A Brief Overview of Islamic Finance: From Madinah Market to Wall Street

Abstract

Many lessons have been learned by the global financial system at the aftermath of the Global Health Crisis (GHC), which could last till the financial crisis occurred in 2008–2009 (global financial crisis [GFC]). As such, the system started facing the deep-rooted questions about regulatory reforms. Amidst a perilous situation, Islamic finance (IF) had demonstrated clear evidence of strong muscles into something that countries appreciate as the tool for money intermediation. It constitutes a brief introduction to the way Islamic Financial System or IFS (1) came forth in the past and (2) continues nowadays. The paper starts with the stating the maqasid al-Shari’ah (goals of the Shari’ah),which are the fundamental objectives of the legal system in Islam. Then, it highlights the key concepts, unique features, andmodes of financing that are unique within the IFS. The integration of Islamic financial institutions (IFIs) into the global economy is covered and IF as well as global financial dynamics at large discussed with the closing comments mirroring IF complexity on the background of global economy. This segment alone has posted very significant gain of almost US$3 trillion, which is projected to rise further to US$6.7 trillion by 2027 – a clear indication of its outreach and accessibility to all.