7 Big Reasons Why Islamic Finance Should Be On Your Radar.July 12, 2019 at 10:20 am
People are always asking us about the benefits of Islamic finance. That’s why we decided to put together a list of 7 reasons why it should be on your radar.
The Industry is Expanding
The accounting consulting firm Deloitte has already estimated that the assets for Islamic financing equalled US $34 trillion by the end of last year. They also estimate there are over 750 Islamic funds globally that manage over US $60 billion.
Long story short here is investing in an ijara mortgage is a solid move.
The Industry Is Flexible
Sharia compliance is all about social justice. That notion appeals to people in the West and Arab worlds both. The idea of doing away with riba which is a form of usury appeals to people regardless of their religious background.
At the same time, Islamic finance and more Western models are compatible with each other.
The Industry is Already Here.
If you take a quick look, you’ll notice that Islamic finance has already grown in Western countries. There are dozens of British banks that provide these products and ijara mortgage companies in the United States and Canada.
The Industry Doesn’t Speculate
Islamic finance/sharia compliant banks don’t speculate. That means they don’t bet on current trends in investments with deposits customers make. Generally, Islamic banks stay away from the kind of risks that caused the financial crisis in 2008.
Muslim Populations Are Growing.
No matter where you look across the world, the Muslim population is growing. For example, research tells us that from the years 2008 to 2010, the population increased by 300 million people. There are even predictions that the number of people looking for Islamic finance will jump 35% by the year 2030.
If you do the math, you’ll see that that population increase is almost twice as large as the non-Muslim population. Considering that most of these people will want to buy sharia compliance financial products, it’s easy to see how Islamic finance will grow too.
Non Muslin Investors Are Taking A Second Look
Ever since the financial meltdown in 2008, investors have been looking for a more secure way to make profits. Islamic finance investments are generally based on transparent contracts that reduce the kind of speculation that can lead to trouble.
Here’s another good reason to consider this model. When investors screen the equities they are considering for sharia compliance, they are looking closely at an organization’s financial ratios. This is a good way to get rid of any possible investments that are carrying a large amount of debt.
Islamic Indexes are Making Inroads
One of the biggest developments that has come along to help Islamic finance is the emergence of indexes. Even the Dow Jones has been joined by other traditional places like Standard & Poor’s in indexing sharia compliant products.
This allows Western investors looking to get involved with Islamic finance the ability to use rating systems they understand. It also makes it easier to track the progress of Islamic finance products.