I Would like to take this opportunity to thank all those people who contributed their time and effort and provided their insight in enabling the compilation of this report, it is with much regret that all of their names cannot be mentioned individually here, however special mention needs to be made of certain individuals, without whose input this report would have not been possible.
Mr Baratha Devanarayana course coordinator and project supervisor of the Advanced Diploma in Business Management programme at the National Institute of Business Management (NIBM) for the support and advice given in content structuring and format design of the report. Would also like to mention Mrs Zeti Akhtar Aziz, Governor of Bank Negara Malaysia and Mrs Shamshed Akhtar, Governor of the State Bank of Pakistan whose knowledge and valuable insight on the Islamic finance industry as leading professionals in the field have provided the basis on which the compilation of this report has been made possible.
Executive Summary Islamic finance is a financial system based on Shariah law or Islamic law which mandates the prohibition of charging or payment of interest encourages risk and profit sharing between all parties to a contract and emphasizes the need of ethical investment which contributes to the greater good of society as a whole.
Islamic finance is now one of the fastest growing financial segments in the international financial system today with an estimated annual growth rate of 15 to 20%. Industry assets worldwide are currently estimated to be between $1. 3 trillion and its industry assets and overseas portfolios are estimated to reach 4 trillion in the medium term. Diverse financial products and services, progress in developing regulatory frameworks and enhanced international linkages are driving industry growth.
The critical success factors for Islamic finance to foster the growth of the industry, the application of these critical success factors and there potential applicability in the Sri Lankan context will be analysed, a comparison between Islamic finance and the conventional system on some basic indicators for competitiveness, social development and development finance will be made and the Sri Lankan and regional potential of Islamic finance will be analysed as the research undertaking of this study.
The progress that has been made on certain aspects of the Islamic financial system both locally and globally, the importance of Sri Lanka fostering the growth of the Islamic finance industry are some of the issues discussed in this study. As a prelude to the research part of this study the recent developments of Islamic finance both globally and locally and the historical development of Islamic finance will be looked at to facilitate an understanding on how the system has evolved from a single institution a few decades ago to a global industry with a global presence spreading from the Middle East to Asia and the West.