Islamic finance’s phenomenal growth owes to the Shariah compliant nature of its financial instruments. Shariah forbids the charging of interest (Riba) and instead promulgates risk-sharing and trade-based modes of financing. The Islamic financial industry has been subject to both critique and admiration. Critics argue that Islamic instruments (bearing debt-based structures) differ from their conventional counterparts only in legal lexicon and not in economic impact. The admirers argue that such instruments, irrespective of wider economic implications, rigorously comply with ‘juristically sound’ Islamic principles.

This book aims to reconcile the above dispute. It argues that the financial impact of instruments is a consequence of the way they are priced and structured. The similarity in pricing and structures is an outcome not of the underlying Islamic financial modes but of the competitive environment in which Islamic instruments compete. Even risk-sharing and trade-based Islamic structures, if implemented in such an environment, would have a financial impact similar to that of conventional instruments.

This book has a wider appeal for both academic and non-academic audiences. It can complement undergraduate and graduate courses as an additional reading on the intricacies of Islamic financial instruments and markets. For PhD students, it would help identify future research areas. To non-academics, it offers a deeper understanding regarding the working of the Islamic finance industry.

chapter 1|4 pages


chapter 2|5 pages

The paradox of risk sharing

chapter 3|6 pages

Freedom from interest

chapter 4|5 pages

Financial crisis and Islamic finance

chapter 6|7 pages

Issuer’s choice of Islamic bond type

chapter 7|4 pages

Risk in risk-sharing Sukuk

chapter 8|6 pages

The challenge of Shariah compliance

chapter 9|5 pages

Replicating conventional finance

chapter 10|11 pages

Can Islamic banks have their own benchmark?

chapter 11|9 pages

Islamic versus conventional equities

chapter 12|8 pages

Charity in Islamic banks

A distinguishing feature?

chapter 13|10 pages

Rethinking Islamic finance

The limits of our understanding

chapter 14|12 pages

Rethinking Islamic finance

An ethical perspective

chapter 15|4 pages