Six Factors Driving the Future of Islamic Banking (Part I)

By Mabroor Mahmood | January 02, 2017

During the last few decades, the Islamic Banking industry witnessed a sustained growth that resulted the total asset size exceeding over two trillion dollars. Now the Islamic Banking is no longer an alien in the global financial industry.

Besides the forerunner countries, such as Malaysia, UAE, Iran, Saudi Arabia, Kuwait and Bahrain, many Non-Muslim cities are becoming increasingly popular as an Islamic Banking hub. Despite such increasing visibility globally, there is a need for self-check for the Islamic Bankers in order to sustain such growth in the future.


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In this five part article series, Mabroor Mahmood presents six factors that will be instrumental in shaping the future of Islamic Banking. Today the first Factor is described. 

Factor 1: Believing the Principle

It is imperative for any industry that its people driving it should believe its core mission and objectives. For Islamic Banking, since the industry has grown bigger, many people have joined the industry from diverse backgrounds during the last couple of decades. Many have conventional banking experience; many don’t have adequate exposure on the historical perspectives of Islamic Banking; many rejoin conventional banking industry even after spending years in Islamic Banking.

As a result, absence of belief in the core mission and purpose of Islamic Banking is relatively common in the industry and such ignorance might act as a deterrent for its sustainable growth in the future.

Any product to survive in a very competitive industry needs to find its target market, design its marketing strategy and differentiate itself from other competing products. Global banking industry has hundreds of years of history and the competition in this ever-evolving industry is fierce.

So in order to survive in this competitive arena, the people behind any new product should know clearly what their objectives are and how to achieve those objectives. Otherwise, the product will eventually perish.

Islamic Banking is providing relatively new sets of products for supporting entrepreneurs to grow their business and depositors to diversify their savings. Thus just like any other product, Islamic Banking should also differentiate itself from its counterpart conventional products as much as possible in order to gain the market share. So unless the people behind it firmly believe in the mission of Islamic Banking, the growth opportunities through innovation and creativity will not continue.

In order to resolve this problem, all Islamic Bankers need to be taught the core principles of Islamic Banking and they should all be aware of the premise why Islamic Banking exists today.    

(To be Continued)

The views expressed in this article are the author's own and do not necessarily reflect the views of the institution where he works. 

12 Comments

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Murat Ahmet 9 months ago
MD, MA Istanbul

Thank you for the article, and look forward to reading the rest of this series. (edited)


Principal, Term Finance, Islamic Corporation for the Development of the Private Sector (ICD)

Thank you


Shafraz Nilam 9 months ago
Fund Manager, Amana Wealth Management Limited

Jazakhallah Looking forward to read (edited)


Principal, Term Finance, Islamic Corporation for the Development of the Private Sector (ICD)

Thank you very much Br Shafraz. Regards.


Dr Allan Wain 9 months ago
LWP Fellow, Harvard University

Dear Mr Mahmood, thank you very much for your most interesting article. With much pleasure, I anticipate reading the remainder of your series. Thank you. With kind regards. Allan (edited)


Principal, Term Finance, Islamic Corporation for the Development of the Private Sector (ICD)

Dear Mr Allan, Thank you very much for your inspiring words. I will upload all the remaining parts during next few weeks in sha Allah. You can also read my other articles which are uploaded in this portal. Regards. (edited)


head of community development projects and faculty of economics and business management, Eastern public school

Dear Mabroor Its a futuristic article hence carry's lot of insights for thought,I have just browsed through ,shall go through in detail and also looking forward to other articles in sequence

best wishes

Dr shahab Ali Khan


Principal, Term Finance, Islamic Corporation for the Development of the Private Sector (ICD)

Dear Dr Shahab, Thank you very much for going through the article. Will be uploading all the remaining parts during the next few weeks in sha Allah.


Blake Goud 9 months ago
CEO, Responsible Finance & Investment Foundation

One of the challenges I think is that the simple explanation for Islamic finance that is used in any article for a general audience is that Islamic finance is 'finance without interest'. This, I am afraid, often sets up the perception that it is just a work-around exercise, an exercise in financial engineering to create the exact same result as conventional finance. However, when viewed a different way, as a form of responsible finance, Islamic finance starts to look different even on a high-level perspective.

For example, attention shifts to things like the changes in the relationship between two parties in a transaction that shares the burdens more equally. Or issues like not being able to sell what you do not own (or that which does not exist) requires more specific connection to real economy, tangible assets and businesses.

I think this is in line with your call to "make all be aware of the premise why Islamic Banking exists today" but I don't know even if the main audience for Islamic finance at this point has been fully made aware either about the purpose of Islamic banking besides removing riba. (edited)


Principal, Term Finance, Islamic Corporation for the Development of the Private Sector (ICD)

Dear Mr Blake, Thank you for your nice comment. The problem of misconception arises from the fact that not too many people are aware of what Riba is and why it should be avoided. I have explained in my previous article series all these dimensions of Riba from various perspectives. You can read them which are available in this portal. First of all, we the Islamic bankers need to explain why charging 10% interest in 100 dollar loan is different from selling a good of 100 dollar at 110 dollar sale price, and what are the economic benefits out of it for the user and the general people Unless we explain these in a crystal clear manner, people will still be thinking that Islamic Banking is nothing but doing the same thing in a different way. Besides the abolition of Riba, we also need to explain what are the benefits of abstaining from uncertainty, speculation, etc. I think there are now many cases in the world where we can find good examples of why these elements should be avoided. Unfortunately, the marketing of such things are not very common. Thank you again for your comment. (edited)


Stephen Ngenchi 9 months ago
Microcredit Specialist, LIFIDEP

Thank you very much for this great article on Islamic Financing. I look forward to reading the next part of the article.
Best Regards (edited)


Principal, Term Finance, Islamic Corporation for the Development of the Private Sector (ICD)

Thank you very much for the comment. Regards.