Loans in the Islamic Banking System - Research Paper Example

Download file to see previous pages The rapid growth of these institutions in the global market has proved another fact: firms that are not based on common corporate and social ethics may be more well protected in case of strong market pressures – a fact that was made clear after the appearance of recession in 2008 which revealed the weakness of Western financial institutions to handle the crisis as effectively as their rivals based on the principles of the Islamic finance. The current paper focuses on a particular activity of Islamic banks: the provision of loans. In current market conditions, the financing of firms and individuals is particularly crucial for ensuring the stabilization of local economies. The examination of the forms and the terms of financing provided by the Islamic banks have proved that the ability of these institutions to respond to the relevant market needs is higher compared to the Conventional (Western) banks. This differentiation verifies the level of growth of Islamic banks since their entrance in the global market; it can be also used in order to verify that alternative solutions are available in regard to the financing needs in markets worldwide.
The development of Islamic banking in the international market has been primarily related to the need for supporting the local needs of individuals and firms that were interested in keeping their funds under the control of the Sharia law – on which Islamic banking is based. However, through the years, it was made clear that Islamic banking could be expanded in order to meet the demands of individuals and firms that had related their activities to the Western Financial institutions. The position of Islamic banks in markets worldwide indicates the above phenomenon. In accordance with Khan (2010) the actual financial status of Islamic banks worldwide is quite impressive; more specifically, the above researcher notes that  ‘Islamic Banks hold well over the US $700 billion in assets and are growing at over 15% p.a.’ (Khan 2010, 805).   ...Download file to see next pagesRead More