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which openly coordinates its policy with the International Monetary Fund and other international organisations� ( Warde , 2000 , p . 107 )
Viewing this from the dominant neo-liberal development perspective , this move towards the standardization of financial practice leading to the removal of regulatory barriers and enabling the free movement of capital and the rapid expansion in multinational banking must be looked upon as a fundamentally positive development . However , there are several problems . The growth in foreign banks affects the profits of domestic banks whose link to societal growth is hindered through an initial reduction in lending . This has also induced further problems in the medium term by forcing the local banks to invest in riskier ventures ( Gnos & Rochon , 2004 , 2005 ). Moreover , the increased internationalization of banking standards favors large international financial actors , often to the detriment of smaller banks . For example , in relation to the recent economic downturn , Basel III ( through the BCBS ) initiated a series of regulations designed to stabilize the macroeconomic system by improving resilience at the banking level . In doing so it has increased requirements in the amount of capital held ( capital buffers ) and quality liquid assets ( such as the LCR or Liquidity Coverage Ratio ), which have placed significant restrictions on the ability of smaller banks to expand their businesses and has ultimately affected access to credit , particularly for those in need of finance for either consumption or business purposes . As Avgouleas ( 2008 ) writes ,
… access to credit , insurance , and savings facilities can reduce the vulnerability of the poor to a number of external shocks , including bad harvests or health difficulties . The mobilisation of savings also creates an opportunity for re-lending the collected funds into the community strengthening community ties . ( Avgouleas , 2008 , p . 66 )
Nevertheless , while the latter statement identifies with a type of ethical financing appropriate under Islamic reasoning , Islamic financing continues to find itself drawn to conventional , profit orientated methods . This will be discussed in more detail below , identifying with the debates surrounding the key tools of Islamic finance and Islamic banking in particular .
Islamic Banking and Financing : Background and Variety
In 1963 , one of the first recognized Islamic banks named Al-Idkhar Mahalliyah in Mit Ghamr , Egypt was established . It was adapted from the German Sparkassen savings bank ( based on a social model ) and provided access to credit for rural and other small businesses built on non interest banking and profit sharing . It also promoted charity payments or ����� through accounts , which paid a percentage of individual deposits to local charities ( Klarmann , 2007 , pp . 93-94 ; Tripp , 2006 , p . 136 ). By the 1970s Islamic banking had branched out across the Middle East , largely through the surplus capital gained from the oil industry in the Gulf state region and the subsequent demand for financial mechanisms to purify earnings in accordance with Islamic values . Currently , the Islamic financial market spans across Europe , Asia , Africa , and the Middle East offering Islamic accounts , loans , insurance , and securities through both Islamic institutions and Islamic “ windows ” within conventional institutions . In accordance with the Global Islamic Financial Report for 2011 the estimated global market value of Islamic finance was $ 1.14 trillion and growing annually at a rate of 10 % ( Dar & Azami , 2011 ).
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