Trends and Challenges in Islamic Finance: A case study of Switzerland

Sacarcelik, Osman

Zusammenfassung

Islamic finance, which was a niche market not longago, is on the rise and has attracted increasing interestin both predominantly Muslim countries and theWest alike. Major international financial institutionsare already active in this industry. Various contractualtypes and structures derived from classical Islamiclegal and commercial concepts have emerged, basedupon the principle of prohibition of "riba", which isgenerally interpreted as a prohibition of interest, aswell as other principles of the Sharia (Islamic law)as interpreted by religious scholars. A wide range offinancial products, conforming to these guiding principlesand provisions, and frequently replicating instrumentsavailable in conventional finance, presently,span from savings accounts and credit facilities to investment funds and Islamic investment certificates(sukuk). However, the implementation of Shariacompliantfinancial concepts and instruments withinsecular legal and regulatory settings as well as theirintegration into international financial markets posesunprecedented challenges. These include the classificationof Sharia-compliant instruments under existinglegal, fiscal and regulatory frameworks, the roleof religious scholars within the governance structureof Islamic financial institutions and conflict of lawsproblems. This paper will explore these multi-facetedissues by focusing on Switzerland as a case study.Resolving these challenges will play a decisive rolefor the future development of Islamic finance, bothwithin and outside the Muslim world.