Sharia Banking

Modern Economies and Sharia

Growing at an estimated 15 percent annually, Islamic banking and finance is a worldwide industry that modifies modern business practices to conform to the rules of sharia. Central to this field is riba, the charging or payment of interest, banned under Islamic law. Clever twists on standard financial products like credit cards, savings accounts, mortgages, loans, and even trust funds bypass the interest business model. A 2008 report by the General Council for Islamic Banks and Financial Institutions estimates the Islamic banking industry to stand at $442 billion. Even big name banks such as Citigroup, HSBC, and Deutsche Bank are developing Islamic banking sectors to cater to the demand. The industry is small in comparison to the global market, but may grow as some non-Muslims areturning to sharia-compliant services. Some of the ethically minded are also switching over to sharia-compliant investments. Businesses are required to avoid transactions related to forbidden things, such as weapons, alcohol, tobacco, gambling, pornography and pork, and investors are guaranteed that their money won't end up financing those industries. Governments are also looking to get a piece of the pie: Malaysia is the largest issuer of sharia-compliant bonds and Indonesia launched its own in January 2009.