Islamic financing companies have been a significant force in the financial market since the early days of Islam. Although there is nothing to suggest that the use of these companies has been restricted to countries that are Islamic, the role of the finance industry in the Islamic world has not been neglected.
As a consequence of this history of Italian finance companies having had a major impact in Islamic lands, it is no surprise to find that most Islamic countries, including Pakistan, have had their own banking sector. But the development of Islamic banking and financial markets has meant that these markets have also become an important source of revenue for Islamic finance companies, as they now compete with commercial banks for finance from Islamic customers. This is in a country where the financial sector is predominantly Islamic and where there are some very high levels of unemployment.
The rise of Islamic finance companies in India as well has led to the emergence of new players in the finance industry. Although the Indian economy is largely secular and has been growing at a much slower pace than other parts of the developing world, the growth of Islamic finance companies has seen an increase in the number of companies that are opening their doors in India. Of course, these companies have their own interests and that includes being able to serve the needs of customers and expanding their presence in areas where such companies cannot operate at its current scale. Many new companies have entered the Indian financial services market since the global financial crisis, as many traditional financial players have become increasingly reluctant to lend money to business houses based in countries such as India.
However, despite the growth of Italian and other Islamic financial companies in India, there are a number of reasons why the finance industry in that country is dominated by commercial banks and other financial institutions that are not based on Islamic principles. For instance, in many countries, Islamic banking has an important role to play, and the role it plays is different from the one played by commercial banks. As mentioned earlier, Islamic finance companies have had an important part to play in the expansion of Islamic finance markets in the UK, but the role of commercial banks is much larger in most developed countries.
Another difference is that while many Islamic finance companies have a wide range of products that they offer, most commercial banks concentrate on providing a certain product line or a single product line to their customers, and do not allow their customers to provide them with advice or recommendations on other alternatives. This is in stark contrast with the financial services provided by Islamic finance companies. Some commercial banks also refuse to accept credit cards that are issued by companies based in Islamic countries, which may have an Islamic origin. In many cases, customers have to apply to a special branch or division of a bank to obtain these cards, even though there are many different methods of doing so.
As mentioned previously, Italian companies have had a major role to play in the creation of Islamic finance markets in countries such as Pakistan, but commercial banks and other commercial banks are also responsible for the expansion of Islamic finance in India. In addition, the lack of knowledge among consumers, both Muslims and non-Muslims, about Islamic finance products and services means that the companies have had to rely on local Islamic brokers who specialize in Islamic financial products and services in order to gain local customers. Although the role of the broker varies in countries like India and Pakistan, the role is still significant in some Muslim countries such as India, especially if the client is new to the market and is not completely familiar with Islamic finance. However, the role of the broker is only one of several factors that contribute to the low level of interest rates charged by Islamic companies in India, despite the fact that the products offered by these companies are not very similar to those of commercial banks.
Even though Italian companies have developed in such a way that has allowed them to gain significant market share in many markets, they have also attracted many investors who have bought the rights to offer products from Italian companies in other countries. This has resulted in the opening up of more financial markets for Italian companies in the Middle East and Eastern Europe.
Islamic companies have grown substantially in the last decade in both size and scope, but commercial banks have not only managed to expand their market share to large cities around the world, but are now able to offer consumers with highly attractive financing solutions that have helped to drive down interest rates. Some companies have even been able to offer their clients competitive interest rates because they have been able to develop effective marketing campaigns that have successfully brought in many new customers and clients. Commercial banks and other Islamic companies have also managed to reduce risks, which has contributed to lower interest rates. by taking out extra risks in the form of “non-traditional” products such as mortgages, loans and business lines of credit, which were previously associated with Islamic finance companies. These companies are now providing consumers with new ways of making money for themselves and their families without worrying about the effects it will have on the global economy.