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Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited
Article Type: Guest editorial From: Qualitative Research in Financial Markets, Volume 4, Issue 2/3
Since its inception three decades ago, the number of Islamic financial institutions worldwide has risen from one in 1975 to over 300 today in more than 75 countries. They are mostly concentrated in the Middle East and Southeast Asia (with Bahrain and Malaysia the biggest hubs), but are also appearing in Europe and the USA. Total assets worldwide are estimated to exceed $500 billion, and are progressively growing at an estimated 15 per cent a year. There are many reasons which can be attributed for the rise in Islamic banking, such as the strong demand from a large number of immigrant and non-immigrant Muslims for Sharia-compliant financial services and transactions. Second due to growing oil wealth the demand for suitable investments has soared in the Gulf region. Third the competitiveness of many of the financial products has attracted Muslim and non-Muslim investors. Lastly the phenomena growth in this sector is because the Islamic banking has so far been spared from a serious financial crisis.
Islamic banking represents a radical departure from conventional banking, and from the viewpoint of corporate governance, it embodies a number of interesting features since equity participation, risk and profit-and-loss sharing arrangements from the basis of Islamic financing. Since Islamic business practices prohibit interest (riba), an Islamic bank cannot charge any fixed return in advance, but rather participates in the yield resulting from the use of funds. The depositors also share in the profits according to predetermined ratio, and are rewarded with profit returns for assuming risk. Unlike a conventional bank which is basically a borrower and lender of funds, an Islamic bank is essentially a partner with its depositors, on the one side, and also a partner with entrepreneurs, on the other side, when employing depositors’ funds in productive direct investment.
We have had an overwhelming response to this issue on Islamic banking, based on this we have divided the special issue in two issues. This is the first issue came last year and was one of the highest downloaded issue of Emerald of last year. The second issue published is much awaited. All the papers selected are of the highest quality and ground-breaking. I am sure in time would be part of policy make in Islamic banking and finance sector. I want thank everyone who has contributed to it.
Omar MasoodGuest Editor