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An Overview of Islamic Finance

Mumtaz Hussain, Asghar Shahmoradi () and Rima Turk Ariss

No 15/120, IMF Working Papers from International Monetary Fund

Abstract: Islamic finance has started to grow in international finance across the globe, with some concentration in few countries. Nearly 20 percent annual growth of Islamic finance in recent years seems to point to its resilience and broad appeal, partly owing to principles that govern Islamic financial activities, including equity, participation, and ownership. In theory, Islamic finance is resilient to shocks because of its emphasis on risk sharing, limits on excessive risk taking, and strong link to real activities. Empirical evidence on the stability of Islamic banks, however, is so far mixed. While these banks face similar risks as conventional banks do, they are also exposed to idiosyncratic risks, necessitating a tailoring of current risk management practices. The macroeconomic policy implications of the rapid expansion of Islamic finance are far reaching and need careful considerations.

Keywords: Financial stability; Financial services industry; Financial instruments; Banks; Bonds; Central banks and their policies; Fiscal policy; Monetary policy; Islamic finance; Islamic banking; International financial markets; Risk management; Sukuk, finance, Financial Markets and the Macroeconomy, Monetary Policy (Targets, Instruments, and Effects), Government Policy and Regulation, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2015-06-02
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Journal Article: An Overview of Islamic Finance (2016) Downloads
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