Islamic finance Essay Example | Topics and Well Written Essays - 3000 words

Islamic finance - Essay Example In this regard, the Islamic financial system with the assistance of macroeconomic models is able to conduct their operations effective in the Islamic economy. Islamic financial system came into existence in the mid-1980s wherein this system was practiced mostly in the Muslim communities that eventually nurtured trade and commercial activities in numerous nations. Islamic merchants became the brokers of trade related activities in Spanish and Mediterranean regions, which helped in promoting Islamic finance amid European financiers and capitalists. In the modern day context, Islamic finance has made a huge impact in various parts of the world, as it has been promptly growing in the financial sector. Islamic finance is not just limited to Islamic nations, but it has spread to other nations wherein the Muslim community is quite large. It has been identified that there are over 100 financial institutions using Islamic finance and the system is presently practiced in more than 45 nations. Industries using Islamic finance have witnessed a growth rate of 15% in their annual turnover from the estimation of the last five years financial performance s. Accordingly, it has been witnessed that the market’s annual turnover has grown to about 70 billion USD as compared to 5 billion USD in the year 1985. It has been further estimated that markets, which use Islamic finance will witness a growth of 100 billion USD by next century. In reality, Islamic finance commenced successfully from the time when the Islamic nations obtained surplus profit in their oil exporting businesses. It will be worth mentioning that anatomic and macroeconomic reforms in the financial system, privatisation of industries, assimilation of the financial markets and liberalisation of capital have cemented the growth of the Islamic financial system (Iqbal, 1997). The paper is primarily intended to summarise the chapter ‘The Financial System and Monetary Policy in an Islamic