Author(s):
Mohammed Buba, mohammedbubapj@gmail.com,
Abstract:
Islamic funding institution represents an inimitable method of financial transaction without an element of
interest either paid or charged; hence its popular designation as being “non-interest Institution” finance.
This financial institution has started to breed in international finance across the globe, with some
concentration in few countries. Nearly 20 percent annual growth of Islamic finance in recent years seems
to point to its resilience and broad appeal, partly owing to principles that govern Islamic financial activities,
including equity, participation, and ownership. In theory, Islamic finance is resilient to shocks because of
its emphasis on risk sharing, limits on excessive risk taking, and strong link to real activities. Islamic
banking system operates on two principles; Mudarabah and Musharak. Many Muslims do not put their
money in the bank thereby encouraging idle cash. Several literatures were reviewed to assess different
authors view on Islamic banking impact in a country’s banking sector. The macroeconomic policy
implications of the rapid expansion of Islamic finance are far reaching and need careful considerations. The
paper recommends adequate supervision and normal prudential guidelines to streamline its operation. The
paper concludes that Islamic financial Institution as a part of a financial sector development strategy should
be encouraged by regulations and supervision authorities, that accommodate its outward appearance while
ensuring that their unfamiliarity is not exploited to defraud clients.
IWF