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Chapter – 1

Introduction

Finance:The core objective of the dissertation is to analyze the progress of Islamic Finance after the global recession of 2007 – 2009 and compare it with the progress in Conventional Finance. The chapter starts with the background of the research and the motivation of the researcher behind this research. After that the chapter aims to highlight the problem that will be solved by the research and states research aims, objectives and questions. The chapter also aims to highlight how the research is applicable in the current era and discusses the significance of the study. Lastly, the chapter summary is provided and next chapter has been introduced in the research.

Background of the Study

In the view of Crotty(2009), the financial services industry has changed tremendously after the global financial recession as financial sector was mainly held responsible for the crisis. The industry dynamics have completely changed and moved towards a conservative approach rather than aggressive approach as pursued earlier. The conventional financial instruments also got defamed to certain extent as they were heavily used before the crisis. In the view ofHasan and Dridi(2010), the Islamic banking products are based on profit sharing and sell of goods to the clients so they are conservative as compared to the conventional banking products which solely rely on the interest rate. The debt financing in Islamic industry is also based on profit and loss sharing or the buy & sell approach. The lack in credibility of conventional banking products led to the increase in popularity of the Islamic Finance because people now cannot survive without financial sector.

In the view of Yılmaz(2009), the Islamic finance has progressed rapidly over last few years after the global financial recession. The progress of Islamic finance is very much evident in the industry as the Islamic banks and Islamic funds have grown to certain extent after the crisis. Not only the Islamic banks and Islamic funds have grown but commercial banks and funds have also opened Islamic banking sections; almost all commercial banks have Islamic banking section at-least in Islamic countries which clearly highlights the rising importance of Islamic finance in the recent years. The term popularity refers to the knowledge and influence among the target market for any given group of finance.

Motivation of the Study

The research mainly aims to analyze the progress of Islamic finance over the last few years after the global financial recession. The motivation behind studying this topic is that the dynamic of financial services industry have changed significantly and importance of Islamic finance has increased significantly over the years. Firstly, this increasing importance of Islamic finance and introduction of Islamic banking department by commercial banks has attracted me towards the topic and motivated me to conduct study on this topic. Secondly,I am personally interested in this topic due to my interest toward gaining in-depth knowledge regarding the Islamic finance; this is one of the motivation behind the study….