Abstract

Islamic banking has developed immensely and has gained global acceptance. From a local system of finance with limited assets and market shares, Islamic banking now emerges as a multinational industry holding assets of around US$1.3 trillion (2011) as compared to US$6 billion in the early 1980’s which represent average annual growth of 17%. While the prospects for Islamic banking growth continue to be positive, the challenges faced and the opportunity to offer a new financial approach and hence regulation in the international financial landscape is very much awaited. Islamic finance has not only demonstrated its viability and competitiveness in the current environment of a more liberalized and globalized financial system with changing business and technological climates, but now, it is also in the move towards integration into global financial market. The paper attempts to observe the development of Islamic finance worldwide by looking at the history, trends and prospects. The paper also discusses some challenges faced by Islamic financial industry for future progress and development.

Keywords

Islamic Banking; Islamic Finance; Inter-linkages; Intermediation; International Financial Services Industry; Development.