Islamic Finance: Overview and Policy Concerns [February 9, 2009]   [open pdf - 165KB]

"Islamic finance is based on principles of shariah, or 'Islamic law.' Major principles of shariah are a ban on interest, a ban on contractual uncertainty, adherence to risk-sharing and profitsharing, promotion of ethical investments that enhance society, and asset-backing. The international market for Islamic finance has grown between 10% to 15% annually in recent years. Islamic finance historically has been concentrated in Persian Gulf and Southeast Asian countries, but has expanded globally to both Muslim and non-Muslim countries. There is a small but growing market for Islamic finance in the United States. Through international and domestic regulatory bodies, there has been effort to standardize regulations in Islamic finance across different countries and financial institutions, although challenges remain. Critics of Islamic finance express concerns about possible ties between Islamic finance and political agendas or terrorist financing and the use of Islamic finance to circumvent U.S. economic sanctions. Supporters argue that Islamic finance presents significant new business opportunities and provides alternate methods for capital formation and economic development."

Report Number:
CRS Report for Congress, RS22931
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