L’Osservatore Romano (2009), stated matter of fact a few years ago: “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service”.

1.2 Current Situation

Today Islamic banks are operating in nearly all Muslim countries and many non-Muslim countries. This has been so ever since the 1970s when Islamic banks first emerged in the Middle East. Unlike conventional banking industry, the Islamic banking industry provides only the Islamically compatible financial services for their customers. Therefore, governance according to Islamic requirements is essential to the system. A well-known saying in the industry goes “An Islamic Bank is as good as its Sharia Board”. The Sharia board determines what products such a bank may or may not offer. This is a key feature of Islamic banking industry which distinguishes it from the conventional financial system.

Conventional banks on the other hand have been established on unbridled capitalistic principles based on interest which is unacceptable in Islam (Quran 2:275). Thus Muslims have had little choice but to establish their own financial institutions under Islamic principles and not because of any desire to be exclusive in any sense. In fact Islamic banks promote their products and services to all, irrespective of their religious affiliation while leading conventional players have also set up Islamic windows to fulfil the religious requirements of their Muslim customers.