About Us

Why

There are 1.2 billion Muslims in the world, and 6 million in the United States[1], yet little is known about a relatively new and rapidly growing area of finance administered in compliance with Shari'ah law. Shari'ah (Islamic) law lays down a code of ethics and conduct under which Muslims are instructed to live their lives. However, it is very difficult for Muslims to comply with the financial restrictions enunciated in the Qur'an and Sunna because the Islamic financial industry is still undeveloped or absent in many areas of the world.

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Mainstream financial institutions have not yet fully recognized the importance Muslims place in following their religious proscription of paying or receiving interest (riba) and avoiding speculation (gharar). As a result, Shari'ah-compliant financial products are not widely offered. Even where they are offered, there is a lack of basic understanding about how non-interest-based products operate Worldwide, there is a thriving market for Islamic financial products, particularly in the Middle East and South Asia with the UAE, Bahrain, Malaysia and Brunei vying to become international centers of Islamic finance. Many multinational Western banks have begun to recognize the growing demand for Shari'ah-compliant products, but only a few of them have entered the market within the United States. Islamic finance institutions (IFIs) are estimated to manage between $300 and $750 billion worldwide, and this figure is growing at 15 percent per year[2]. Islamic bond (sukuk) issues reached almost $16 billion through the first three quarters of 2006, compared with only $11 billion in all of 2005[3].

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In the United States, however, the Islamic financial industry has remained small. In the market for banking & finance products, small community-based banks offering Shari'ah-compliant financial products (some for almost 25 years) have been quite successful. Many of these banks offer their products across the country. However, their physical presence is still limited to the areas in which there is a large Muslim population (Chicago, Northern Virginia, Michigan, St. Paul/Minneapolis, Southern California and New York)[4].

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On the investment side, there are a few rapidly growing mutual fund companies that use the Dow Jones Islamic Market index to screen companies for Shari'ah-compliance. These funds, while representing only a small part of the mutual fund market, they are growing quickly and represent an important broadening of the socially-responsible mutual fund spectrum.[5]

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The main area in which Islamic finance has entered the United States is in academic institutions. Harvard University has a well-developed Islamic Finance Project (IFP) under the law school, which brings in scholars from law, economics, business and Islamic studies together to study the development of Islamic finance. Since 1997, the IFP (previously the Harvard Islamic Finance Information Project (HIFIP)) has hosted an annual conference, the University Forum on Islamic Finance, where current research in Islamic finance is presented and discussed. Since 2000, this conference occurs biennially.

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Worldwide, Muslims hold $1.5 trillion in both Islamic and conventional financial institutions and this wealth is growing at 15 percent per year[6].

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