• Islamic finance: The unconventional but nascent financial system

In recent years, the concept of Islamic finance as well as its principles are quickly gaining recognition across the globe, with more financial institutions and corporations adopting the idea into their systems.

Islamic finance, which banks on syariah principles or Islamic rules that promotes responsible risk sharing, has been attracting greater attention in the wake of the recent financial crisis, as evidenced by the rise in syariahcompliant transactions in the global market.

World Bank coined Islamic finance, through its core principles, as advocating for the just, fair, and equitable distribution of income and wealth during the production cycle and provides mechanisms for redistribution to address any imbalances that may occur.

“Islamic finance emerged as an effective tool for financing development worldwide, including in non- Muslim countries. Major financial markets are discovering solid evidence that Islamic finance has already been mainstreamed within the global financial system – and that it has the potential to help address the challenges of ending extreme poverty and boosting shared prosperity.

“Islamic finance is equitybased, asset- backed, ethical, sustainable, environmentallyand social ly- responsible f inance. It promotes risk sharing, connects the financial sector with the real economy, and emphasizes financial inclusion and social welfare,” it said in an overview of the Global Islamic Finance Development.

According to Thomson Reuters’ 2016/ 2017 ‘ State Of The Global Islamic Economy’ report, the exisiting Islamic Finance market stood at an estimated US$ 2 trillion in assets in 2015 and of this US$ 2 trillion, Islamic banking was responsible for US$ 1.451 trillion, the Takaful (insurance) sector for US$ 38 billion, sukuk ( bonds) outstanding for US$ 342 billion, Islamic funds for US$ 66 billion, and other financial institutions for US$ 106 billion.

“Total Islamic finance assets are expected to reach US$ 3.5 trillion by 2021, a compounded annual growth rate ( CAGR) of 12 per cent, with Islamic banking responsible for most of this growth, and projected to reach US$ 2.7 trillion in assets by 2021,” it added.