Islamic Finance and Economic Development: Risk, Regulation, and Corporate Governance

CHAPTER 2

Islamic Finance: Opportunity for Egypt's Development

Islamic finance's renaissance did not escape international finance leaders' notice. Promptly, they understood its financial intermediation nature and the opportunities it offered for financial deepening, diversification, and inclusion. For instance, in a 1995 speech, Lord Edward George, then governor of the Bank of England, recognized the “growing importance of Islamic banking in the Muslim world and its emergence on the international stage,” as well as the need to put Islamic banking in the context of London's tradition of “competitive innovation.”¹ Other European countries have also identified the potential role of Islamic finance in their economies and made room in various ways for its introduction.²

In the United States, the country of entrepreneurship, financial entrepreneurs introduced Islamic financial products at both the retail and wholesale levels. They have succeeded in providing access to a pool of financial resources for business ventures, and have offered profitable and secure Shari'a-compliant placements to investors. They have also allowed many to have access to retail financial services such as mortgages, contributing to inclusion and welfare. U.S. regulators have focused on the challenges of integrating Islamic finance in the mainstream of the country's financial system. Their focus on the economic substance of transactions rather than the formality of product structures facilitated market expansion ...