Sample Essay

Islamic finance is hinged on financing of socially responsible investments, where risk sharing is the main feature. The global has been treated to an assortment of institutions offering these products either exclusively or in addition to other conventional banking products.

 Since it is market driven, the spread of Islamic finance has been stimulated by the demand for these products owing to the increasing umber of Muslims involved in productive economic activities. The increased productivity of the region and the growth of the capital exports from the regions have also compounded the amount of Islamic finance in the market.

                According to Salah (2011), a large proportion of the Islamic finance has been channeled to real estate and mutual funds, with funds established for real estate depending on the region and country. In spite of the restrictions on the utilization of the assets, the fact that they exist in different tax and judicial jurisdictions imposes certain requirements with regard to the manner in which returns, costs and taxes are handled. The fact that the investment in Islamic finance are treated in much the same way as those acquired through conventional means contributed to the severity of the impact once the credit crunch hit (Roubini, 2009). These restrictions imposed difficulties in the range of tenants, to which the properties could be leased, thereby reducing their utility while magnifying the reduction in value. The number of ways in which the properties could be redeveloped or renovated was also restricted according to the Shariah laws, significantly limiting the amount of returns from these investments. Consequently, foreclosures ensued with some of the properties suffering the loss of value; owing to the fact conventional financial assets were more versatile to the changes in the economic outlook

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