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According to economist and Islamic finance critic Feisal Khan, a "true" or strict Islamic banking and finance system of profit and loss sharing (the type supported by Taqi Usmani and the Shariah Appellate Bench of the Supreme Court of Pakistan) would severely cripple central banks' ability to fight a credit crunch or liquidity crisis that leads ...
Profit and loss sharing has been called "the main justification" for, [5] or even "the very purpose" of the Islamic finance and banking movement" [47] and the "basic and foremost characteristic of Islamic financing". [48] One proponent, Taqi Usmani, envisioned it transforming economies by rewarding "honest, honorable and forthright behaviour";
Banking makes up most of the Islamic finance industry. Banking products are often classified in one of three broad categories, [44] [45] two of which are "investment accounts": [46] [47] [Note 4] Profit and loss sharing modes—musharakah and mudarabah—where financier and the user of finance share profits and losses, are based on "contracts ...
A financial system built solely around these modes of financing can hardly claim superiority over an interest-based system on grounds of equity, efficiency, stability and growth. [ 79 ] Circa 1999 the Pakistan Federal Shariat Court ruled that the "mark-up system ... in vogue" among banks in Pakistan was against the Islamic injunctions. [ 28 ]
The industry has been praised for turning a "theory" into an industry that has grown to about $2 trillion in size; [6] [7] [8] for attracting banking users whose religious objections have kept them away from conventional banking services, [9] drawing non-Muslim bankers into the field, [2] and (according to other supporters) introducing a more stable, less risky form of finance.
A supporter of Islamic economics describes a "major difficulty" faced by Islamic reformers of Islamic economics and pointed out by other authors, namely that because a financial system is an "integrated and coherent structure", to create an Islamic system "based on trust, community and no interest" requires "changes and interventions on several ...
Following the Iranian Revolution, Iran's banking system was transformed to be run on an Islamic interest-free basis. As of 2010 there were seven large government-run commercial banks. [1] As of March 2014, Iran's banking assets made up over a third of the estimated total of Islamic banking assets globally.
According to critic of Islamic finance, Mahmoud A. El-Gamal, one way the Islamic finance industry gets around prohibitions on the use of options is to use conventional banks/financers as a "buffer" between the haram income and its sharia obedient customers — employing conventional banks as partners or advisers and paying them with the haram ...
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