Islamic Banking Controversies and Challenges

The concept of interest free financing was practiced by Arabs prior to the advent of Islam, and was later adopted by Muslims as an acceptable form of trade financing. While the system had been used on a small scale for centuries, its commercial application began in 1970. Many countries in the world are now experiencing dual banking system, where the banks are involved in alternative form of banking along with conventional banking. Islamic Banking is based on two main pillars; one is economic Philosophy of Shariah and second is monetary theory of Islamic economics. Despite a substantial growth of Islamic banking in the last decade, there is not every thing right. There are some controversies and challenges which are prevailing about different concepts of Islamic banking and which need to be addressed. This paper basically examines and explores the different controversies which are in the minds of people which need to be addressed. The author has also tried to suggest suitable solutions to overcome these challenges and controversies.