Is Islamic Banking in the United Kingdom Really Islamic - Research Paper Example

Future research is recommended to lend further validity to the results.Islamic banking, commonly known as interest-free banking, has to become a growing force in financial circles globally over the past three decades. Islamic banking is not only widespread in Muslim countries but is also found in Non-Muslim countries. In 2008, it was estimated that the world’s Islamic assets were almost $700 billion with a growth rate of 15% per annum (Khan 2010). At present, this fastest growing financial sector all over the world is widespread but the question arises as to what extent Islamic Banking practises the Shariah law (Islamic rulings) as prescribed by the Quran?

Moreover, it is worth asking how they differ from conventional banks. After the introduction of the Islamic banking three decades ago, a preliminary investigation shows that there remain substantial deviation between the ideas and practises of Islamic banking. Therefore, Islamic banks are facing criticism on not being totally “Islamic”, i.e. they are slightly deviating from the Islamic financing principles. Khan (1994, p.80) stated that Islamic banks in operation have failed to devise a mechanism that could finance government debts and consumer loans without interest.

Also, most banks fear the higher potential risks involved in profit sharing so they persistently acquire those financing techniques that assure them a definite return. This has given rise to an on-going debate concerning the issue that Islamic banks have not eradicated interest rather “changed the nomenclature of their transactions”.Islamic banking has continuously expanded and widely accepted all over the world, particularly in the United Kingdom (Kahf and Ahamd 1998; Khan and Bhatti 2008).

Islamic banking has not been undervalued and considered as a short-term phenomenon; rather, its considerable development implies its long-term application and progress as an extremely fast-growing industry.