The rationale for the adoption of Islamic banking in Muslim-minority jurisdictions
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What differentiates Islamic banking from conventional banking is not simply the absence of interest payments. The fact that Islamic finance is interest-free does not mean that capital is costless. Unlike in the conventional system where the interest rate determines the cost of borrowed capital, which is pre-determined, the returns on funds provided by Islamic banks are not pre-determined as that would depend on the final outcomes. That said, one must hasten to add that there is much more to Islamic banking than the elimination of interest (riba) which is prohibited in Islam. Real sector connectivity and risk sharing principle represent the two important hallmarks of Islamic finance.
Islamic finance , Islamic banking , Economic growth
Abdul Kareem, M. A. (2020). The rationale for the adoption of Islamic banking in Muslim-minority jurisdictions. IF Hub, 3 (September 2020), 47-53.
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