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CHALLENGES FACING ISLAMIC FINANCE - Coggle Diagram
CHALLENGES FACING ISLAMIC FINANCE
IDENTITY CRISIS
People said it is mimicking the conventional system through juristic exercise as IFIs aim at profit maximisation, market oriented and offer shariah compliant product and services.
The challenge is to differentiate itself from conventional banking and finance in terms of its objectivem business philosopy, and product offering.
BUSINESS PHILOSOPY
IBF's current practice is more likely opportunistic as that of conventional financial system.
Islamic finance industry should move towards the creation of more risk-sharing instruments as the future stability of the financial system provides motive to go in that direction
PRODUCT OFFERINGS
IFIs have a strong tendency to mimic their conventional counterparts.
studies indicate that current financial instruments of the IFIs are economically no different from those offered by conventional ones.
SHARIAH GOVERNANCE
Shariah governance introduced to complement the existing corporate governance framework in the IFIs.
it is the mechanism which determine the Islamicity of any particular Islamic business or financial institution as well as the system as the whole
STANDARDISATION OF SHARIAH
different interpretation of shariah among shariah scholars in determining what makes a instrument Shariah compliant is one of the challenges.
this can may create confusion among the general public as well as practitioners of islamic finance
DEBT VS EQUITY
Overdependence on debt-based products led to this imprudent growth of debt
Overdependence on debt-based products reveals the reluctance of market players to promote risk sharing and equity based financial products.
it is believed that the promotion of these two is crucial in achieving the full potential of an Islamic financial systems
DEBT-BASED MONETARY SYSTEM
Islamic finance cannot refrain from debt-based financing unless the government is prepared to replace the existing fractional reserve banking model with an entirely Shariah-based model.
DOMINANCE OF THE CONVENTIONAL
unable to break away from the spirit of interest-based financial business.
Use LIBOR as a benchmark make Islamic Financial Products just replicas of their conventional counterparts.