Integration of Islamic Financial Concepts into Modern Banking System

by

ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

Signed __________________ Date _________________

ABSTRACT

In this study, we try to understand the Islamic concepts and how they can be integreated into the modern financial system. The reason why they should be integreated is that Islamic banking is less vulnerable to the economic crisis, this will be explored in the literature review and also with the help of various case studies. The research is qualitative and it will follow the case study methodology.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Islamic Banking1

Research Problem4

The research paper covers the following topics5

Overview of the literature5

CHAPTER 2: LITERATURE REVIEW6

Transition of Modern banking into Islamic banking6

Measuring the Quality of Islamic banking10

Modes of Islamic Financing14

Mudarabah14

Musharakah14

Musawamah15

Ijarah15

Istijrar15

Salam:16

The reality of Islamic banking services at the regional and global: A case study of Hilal bank16

Banking in Islam18

Islamic banks playing role in Economic Development of the Country18

Differences between Islamic banking and conventional banking19

Financial crisis and Islamic banking22

The Bank's Role in the Global Financial Crisis23

Challenges and opportunities for Islamic banking in Middle East26

Globalization Services29

The emergence of the New Challenges31

Global Strategic Initiative31

Immune reinforced by Intrinsic Features of Islamic Finance32

Islamic finance: Crisis proof?33

CHAPTER 3: METHODOLOGY37

Research Strategy37

Data Collection37

Analysis of Data37

Interview Questionnaire38

Case study38

Informed Consent41

Confidentiality42

Validity42

Reliability43

CHAPTER 4: DISCUSSION AND ANALYSIS45

Size & Growth46

Innovation and Growth46

Case study Analysis47

Al Baraka Bank47

The Royal Bank of Scotland Group49

Analysis of Case Study49

The Nature of Islamic Banks49

Definition of Islamic banks51

The importance of Islamic banks52

CHAPTER 5: FINDINGS AND CONCLUSION55

Comparing Islamic and Conventional Banks55

Islamic and Conventional Banks during the Crisis56

Findings56

Recommendations58

REFERENCES60

CHAPTER 1: INTRODUCTION

Islamic Banking

The roots of Islamic banking services that focus on acceptance of deposits and refusal to usury in the days of the Prophet (Peace be upon him). At that time, people deposited money to the Prophet Muhammad (Peace be upon him), or to the Abu Bakr may Allah be pleased with him, the first Khalifa of the Muslims. However, Islamic banking in its present form began to emerge in the late sixties of the last century, when several Muslim countries worked to develop the idea into practice. As some forms of Islamic banking emerged in the seventies of the last century, but faced a number of problems in terms of total commitment to the foundations of Islamic law. During the same period, work began on the development of the foundations of Islamic accounting, which is a vital tool and key to the success of Islamic banks. The first meeting of the Conference of the Islamic Organization was held in 1973 in Jeddah and discussion of the suspension of interest rates were defined that invented new financial system based on the teachings of religion (Carvallo, 2005, ...