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Below answer taken from an article i read
Islamic banks, it is still not popular. There is a need to identify some major challenges this industry needs to highlight in order to more popularise Islamic finance. The first thing is Islamic finance must follow a big principle namely; money cannot be rented. Its nature is not something available for renting given its feature of having currency value. Money in itself doesn’t reproduce more money or value. Its nature changes upon usage. This is a very important key to differentiate Islamic finance from the conventional. Second point in the process of popularising is education. The education of riba’ must begin from childhood. Therefore we must start with educating the mothers in order to educate their future heirs. Thirdly, media has a huge impact on today’s globalization of marketing. This medium is therefore another vital instrument to enable Islamic finance to be introduced into more global perspective.
“Commodity Indexation”. Financial sector should be trained or exposed to apply the monetary discipline and theory based on Commodity indexation applied by the Prophet. All prices should be based on indexed by comparing with the price of commodity. Since money existed, pricing has become something determined by the market without any benchmark. The volatility of pricing occurs due to the fluctuating price set by the market players. This has caused in certain cases, the price of the asset is either over-priced or under-priced. The prophet has introduced the method of benchmarking the price of assets against the measurement value of precious metals and staple commodities. During the talk, Dr. Yahia has presented the study of the real commodity price indexes using reference commodities to price homes, commodities and agricultural products.
Responsible Finance is a term chosen to promote everyone not only Muslims but also non-Muslims to participate in the banking system. RF Banking is system work without any involvement of renting money; instead we are in the business of investing money. RF Banking treats the customer as an investor not a follower. The customers have the right to be aware of the investment they are involved in.
popularize RF banking in the West through LIEN, the US market is the most suitable market for Islamic finance. Americans are investors who take thorough consideration on the investment they are involved in. They would like to understand what they are buying and selling. The key to attraction of non-Muslims towards this new system is influence and not force. Influence through advantage for them, influence through thorough explanation on the purpose and the system of RF Banking. The key is to be sensitive towards the market.
LIEN can be introduced as a new system for finance as an implied co-ownership. According to jurists LIEN was translated as RAHN which is pawn. There is a major different between Lien and Pawn. Lien allows the original owner to co-own the property without losing the usufruct. Pawn on the other hand, the original owner loses the ownership of property and its usufruct. This is applied by the al-Barakah bank since the 1980s.
These are the 4 challenges we as Islamic financiers need to consider in further develop Islamic finance.
Islamic banking is sophisticated enough structure, which in turn affects the development and growth of the Islamic financial institutions to the inadequacy of the existence of legitimate government legislation and regulations that govern the conduct of its work
The fear of a large section of which no compliance with the law of the different legal and regulatory frameworks that govern them, and these risks exclusively in Islamic finance for fear of profit achieved by the source of the institutions is it OK for the law
Labor shortages expert in Islamic banking, it depends on the experience of commercial financial institutions
Retaining substantial liquidity to meet the requirements of its customers and this affects the lack of investment and flows of different revenues, as well as the small size of the Islamic financial market and strong oversight and secured from suspicious operations into the west of the financing of terrorist operations, especially after the events of September 11
