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.
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