Islamic Finance and the New Financial System: An Ethical Approach to Preventing Future Financial Crises

Chapter 9Criticisms, Shortcomings, and Misconceptions of Islamic Finance

Islamic finance is not free of criticism, nor should it be. Any financial instrument, tool, or system should be open to critique and criticism in order to have an open debate on its merits and interworking. This allows for growth and improvement versus a closed system. Islamic finance also has its own limitations and shortcomings, which have so far restricted Islamic finance mainly to Muslim countries. Even though Islamic finance is active all over the world, including Europe and the United States, its presence outside of the Islamic world remains small and fragmented.

Some questions that come up frequently when discussing Islamic finance in the West include: If Islamic finance is such a great system, why hasn't it been able to effect any changes in the current financial system? Why are all the countries around the world, including Muslim countries, still on the conventional financial system? Answers to these questions are at the heart of the Islamic finance debate. However, there are also some misconceptions around the world about what Islamic finance is and what values it strives to achieve. I think it's important to address these in addition to some of the criticisms and shortcomings.

Throughout the course of my career, I have come across five main criticisms, shortcomings, and misconceptions on Islamic finance, as follows:

1. Islamic finance supports and is linked to terrorism.
2. Islamic finance is for ...