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The Islamic Financial System

A Critical Analysis and Suggestions for Improving its Efficiency

Series:

Sami Tamer

This study deals with the Islamic financial system and investigates the financial instruments utilized in it. Apart from the problems related to the prohibition of interest, the suggested concept for the Islamic financial system could not be applied in practice. Profit and Loss-Sharing instruments have been utilized on a small scale so far and it would be very difficult to increase the attractiveness of these financial instruments without easing Islamic legal restrictions or at least reconsidering relevant issues from both, the Islamic socio-economic and ethical viewpoint, as well as the position of conventional finance. An improvement of efficiency may not be possible without taking a fresh look at Islamic injunctions while considering at the same time contemporary financial realities and needs such as investment opportunities, risk diversification and regulatory issues.
Contents: Analysis of the prohibition of interest in Islam – Application of the Shari’ah in Islamic finance – Analysis of Islamic financial instruments – Analysis of marketable securities and trading techniques in Islamic finance – Suggestions for improving the efficiency of the Islamic financial system – Restructuring the Islamic financial system.