Globalization and Islamic Finance: Convergence, Prospects and Challenges
Dr. Umer Chapra
Prominent Scholar of Islamic Economics and currently Research Advisor
Islamic Research and Training Institute (IRTI), Islamic Development Bank (IDB)
Globalization and Islamic Finance, by three
well-respected authors in Islamic finance, provides a
thought-provoking analysis of an important and topical issue,
particularly, given the global impact of the current financial and
economic crises. The book is the first attempt to make a compelling
case of convergence between globalization and Islamic finance.
Askari, Iqbal and Mirakhor should be praised for this serious
effort, which is a must-read for academics and practitioners
interested in Islamic finance.
Professor Rifaat Ahmed Abdel Karim
Islamic Financial Services Board (IFSB)
This book has a robust discussion of the growth and spread of
Islamic finance within the umbrella of globalization. The book
provides a unique view of Islamic finance, not only from the
perspective of how Islamic finance fits within globalization in
general, but globalization of finance in particular. This is a must
read for anyone interested in the complex and complicated world of
Scheherazade S. Rehman, Ph.D.
Director, European Union Research Center
Professor of International Finance, School of Business
The George Washington University
I have not come across any literature that has delved so
intensely in financial globalization, in particular Islamic
finance. Due to this reason, I would encourage all interested in
this area to read this book.
Hajah Salma Latiff
Managing Director, Crescent Sdn. Bhd.
Former Director, Centre for Islamic Banking, Finance and Management (CIBFM), Universiti Brunei Darussalam
The recent crisis has evoked wide interest in Islamic finance
publications. Globalization and Islamic Finance is both
timely and needed.
Director, Wealth Management
Financial Alliance (Singapore)
CHAPTER 1 A Brief History of Globalization and Islamic Finance 1
1.1 A Brief History of Globalization 2
1.2 How Complete Is Globalization? 7
1.3 A Brief Introduction to Islamic Finance 11
1.4 Islamic Finance and Globalization: Convergence or Divergence? 26
CHAPTER 2 The Consequences of Globalization: Convergence or Divergence with Islam? 29
2.1 Theoretical Consequences of Globalization: Growth, Income Distribution, Poverty Alleviation, and Regulation 29
2.2 Some Empirical Consequences of Globalization 35
2.3 Financial Globalization 41
2.4 Basic Islamic Economic and Financial Doctrines and Globalization 47
2.5 Convergence or Divergence? 53
CHAPTER 3 Islamic Finance, Conventional Finance, and Globalization 59
3.1 The Development of Islamic Finance 59
3.2 The Development of Conventional Finance 68
3.3 Islamic and Conventional Finance: The Impactof Globalization 70
3.4 Financial Stability and the Emerging Relationship between Islamic and Conventional Finance 75
CHAPTER 4 Recent Developments in Conventional Finance, Financial Globalization, and Islamic Finance 79
4.1 Introduction 79
4.2 The Role of Financial Systems and the Stability Characteristics of the Conventional Financial System 80
4.3 A Different Explanation for the Financial Crisis of 2007 94
4.4 Islamic Financial System and Lessons from the Recent Crisis 111
4.5 Summary 119
CHAPTER 5 Empirical Trends in Conventional and Islamic Financial Globalization 121
5.1 Trends in Conventional Financial Globalization 121
5.2 Growth in Islamic Finance 137
5.3 Convergence or Divergence? 147
CHAPTER 6 Key Considerations in Developing an Islamic Financial System 149
6.1 Lessons from the Conventional Financial System 149
6.2 Gaps in the Islamic Financial System and its Practice 157
6.3 Policy Recommendations 163
6.4 Concluding Remarks 171
CHAPTER 7 Conclusions and the Future of Islamic Finance 173
7.1 The Future of Globalization 173
7.2 The Evolution of Financial Globalization 177
7.3 The Expansion of Risk Sharing 179
7.4 The Likelihood of Convergence 180
DR. ZAMIR IQBAL works as Lead Investment Officer with the Quantitative Strategies, Risk and Analytics department in the Treasury of the World Bank in Washington, D.C. He earned his Ph.D. in International Finance from the George Washington University, where he also serves as adjunct faculty of International Finance. He has published numerous articles and presented at international forums on Islamic finance. He has extensive experience with capital markets, structured products, risk management, financial sector development, and financial modeling. His research interests include Islamic Finance, Financial Engineering, Structured Finance and International Banking. He is co-author of Introduction to Islamic Finance: Theory and Practice (2007), Risk Analysis for Islamic Banks (2007), and New Issues in Islamic Finance and Economics: Progress and Challenges (2009).
DR. ABBAS MIRAKHOR, born in Tehran, Islamic Republic of
Iran, attended Kansas State University, where he received his Ph.D.
in economics in 1969. From 1969 to 1984, he taught in various
universities in the U.S. and Iran. From 1984 until 1990, he served
on the staff of the IMF, and from 1990 to 2008, he served as the
Executive Director at the IMF. Currently, he is The First Holder of
International Center For Education in Islamic Finance (INCEIF)
Chair of Islamic Finance. He has received several awards including
“Order of Companion of Volta” for service to Ghana,
conferred by the President of Ghana in 2005; Islamic Development
Bank Annual Prize for Research in Islamic Economics, shared with
Moshin Khan in 2003, and “Quaid-e Azam” star for
service to Pakistan conferred by the President of Pakistan in 1997.
Dr. Mirakhor is the co-author of Essays on Iqtisad: Islamic
Approach to Economic Problems (1989), Theoretical Studies in
Islamic Banking and Finance (1987), Introduction to Islamic
Finance: Theory and Practice (2007), and New Issues in
Islamic Finance and Economics: Progress and
The financial tsunami of 2008 emphasized the fragility of a debt-based financial system. Numerous international banks have had their reputations tarnished by the credit crisis, and investors’ confidence in debt instruments and debt financing has since waned. On the other hand, Islamic banks, which operate on principles such as risk sharing, trust, transparency and the upholding of Islamic values to promote equality and social welfare, have remained largely unscathed. This success has lured a growing number of investors to the non-debt, equity-based domain of Islamic finance.
Published by John Wiley & Sons, Globalization & Islamic Finance: Convergence, Prospects and Challenges (ISBN: 978-0-470-82349-1) is the first serious attempt to study the affiliation between the current trend of globalization and the development of Islamic finance. It explores the potential asymptotic convergence of Islamic and conventional finance as these systems continue to design and develop better risk-sharing structures and an expanded medley of financial instruments.
The crisis has intensified the quest for a reformation of the international financial architecture, toward a system with greater reliance on equity financing and risk sharing. As it would appear that Islamic finance and financial globalization share a common objective of achieving maximum risk sharing, it is plausible that conventional and Islamic finance converge as we continue down this path.
Written by three well-respected authors and voices in this field, Professor Hossein Askari, Dr. Zamir Iqbal and Dr. Abbas Mirakhor share innovative thoughts on the future of Islamic finance in the wake of globalization as well as the legal, institutional, governance and financial preconditions that must exist for this institution to succeed. This book will be an important read for practitioners, academics and anyone with an interest in the impact of globalization on Islamic finance and its portents for the future.
Globalization & Islamic Finance: Convergence, Prospects and Challenges
Published by John Wiley & Sons
Publication Date: October 22, 2009
US$49.95; Cloth; 240 pp.; ISBN: 978-0-470-82349-1