Islamic Banking and finance Essay Example | Topics and Well Written Essays - 4500 words

Islamic Banking and finance - Essay Example t, lack of technological support and sophistication for dealing with long drawn projects and existence of information asymmetry in relation to unique products offered by Islamic banks (Abduh and Omah, 2012). The paper is aimed at a detailed discussion of Islamic Banking development and foundations that lay the basis for their banking system. The paper attempts to understand critical aspects of the Islamic banking system and one of its critical schemes of profit and loss sharing mechanism within their lending process. Through an understanding of the PLS structure, the paper comprehends reasons for its unpopularity and reduced acceptance over other modes of finance, despite its evident advantages. The identification of problems also brings forth solution to problems associated with PLS finance. The paper makes recommendations to improve and revive the PLS finance based on such comprehensive analysis. With independence of Muslim community, it has been increasingly felt that modern financial institutions need to come into the Islamic Banking system and run in compliance with the Islamic sensitivity. The first degree of concrete steps towards combining modern day finance with Islam was seen in Egypt through Mit Ghamur project of savings in 1963 (Al-Alwani and El-Ansary, 1998). This project refrained from calling themselves to be Islamic in nature, yet there was an inherent culture of providing financial intermediation, as per teachings of the Islamic community. Dubai Islamic Bank was the first of its kind in commercial modern Islamic Banking and was founded in 1975 (Thomas, 2006). Out of a total of 176 Islamic banks as of 2006 that have been registered with Bankscope, 70% have been reported to be concentrated in Middle East. The remaining is split between South East Asia with 17% and Sub-Saharan Africa with 15% (Al-Hejailan, 2000). The report by Alvi (2010) also states that develop ment of organizational structures towards more sophisticated financial instruments like,