An Analysis of Islamic Finance Framework, Authority in Islam and a Need for Paradigm Shift in Islamic Finance

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The British University in Dubai (BUiD)
Islamic Finance has always been condemned by some of the influential advocates of interest based economies as a backward looking, less considerate and Shariah driven financial system still characterizing the principles laid in 6th century by the divine revelation of Allah (s.wt) and traditions of holy Prophet (s.a.s). Most of the scholastic and Industry efforts are aimed at providing solutions to financial issues faced by modern Islamic society with easy references to conventional banking system. They try to highlight issues with Shariah laws that underpin the fundamentals of Islamic Finance Industry and attempt to project a sense of urgency to adopt forbidden conventional forms of financial transactions like derivatives, leasing, etc in order to bring Maslaha for the society. However very few speak in length about the advantages of running a Shariah based ethical banking framework and the depths of foresightedness available in revealed sources on running a socio-ethical economic system. The aim of the study is to highlight several such issues faced by Islamic Finance industry, the distinct authority and legislative structure in Islam and a dire need to effect a paradigm shift in constructing future dialogue on Islamic Finance. While aiming at these objectives, the study also attempts to focus on addressing some of the key areas of concern ailing the present global economic system and makes a proposition towards creating a thought process that can safeguard interest of depositors, investing community and society, at large, without compromising on economic growth.
Islamic finance, financial system, banking