7Days has an article on how Islamic finance is becoming part of the mainstream, rather than a niche market.
The Islamic financial sector has been growing strongly over the past few years, and is slowly gaining recognition in international financial circles. More than 20 years ago, when Shariah-compliant instruments were still being defined, a range of less than honest ventures in Egypt almost ended the concept. The shady dealings of el-Rayyan, el-Sherif and el-Hoda saw in the former case the loss of some $1.43 billion overnight in a ‘Shariah-compliant’ institution that was little more than a pyramid scheme.
The industry has learned from its mistakes well. With the Islamic ban on ‘riba’, i.e., usury or interest-based earnings, Shariah-compliant finance seeks to incorporate the concept of risk with earnings made through profits. A variety of products, such as musharaka and ijara, have launched themselves on the market using an asset as securitisation, most commonly in the form of real estate ‘mortgages’.
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