Islamic Finance and Global Economy: Prospects and Challenges

Abstract

Islamic finance has emerged as one of the most dynamic and rapidly growing segments of the global financial system, with its assets exceeding trillions of dollars across more than 80 countries. Rooted in the principles of Sharia, Islamic finance emphasizes risk-sharing, ethical investment, prohibition of rib (usury), and avoidance of gharry (excessive uncertainty), positioning it as an alternative to conventional finance that is often criticized for fostering speculative practices and financial crises. This paper explores the prospects and challenges of Islamic finance in the global economy. On the one hand, it highlights the opportunities for Islamic finance to contribute to sustainable development, financial inclusion, poverty alleviation, and resilience against financial instability. On the other hand, it examines the obstacles faced, including lack of harmonization in regulatory frameworks, limited product standardization, misconceptions about its principles, and integration difficulties with international financial markets. Furthermore, the study emphasizes the growing role of suck (Islamic bonds), tactful (Islamic insurance), and Sharia-compliant finch as vehicles for growth, while pointing out structural, institutional, and policy-related barriers that must be addressed. The article concludes that Islamic finance, if systematically integrated with global financial architecture, can play a vital role in fostering ethical, equitable, and sustainable economic development worldwide.