A Growing Challenge for Islamic Banking Industry

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Islamic banking has recently attracted significant attention from the public as it has grown much faster than the conventional banking sector. Many global companies, including McDonald's and Tesco, financed some of their operations through Islamic finance. Moreover, UK Prime Minister David Cameron recently announced that Britain wants to position itself as an Islamic finance hub. One of the reasons behind this strong growth has been that the usefulness of the Islamic capital markets has been increasingly recognised during and after the financial crisis. Islamic financial institutions, whose transactions must be supported by tangible assets, have managed to weather the financial crisis rather well than their conventional counterparts in the developed world that suffered from their exposures to more opaque securities. However, there is a growing frustration in the industry: not enough product development and innovation are taking place.
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