The field of Islamic finance, or banking within the principles of Islamic sharia law, is growing rapidly. Over the last seven years, the practice of Islamic finance has seen steady growth, and is well on its way to becoming part of mainstream finance globally. In response, we at GARP have partnered with several leading financial institutions to create “The Islamic Finance Risk Initiative,” a guide to the unique risks, challenges, and opportunities presented by sharia-compliant practices.
To make this project a reality, we partnered with the Islamic Research and Training Institute (IRTI), The Islamic Development Bank, Al-Baraka Bank, Bahrain Islamic Bank, Bank Nizwa, and Qinvest. This collaboration’s goal was to develop an approach to assessing the risks of sharia-compliant financial products and services. The result is a book that provides crucial insight and best risk management practices related to dealing in Islamic financial instruments.
Currently, differing approaches to analyzing Islamic financial instruments raises uncertainty about how risks related to these products and services should be assessed and disclosed. Because of the uncertainty surrounding these issues, Islamic finance’s integration into the global financial system, and its inclusion alongside conventional finance, will face considerable challenges. By developing globally accepted approached, we aim to create increased transparency and understanding of sharia-compliant financial products, which will lead to the adoption of the best practices necessary to fuel further growth in Islamic finance.