Benefits The very idea of IB brings in ethical values to center of banking practices. It has increased banking habit in the Muslim community. Islamic investment companies have brought out some hoarded wealth, encouraged people to save more and helped Muslim entrepreneurs. At the community level, it brings them closer to the rest of humanity as it is open to all. As per scholars, Islamic finance is less prone to inflation and less vulnerable to speculation. Islamic finance is more efficient in that it allocates investable funds on the basis of the expected value productivity of projects rather than on the criterion of the creditworthiness of those who own the projects. Profit sharing principle more beneficial for depositor Criticism IB cost more due to smaller size of these institutions which makes them incur higher unit overhead costs Default in payment – blacklisting of customer : not satisfactory solution High training costs Technical and organisational problems Inadequate sensitivity to customer satisfaction Unsuitable supervision standards both internally and externally by central banks Difficulty in accessing financial services, whether that be geographically or culturally (language barriers) Labels: Islamic Banking |
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