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popularity of islamic banking in canada

Fadiyah Sameh
Fadiyah Sameh
Posted: 2015-02-27

Sharia Law refers to the body of the formally established sacred law. This law is rooted primarily on Allahís (Godís) commandments found in the Quran, which is the written word of Allah as revealed in Arabic to Prophet Mohammed (SAW). The governance of this Sharia law is practiced across many fields of Islam such as public behaviour, private behaviour, political, economic, civil, social, ethical, religious matters and the like. Inspired by, and in congruence with, this law is the banking industry of Islam. Its practical applications in Islamic economics have seen the industry expand exponentially over the last few decades and the industry continues to develop and rise almost at 15 to 20 % each year. These principals, as illustrated under the Sharia law, emphasise moral and ethical values in all dealings and have growing universal appeal. The Islamic Banking industry remained unscathed after, and resilient to, the financial crisis in Canada. The regulatory framework for such institutions in the market solidifies with more entrants in the market that invest and satiate the desire for economies of scale. One of the most important and fundamental tenets of financial and banking institutions is interest, which is waived under the Sharia law, thus making Muslims, as well as any welcome Westerners, more privy to the perks of investing in the blooming industry. This foregoing waivered interest is called as riba. The Canadian government and Islamic Banking industry seem to have a common goal of maximizing economic well-being, despite the fact that Islamic banking models are far different from western models. With the growing number of Canadian Muslims, where already more than a million Muslims reside, any financial institutions that could build relationships with the Muslim communities and provide education about Islamic financial products would have a distinctive advantage. Current competition to the Sharia-compliant financial institutions is virtually non-existent. Entry into the market is virtually stymied by the lack of legislation applicable to Islamic finance. Rising demographic shifts also warrant any other financial institution to adhere to participation banking or give in to the Islamic financing model which will mean that they have to confer and conform to the Sharia law. Even a cursory review of the Islamic banking practices and beliefs results in a rapid realization that the philosophy of money and the acquisition of wealth is in stark contrast to the Western world. Investing in pure speculation or any wary interest is also banned under the Sharia law since the returns would not be determined and this would relate to gambling, which is banned in Islam. The roots of some of the largest Islamic Banking institutions are set in Islamic countries; most of these institutions are in the Middle East, Indonesia and Pakistan; these institutions are also mulling over re-branding their name to appear less religious and more open to investors who are drawn to such no-interest avenues of investment. Many financial institutions in the Muslim majority countries already call themselves participation banks. The Islamic ban on usury seems to have an allure to everyone alike and the industry keeps blooming each year.

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