Islamic banking and finance is becoming one of the most significant aspects of the modern global financial system; because it is a fast-growing industry that has developed rapidly within a few years from a niche industry to a global force to be reckoned with in the international arena.

Islamic Finance, developed during the 70’s in the Muslim countries, is experiencing an increasing popularity far outside the Muslim World’s frontiers. In a world where the dominance of the capitalist economy is obvious, the development of a system where the main principle is the exclusion the interest rate comes close to being an exploit.

At first, Islamic finance has been implemented in the Western World mainly to benefit from the advantages offered by European financial centres such as the Luxembourg and Switzerland. From this first tendency, only the corporate and private banking clients have taken advantage of. It is only recently that retail services started to be offered on the Western territory, conscious of the increasing economic power of the different European and Balcan Muslim communities.


The Muslim communities settled in Europe have different origins and migration stories. They have however the common ground of being newly installed in their host country, claiming at most fifty years of presence. They are mainly characterized by a religious revival and a desire, pronounced even deeper for the new generations, to live in compliance with their faith. This search of a particular identity has resulted in the emergence of a niche market with an exceptional potential: the ethnic market and more specifically in a Muslim context, the “halal” market, the word “halal” meaning “compliant to the Islamic law”. In a context where Islam is a minority religion, Muslim immigrant populations tried to adapt their environment to their religious values. The first market influenced by Islamic rules is the food sector, especially the meat industry.

This growing market illustrates two important facts: the first is that the Muslim population is increasingly considered as an important potential market with specific needs. The second is that the building of a European identity of the Muslim community is reconciling capitalist consumption norms and Islamic values.

Initially limited to the food industry, the halal market is in fact much bigger: alternative sodas, clothes, music… and finance. In the field of finance, this objective of conformity implies the impossibility for Muslims to use the majority of financing and investment products available on the market, as most of them are based on the paying or receiving of an interest fee. 



As basic fundamental of its functioning, Islamic finance rejects any source of unjustified wealth creation: one of these sources considered as unjustified is the payment and reception of an interest rate fee, as Islamic recognizes only two roles to money: exchange middle and a unit of value and does not legitimate the role of money as a “value reserve”. Therefore, it cannot accept the traditional financing system based on a predefined remuneration, the interest fee as price of the capital.

The first Islamic economists defined and built a parallel financial system based on a participation finance, where the money will become working capital only when it is linked with the evolution of an economic activity or with the value of goods/services. Its yield will depend on the principle of profit and loss sharing, principle that links the profit of a transaction to the achievement of an economic activity.

This principle modifies the way a bank is organised: being a financial intermediary between its investing and financing clients, the relationship between these two parties becomes an investor-entrepreneur relation based on the profit and loss hasting instead of a predefined interest margin.

In this framework, generally the Islamic banks and specifically we at United Bank of Albania are continually trying to deploy new technics based on initially commercial contracts that were adapted in order to meet investment and financing needs of our clients.

The economic system of Islam is the collection of rules, values and standards of conduct that organize economic life and establish relations of production in an Islamic society. These rules and standards are based on the Islamic order as recognized in the Koran and Sunna and the corpus of jurisprudence opus which was developed over the last 1400 years by thousands of jurist, responding to the changing circumstances and evolving life of Muslims all over the globe. 

  • Today’s trade and commerce in the whole world is run on the basis of interest based debt. If we look at the money and capital markets in any country we find that they are basically markets for exchanging financial obligations and receivables.

    It is no wonder that just the mere thought that interest rate may go up (or down) will bring havoc to all sectors of the economy. Standard economic analysis tells that interest rates play important roles in the economy.

    Firstly, that it provides incentives for savings, and secondly that it performs an allocative function with regard to capital. 

  • Usually, a main question is raised for discussion: Does the fact that Islam prohibits interest mean that there is no time value of money in the Islamic economic system?

    The answer is negative. Shari’ah does recognize the time value of money.

    There is ample evidence to show that monetary value in many Shari’ah prescribed transactions is attached to time.

  • Policies that are used to determine the extent of risk-taking of insurance operators against the payment of certain premiums are known as underwriting policies. The amount of liability to be accepted and the extent of coverage fall under the underwriting policies.

    There must be adequate measures to ensure that the underwriting policies and investment strategies are Shari‘ah-compliant. Investment of insurance funds should be made in ethical businesses that do not cause harm to people or the environment.

    In addition, ethical considerations in takaful extend to investment in businesses or products that do not contradict the Shari‘ah. Both the process and the end product must be Sharī‘ah-compliant.

    For instance, investment in breweries and casinos are forbidden in Islam. In a similarity, insurance underwriting policies must not contradict the Shari‘ah. These can be realized through the setting-up of a functional Shari‘ah board to guide and approve underwriting policies, investment strategies, and the operators’ products.


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