accumulating nearly USD 1.9 trillion in assets and spreading across 50 Muslim majority and non-Muslim countries around the world, a Global Report on Islamic Finance 2016 shows.
Moreover, this number is expected to increase to USD 3.4 trillion by 2020. In Pakistan in the last 5 years, there has been a growth of 20 percent in the size of Islamic banking. The country is the ninth largest market in Islamic banking and finance. Other core markets of Islamic finance are in the Middle East and Southeast Asia.
Islamic finance has already been mainstreamed within the global financial system – and it has the potential to help address the challenges of ending extreme poverty and boosting shared prosperity.
However, there are a few challenges and opportunities that need addressing, such as the asset quality of Islamic banks, the issues of effective liquidity, dearth of Sharia compliant products, variety of interpretations and regulations of Sharia, research on systems of regulation and governance, and ethical conduct of bankers, regulators and Sharia scholars.
Read more at Huffington Post.