A Descriptive Analysis of Islamic Finance as a Possible Alternative to Conventional Investment Management

In the Western World, prior to the financial crisis, very few people know or understand Islamic Finance or Islamic tools in the financial world. It can be seen that since 2008 every week at least one article would be published in specialized economic and financial presses on the niche market of Islamic Finance. Some columnists predict that Islamic Finance will be the only resource that will save the world from the current financial crisis. One could even read press release from the Vatican saying that the Pope Benedict XVI encourage banks to look at the rules of Islamic Finance to restore confidence amongst their clients at the time of global economic crisis . What a sudden infatuation for a tool that was almost not known outside the Islamic World until recently. In this report, I will give an overview of Islamic Finance and ponder on questions of the authenticity of this growing financial tool within the investment community. I will also present the different tools used in Islamic Finance including Takaful insurance, and present the way they work and how they differ (if they differ at all) from “regular” conventional financing. The final part of the paper will review the viability of meeting the requirements to be deemed as “Islamic Finance.”