In the name of God, the compassionate the merciful
Christopher Towe, a former Deputy Director, Monetary and Capital Markets of The International Monetary Fund (IMF) has made some profound observations about Islamic Finance in the global economy:
- Islamic Finance is strongly based on Islamic law. This means interest can neither be paid nor received. No bankrolling of illicit businesses such as pork, alcohol, tobacco, pornography and so on. No gambling or any game of chance.
2. Islamic economics is growing rapidly. In fact, at a double-digit rate, but still concentrated in predominantly Muslim populated countries such as countries in the Middle East and North Africa (MENA), and some countries in South East Asia. Other non-Muslim countries that practice Islamic finance include the USA, UK, Australia, Germany, etc. In a report of the Dinar Standard 2022, dabbed “The State of The Global Islamic Economy Report: Unlocking Opportunities 2022”, it reported the growth of the Islamic economy as $3.6 trillion in 2021, at a growth rate of 8.0%. By 2025, it is estimated to be $4.9 trillion. In a nutshell, the Islamic finance global system is growing at a compounded annual growth rate averaging 17% per annum.
- Islamic finance offers possible economic benefits due to its asset base, and risk-sharing features. This makes Islamic finance buoyant and inherently less risky as compared to its conventional counterparts. It promotes growth in 2 dimensions; proffers greater access to banking, and by tapping a larger pool of savings which unleashes greater potential for funding infrastructure and macroeconomic stability.
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And lastly, standards and codes for Islamic Finance have been drafted by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and defined and applied in a more consistent manner, both nationally and internationally. This has enabled Islamic finance to realise its potential growth and stability at both micro and macroeconomic levels. And Allah knows best!
YAHAYA ILIASU MUSTAPHA
The writer is an Islamic Banking and Finance patron and advocate in Ghana.
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