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Document Type

Conference Paper

Publication Date

11-8-2005

Conference Name

Keynote Address at the Islamic Financial Services Forum organized by the Islamic Financial Services Board and the Central Bank.

Conference Location

Luxembourg

Conference Dates

November 8, 2005

Series

Faculty Research - Book Chapters and Conference Papers

First Page

1

Last Page

10

Keywords

Finance, Islamic finance, financial services industry, Islamic Financial Institutions, Regulatory challenges,

Abstract / Description

First and foremost, I wish to commend the Islamic Financial Services Board and the Central Bank of Luxembourg for organizing this Forum and providing me with this opportunity to share my thoughts and experience with this august gathering. In view of the growing interest in Islamic Finance, it is incumbent upon us to outline the distinguishing features and delineate the unique characteristics that make it attractive to a segment of the consumers and investors all over the world. What is Islamic Finance? There are at least three characteristics which makes it different from the conventional debt finance. First, it prohibits riba or interest, or in other words a fixed and pre-determined rate of return to be paid on the deposits or to be received from the borrowers. The rate of return is variable and determined by the profit and loss that the bank makes during a given period and the returns on assets depend on the particular mode and purpose of financing, i.e. Murabaha (trade finance), Mudaraba (profit sharing), Musharaka (partnership), Ijara (leasing), etc.

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