MANAMA, 15 October 2007 — Islamic finance and banking industry emerged as an alternate method of investment in the global market. The present pace of growth shows a very promising future for Islamic finance, Dr. S. Nazim Ali of Harvard Law School, Cambridge, Massachusetts, U.S., said in an interview.
Nazim said that the development of the Islamic Finance (IF) industry would continue to be linked closely to the research pursued in its field.
He said that there has been a significant increase in research in Islamic finance and economics, as seen in the growing number of publications in the field.
Nazim, who recently visited Royal University of Bahrain, said: “Prior to the 1970s there were no journals or magazines devoted to Islamic finance and economics, although quite a bit was written on the topic in the form of monographs and articles published in mainstream journals. When in the late 1940’s and early 1950’s authors introduced the concept of banking without interest, the majority of people considered it a novelty. It took almost 30 years to implement Islamic banking in practice.
In the past three decades there has been a rapid rise in the implementation of Islamic finance both in the East and the West, as more and more institutions develop products and offer services.
“The development of the Islamic finance industry is closely linked to the research pursued in its field. As soon as new theories are generated by researchers, the industry picks them up and implements them. And as soon as the industry encounters new problems, they turn to the researchers to find a way to overcome them.
“A closer look at the relationship between research and the industry makes several trends apparent. Islamic finance and economics (IFE) is unique because of its interdisciplinary nature. The field stands at the intersection of economics, finance, religion, area studies, law, and sociology. Among the people who conduct research in this field are economists, who conduct empirical and theoretical studies that provide a solid foundation for the field. There are also financial professionals who address the practical problems faced by the field through case studies, product development, and business plans. There are Shariah scholars who provide the religious foundation based on established sources, such as the Qur‘an, hadith, ijtihad, and the practices instituted by earlier scholars. They endeavor to translate and rationalize the long-standing practices into contemporary usage.
He said: “There are also legal professionals who spend a great amount of time fitting financial contracts into the current legal frameworks. Because researchers come from such varied backgrounds, the ongoing research activities in the field are diverse, ranging from doctoral dissertations to articles published in popular journals to conference papers, and they deal with a vast array of subjects, from financial instruments all the way to the religious basis of Islamic banking.
Institutional trends reveal the growth and development of different organizations that in turn reflect the various areas of knowledge deemed necessary for building and supporting the Islamic finance industry.”
He added: “While nations such as Pakistan and Malaysia are important centers of IFE research, the large volume of published work, particularly in the form of journal articles, comes from outside those regions. A closer look shows that the overwhelming majority of these journals stem from Europe (including the United Kingdom), which has nearly twice as many publications as the United States. Pakistan and Malaysia are respectively the third and fourth largest contributors, but remain far behind the United Kingdom in terms of sheer volume of publications. This situation is changing now that numerous magazines and journals exclusively devoted to Islamic finance news are being published in many different parts of the world. This new development has completely changed the landscape of the research output and is currently shifting the major publications centers toward the Middle East and Asia.”