Abstract

Islamic finance has experienced considerable growth worldwide interms of deposits and assets of Islamic banks over the last 40 years, but showslittle signs of achieving maturity. Almost all Islamic finance products currentlyis use are mere replicas of their conventional counterparts. This study followsthe archival research strategy of Bryman, and analyses the literatureon Islamic finance theory and products and practices in order to ascertainthe reforms needed for the maturity goal. The paper proposes adoption ofa new law regarding money, different policy approaches, new structures offinance for shifting to risk-based financing, new models, procedures and somefresh thought in order to relate banking and finance to the real economy. Itrecommends a leading role for Islamic economists for effective reforms in themonetary and credit system in order to ensure that all financing is based ongoods, services, stocks or securities representing real assets in line withthe Shariʽah principles. The suggested policy measures are expected to leadto social inclusion and harmony in the interests of all stakeholders in businessand finance transactions.