Present day Islamic finance has grown far from domestic markets to emerge as one of the fastest growing financial markets in the international field. Despite many regulatory burdens, some of the world's most sophisticated commercial and legal jurisdictions are increasingly attempting to address the needs of Islamic investors all over the world. There are however, still many hurdles for Islamic banks to jump in order to educate the public and disassociate Islamic Finance from the stigma of funding Islamic radicalism and terrorism – which today plagues the industry from gaining a greater market share in the global financial services sector.
The rising defaults on subprime mortgages in the United States in late 2008, triggered a global crisis for the money markets and has no doubt shaken the confidence of depositors around the world. This presents Islamic financial institutions with a unique opportunity to increase market share. Many depositors have become skeptical of financial institutions and are looking for an alternative to the monopolistic way in which conventional Western banks operate.
Islamic finance is a centuries old concept but a very young discipline in the academic sense. It lacks the required extent and level of theories and models needed for expansion and implementation of the framework provided by the Qur’an and the Teachings of the Prophet Muhammad.
The modern Islamic banking industry should continue to evolve into a more refined and modern industry as promoters of Shari’ah-compliant investment products and their professional advisers work together to meet the regulatory, legal and judicial challenges that undoubtedly will arise.
With an estimated 1.6 billion Muslims worldwide, demand for advanced and sophisticated Islamic products has risen in recent years. The industry and its advisers, together with many different regulators, should continue to create legal structures within which to operate in a secure and Shari’ah - compliant manner in a variety of jurisdictions around the globe.
Islamic banks face many roadblocks stemming from legal structure between the principles of Shari’ah law and Western law. While compliance to Shari’ah is paramount for Islamic banks, the law governing Islamic banking transactions may not necessarily give any consideration to Shari’ah.
For many investors today, Islamic Finance presents many circumstances where unawareness, fear and confusion arise as to the form of the laws in Islamic financial system and its instruments. More sophisticated public relations and awareness techniques should be implemented by Islamic financial institutions to educate potential Non-Muslim investors, as fear and distrust stigmatizes many Western investors in investing in Islam.
The main research objective of this thesis and the survey is to analyze and explain the general public’s perception in terms of the feasibility of Islamic Finance and provide recommendations to the industry to enhance future growth. The paper is divided into the following sections: An introduction to history of the Islamic banking system and a look at its main practices, a historical literature review of practices and policies including the legal risk and the methodology that was used to analyze the Islamic Financial system compared to the conventional Western banking system in the online survey. There are four research propositions and the results and my analysis follow that.
This paper concludes by elaborating on corporate governance practices and provides recommendations exposed to institutions involved in Islamic banking and Finance. As the multitude of transactions that encompass the industry, issues of the capacity of the parties to enter into a contract and its enforceability, uncertainty in laws, regulations, and legal actions pertaining to Shari’ah; as well as the legality of Islamic financial instruments.
To begin analyzing the legal issues involved in this industry one must look at the history of Islam as it pertains to the laws and principles that attempt to guide the believers of Islam and how that has translated into in to multi-billion dollar world-wide industry practiced in over 70 countries by more than 300 financial services institutions.

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