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gif Islamic Finance


ISLAMIC BANKS VS. NON-ISLAMIC BANKS ETHICAL DIMENSIONS


Author: Dr. Kassim Dakhlallah, Assistant Professor of Finance, University of Dubai Dr. Hela Miniaoui, Faculty of Finance and Accounting, University of Wollongong, Dubai


Abstract: Islamic banks have become an international phenomenon as one of the world’s fastest-grow- ing financial sectors. It has been estimated that since 2007 the growth rate of Islamic finance products has reached 30%. In addition, Islamic financial institutions are becoming substantial players in the global banking and financial market. Therefore, it is essential to define them to understand why they are different; how they started; and how they entered the international banking market. Islamic banks can be used to meet the challenges of this competitive environment, especially since they offer new resources and products.


In this article, we will introduce to the main sources of Islamic finance principles that are the founda- tion for Islamic banking practices. It is essential, however, to outline the main beliefs upon which these principles are established. The classification of Islamic banking contracts like Musharaka, Mudaraba, Murabaha. The formation and the different structure of an Islamic financial institution and the challenge to corporate governance are of great importance to the conduct of Islamic banking. The need for regula- tion in the context of Islamic banking and the main risks associated with the different financial products will be discussed.


Keywords: Islamic Banks, Ethics, Adverse Selection, Moral Hazard


62 Global Islamic Finance May 2012


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