Islamic finance, which is mainly an asset-based structure of financing in compliance with Shari’a principles, has rarely been so frequently on the agenda of the world financial system thanks to the current financial crisis. Investors looking to move from a speculative and profit-based financial system to a much more risk sharing and control-driven system can look to Islamic finance as a safe haven. However, the integration of Shari’a principles (or at least a tentative to do so) into the financial system gives rises to problems that are multi-dimensional in terms of their political, economics and social aspects.
From a regulatory perspective, most of the time it results in trying to fit a square peg into a round hole and both regulators as well as institutions face a difficult job. Interim solutions using Islamic finance instruments may create a sort of walking dead full of band aids who will collapse if someone pokes too hard.
While the world is becoming more integrated with all its crises, problems and merits, nothing can be outside the scope of global integration in terms of financial markets. Compared to previous decades, financial system conversion is much more comprehensive regarding developments in information technologies and transportation. However, no income is earned without a cost. Inherited risks of the financial system do not disappear, but evolve. Money laundering is just one important aspect of the current global financial system, which affects Islamic financial business.
Islamic finance institutions are very young compared to their conventional equivalents; however their products have come a long way in a short period of time. Idiosyncratic issues of Islamic finance may also result in the profitability and coverage of niche markets. United Arab Emirates (UAE) is one of the leading Islamic finance bases throughout the world, thanks to its proximity to various international finance markets as well as having a top-rated financial center, Dubai International Financial Center (DIFC).