Islamic banks are facing challenges to sustain the growth they have experienced so far. In order to remain competitive, Islamic banks have to get back to their basic goal of providing Shariah-compliant financial alternatives to the Muslim population.

Since its official launch in the 1970s, Islamic Banking has experienced rapid international growth and acceptance. Today, Islamic financial products are available in nearly all Muslim majority countries as well as other developed and developing countries, including India, Singapore, South Africa, the UK and the US.

However, while the system continues to grow, there are some critics who are questioning its long-term sustainability. A common mistake made by detractors is to compare and evaluate the Islamic banking system with conventional banking principles. These critics fail to grasp the principles guiding the Islamic banking system and the context in which this system operates. It is, therefore, important at the outset to differentiate between the capitalist economic system and the Islamic economic system under which Islamic banks operate. In a capitalist system, capital and entrepreneurs are treated as two separate factors of production. The return on capital is interest, whereas the entrepreneurs' return can be profits or losses. While interest is a fixed return for providing capital, profit can only be earned after distributing the fixed return to land, labor and capital (in the form of rent, wage and interest). Thus, the capitalist system seems to favor capital investors by providing them a secure return while the entrepreneurs bear the risks of incurring losses and still making interest payments on borrowed capital.

Analyst Magazine, Islamic Banking, Islamic Financial Products, Islamic Economic System, Capitalist Economic System, Islamic Market, Capital Investors, Islamic Real Estate Investment Trusts, REITs, Islamic Financial Services Board, IFSB, Conventional Banks, Islamic Market.