Abstract

After more than 40 years of practice, the Islamic finance industryis composed of products with claim of Islamicity but questionable on theirShariʽah credentials. The industry is increasingly exposed to cynicism anddecline in popular interest. This paper restates the essence of riba prohibitionfrom an economic perspective. It evaluates the Shariʽah scholars approach tovalidation of contracts as well as the monetary authorities’ attitude towards theShariʽah content of Islamic finance transactions. It points out the advantagesof Islamic finance within an Islamic macroeconomic environment. It looks intothe problem of convergence of Islamic finance to conventional finance, andreasons behind the convergence. This study finds that several violations of thetrue paradigm of Islamic finance are because of its advantages being all externaland impossible to internalize. The paper concludes with some proposals forchecking the convergence.