ISLAMIC FINANCE:OVERVIEW AND POLICY CONCERNS

Based on the article that written by Shayerah Ilias, an analyst in International Trade and Finance, he has discussed the overview and policy concerns of Islamic Finance. According to Shayerah, the principles of shariah are the base of Islamic Finance. The main financial principles of shariah are a ban on interest, contractual uncertainty, adherence to risk-sharing and profit-sharing, promotion of ethical investments and asset-backing. The research shows that, currently, the existence of Islamic Finance in global finance market makes it grown at double rates and become more capable during the financial crisis and global economic downturn. The Islamic financial concept first applied most by Islamic country at the Middle East and Asia, before applied globally to other Islamic country. The analyst found that, there are some issues arise after Islamic Finance concept being applied globally. First to standardize the regulation of Islamic Finance that applied by different countries and also to increasing interest in industry. The International institutions have been established in order to maintain the similarity in Islamic Finance, such as The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), issues international standards on accounting, auditing and corporate governance, Islamic Financial Services Boards (IFSB) for supervision and regulation. Second is about the critics of the credibility of this concept facing the condition of U.S economic. Other than that, it also may be challenging the maturity of this concept moving from country to country compared to well-established market. The negative impacts of instandardization are the growth of shariah-compliance risk, increase legal uncertainty that not valid under Islamic law.