Discuss critically distinctions between Islamic finance regulation and Essay

Discuss critically distinctions between Islamic finance regulation and conventional financing of commercial credit - Essay Example Islamic financing was first introduced in the UK in 1990 and has since developed to such an extent that the UK hosts the largest share of Islamic assets (valued at US$18 billion) among all Western countries and is eight worldwide.6 As of 2008, there were five â€Å"stand-alone† Islamic banks in the UK and more than 20 conventional banks offering Islamic products.7 This paper provides a critical analysis of the distinctions between Islamic finance regulation and conventional financing of commercial credit. The modernized form of Islamic finance began in Egypt during 1963 when the Mitt Ghamr savings system was introduced as a â€Å"social banking initiative†.8 By 1975 the first commercial Islamic banks were established: Islamic Development Bank and the Dubai Islamic Bank. The Islamic banking sector grew at a steady pace and by the 1990s there was a growing demand for Islamic financial products in investments and loans. In more recent years, the growth in demand and supply of Islamic financial products has been more expansive. Between 2006 and 2008, Islamic financial assets experienced a growth rate of 30%. As a result, Sharia compliant banking products have been described as the worlds â€Å"fastest growing financial sector†.9 There are at least 614 â€Å"registered Islamic finance institutions† in 47 countries with Islamic assets increasing from US$150 billion during the 1990s to approximately US$700 billion by 2007.10 The growth and expansion of Islamic banking and financial products have been impressive. Holden reports that over the last thirty years or so, Muslims all over the world have demonstrated a propensity for withdrawing billions of dollars from conventional banking systems and transferring them to Islamic banking and financial systems. In addition, conventional banks have shown an increasing willingness to offer Islamic banking and financial products and services.11 Islamic banking is defined as a â€Å"system of