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Challenges Faced by Islamic Banking

Islamic banking has been prospering in the last few years. The main target market of these banks is basically the Muslims in Islamic countries as well as Muslims in the Non-Islamic countries. Many banks in Muslim and non-Muslim countries follow Islamic banking, this banking sector has experienced a boom in the late years of 20th century and even many Non-Muslims have availed the services of Islamic banks.

Though there are some differences in the practices of these banks however, generally speaking most of these banks that following Islamic principles are fully complying with Shariah. Since this industry is still new and growing and therefore has to have some kind of relations with other banks that are operating as conventional banks.

Following are the challenges faced by Islamic banking industry:

1. A lot of legislation is required for Islamic banking worldwide and especially in non-Muslim countries; even in Muslim countries some legal loopholes are present in its proper implementation.
2. Comprehensive Islamic economic and banking models have yet to develop or they are not in their maturity stage to provide a blueprint of economic development and prosperity.
3. IT developments and Research in latest Banking are in non-Muslim countries where conventional interest based banking have a very strong position thus Islamic banking will enjoy latest tools of IT, but lesser than conventional banking.
4. Environment for these banks in west have been declined after 9/11 attacks on WTC, New York and later Prophet Mohammad (P.B.U.H.) protests in Muslim world, widening the gaps between the western investors and Islamic banking markets.
5. Market demand is good but very less as compared to conventional interest based banking throughout the world, i.e. beyond some countries.

The article is written by Ahsan Ayub and Maria Iqbal. Both Ahsan and Maria have been working for Marish Solutions and have been writing articles on different topics including business, marketing, finance, entrepreneurship, technology etc. Besides this, the company Marish Solutions offers a range of services broadly in the category of Business and IT Solutions. The company also provides consultation services to many small and medium sized businesses.