Historical Development of Islamic Banking in Australia and its Role in Economic Growth

Abstract

Islamic banking functions differ from traditional financial services since it is founded on the ideas of Islamic law. One of the fundamental principles of Islamic law is the prohibition of 'riba', which refers to the charging or paying interest in financial dealings. Due to their adherence to this principle, Islamic financial services are becoming increasingly popular among Australians. It is worth noting that Islamic banking has not only grown significantly successful over the past years in Muslim countries but also in non-Muslim countries, including Australia. Numerous investigations have scrutinised Islamic banking's potential to foster economic growth. Several research efforts have indicated that Islamic financing reinforces the linkages between financial and genuine economic activities. This thesis aims to delve into the history of Islamic banking and its influence on Australia's economic expansion, underscoring its importance and relevance. Specifically, this paper examines the challenges and opportunities presented by the growth of Islamic banking in Australia and its potential impact on the financial sector. This study used a qualitative research approach and secondary data, which was analysed using content analysis. The study's findings and conclusion are noteworthy: Despite not significantly impacting Australia's economic growth since there is no significant market for Islamic finance products, Islamic financial institutions that operate locally somehow contribute to the economy by giving their employees and their families jobs. Moreover, the presence of these institutions supports the development of a skilled workforce.