Current issues in Islamic banking and finance a way forward

• Main Author: Yusuff Jelili, Amuda
• Format: Article
• Language: English
• Published: 2015
• Subjects: BP Islam. Bahaism. Theosophy, etc; HG Finance
• Online Access: http://eprints.unisza.edu.my/5120/1/FH02-FUHA-16-06072.pdf; http://eprints.unisza.edu.my/5120/

Islamic banking and finance requires a global critical discussion on current issues and practices. Islam encourages Muslims to engage in any lawful and profitable business and transaction in order to enhance and enrich their daily income. However, Islam prohibits all elements of interest (riba) in transaction and business. The prime difference between Islamic banking/finance and conventional banking is the prohibition of interest. The research discusses current issues in Islamic banking and finance such as home/vehicle financing, loans, and other related contract with reference to the opinions of classical jurists. The question is whether Islamic banking and finance is engaging in usury or interest (riba) or not. The study adopts qualitative and quantitative methods in analysis. The key findings is that Islamic banking and finance system is not fully implementing Shariah compliance in loan, home and vehicle financing which are contrary to Islamic principles. Islamic banking and finance needs to be improved in line with Shariah. It is recommended in these findings that Islamic banking and finance should strictly implement Shariah compliance in order to uphold Islamic sanctity. Granting loan should not attract any interest and must be free interest loan because an interest charge is totally prohibited in Islam. Nevertheless, professional or processing charges should be equally charged regardless of the amount of loan. It is better for the bank to engage in transaction in a way of transfer of ownership rather than giving home or vehicle financing with interest. Finally, useful suggestions were suggested on current issues in Islamic banking and finance in order to protect the sanctity of Islamic values.