Islamic Economy : Its banking and financing instruments

Every country sets up their own rules and regulations to settle their socio-economic issues or how they allocate their resources among thepeople. This is called economic system. Countries mainly follow four major economic systems. Capitalism, socialism, Islamic economic systemand mixedeconomy. Banking and financing are the parts and parcels of any economy. Every economy has its own rules, regulations and norms to control its banking and financing system. This thesis is focused on Islamic economic system, its banking and its financing instruments. Islam was introduced to the world 1400 years ago. Muslim people believe that their Holy book of Quran is the complete guidance of every aspect of the life even their socio-economic activities. Muslim people follow Shariah laws which arederived from the holy book and teaching of Prophet Mohammad. Islamic economic system is a set of guidance complying with Shariah laws to perform any financial activities in a country. As Islam was first introduced in Arab lands so Islamic economy is mostly followed by Arab countries. After 1960 this age-old economic system started to flourish from Arab lands to rest of the world. Being modernized Islamic economic products already established an influential market in Asia. Slowly and steadily Islamic banking and financing products are taking attractions of Europeans and going to be a strong alternative of traditional banking and financing. Islamic economy is unique in nature as it has some strong principles to follow. Avoiding interest is most influential. Whereas other two economic systems have interest-based banking and financing system, Islamic banking and financing is completely opposite. It deals with money but avoids interests and offers profit and loss sharing financing. This system doesn’t allow gambling in business. It prohibits investing in alcohol, pork, pornography etc. Like all these restrictions there are so many ethics and moral issues in Islamic finance. Islamic banking has unique financing products such assukuk, takaful insurance etc. Islamic finance is flourishing, and it has good potentials but still in Europe it is still far behind in competition with traditional banking system. People are ignorant on this issue. This thesis will enlighten them and introduce all the Islamic financing and banking and products. I will describe the future of Islamic banking and its financing product in Finland in the last part of the thesis with some analytical data which I got through a quantitativeresearch on local people of different age, professions, religion