Islamic banking and finance globally represents one of the fastest growing financial industries. With an estimated size of $1 trillion, Islamic banking is predicted to grow at 10% per annum. With its strategic position and well regulated financial system, Australia is attempting to create conditions that would facilitate and replicate global success in the Australian context.
Islamic finance encourages mutual cooperation, generosity and risk sharing. Instead of charging interest, Islamic banks derive their profit by trading, investment or leasing. Since money is meant to be a medium of exchange and standard of value for other goods, all profit from interest payments are prohibited.
The wisdom behind prohibition of interest (usury), amongst other things, is to encourage enterprise and real economic activities that contribute to the welfare of society and reduce the possibility for injustice and exploitation. Other prohibitions include excessive uncertainty, unethical, immoral, and speculative activities some of which were the root cause of the GFC.
Since Islamic financial products must be linked with tangible assets and real economic activities, Australia’s resource related economy and infrastructure developments create superb opportunities. Moreover, its geographic position and close proximity to the 972.5 million Muslims in the Asia Pacific region are among the core reasons for Australia to become an Islamic financial hub for the region.
I invite to join my new FACEBOOK page on Islamic finance in Australia and learn more about this exciting developments.
Join: Islamic Finance Australia
Almir Colan
Lecturer (Islamic Finance)
La Trobe University (School of Economics and Finance)
