Business/Finance (islamic Finance) - Research Proposal Example

This sheer increase in the number of banks and their market capitalisation is a point of concern for financial analysts and public in general. Is it a short lived tale, is it here to stay, what could be the determinants of such high growth, will this growth continue, and what could be some of the challenges it will face in years to come. These are all questions that arise in any mind that sees a growth of such magnitude and intensity, in such short period of time. Islamic finance is not an entirely new field.

Its roots go back to 1400 A.D. when it was first introduced by the prophet of Islam as a mandatory mode of financial activities in contrast to then prevalent interest based system. The first Islamic bank, however, was established in 1963 in Egypt. The recent boom of Islamic finance has been attributed to three different reasons by Mohammed El Qorchi (2005). These include 'the strong demand from a large number of immigrant and nonimmigrant Muslims for Sharia-compliant financial services and transactions, growing oil wealth with demand for suitable investments soaring in the Gulf region, and competitiveness of many of the products, attracting Muslim and non-Muslim investors'.

Today, there are many products that Islamic financial institutions offer. . Similar comments are made by Fletcher (2005) through his analysis after conducting a series of interviews with renowned bankers. Islamic Financial Services Board (IFSB) develops the banking policies, codes and rules for Islamic banking operations (IFSB.org, 2007).Although it enjoys an old start, yet Islamic finance remains a relatively new field in contemporary financial markets; and as such, faces critical challenges towards sustaining the high growth rate.

A broad level overview was undertaken by an anonymous reporter at Khaleej Times (2005) in which the reporter tries to explain the nature and types of challenges that Islamic financial institutions face today. These include shortage of experts, absence of accounting and auditing standards, lack of uniform standards for credit analysis, lack of appropriate instrument and others. The above analysis provides silos of information and current analysis about the reasons for this huge leap by Islamic banks and financial institutions, and the problems these face in modern day world.

However, there is little evidence of a proper in-depth analysis or research on this very important topic. Hence, the research question for the proposed research is:'The reasons and challenges faced by recent growth of Islamic finance'As it is evident, the growth of Islamic finance in recent years is mainly due to the perceptions, beliefs, objectives and actions of people towards embracing this relatively new form of financial system, and contributing to its popularity. This has been the source of continuous development and growth for Islamic finance in modern times.

Hence, the most suitable research method to collect data and perform analysis will be 'survey(s)'. As