| Over the past decade the Islamic finance sector internationally has grown steadily and rapidly. However, Islamic banking has been much slower to catch on in the United States, due in large part to rigid regulatory standards and lack of legislative accommodations made specifically for the industry. Still, a handful of banks and finance companies have dedicated themselves to the legal struggle of developing products and contracts that will comply both with religious law and with US regulations designed with interest-based banking in mind. This paper examines how Islamic finance has developed in this country, and how the financial regulatory system has treated the new products being offered by Islamic finance providers. The main focus is on how financial organizations offering Islamic finance products (be they banks, finance companies, or non-profit organizations) developed the products they offer so as to adhere to religious law while still complying with existing financial regulation. What is revealed is a willingness on the part of government officials and regulators to accommodate certain Islamic finance forms in order to serve what is perceived to be an "under-banked" population, namely those Muslims who consider conventional borrowing to be religiously prohibited. However, as of yet, Islamic contract forms have been adapted to the current regulation rather than that regulation changed in any way to accommodate Islamic finance. As the industry continues to grow there will arise issues that will not be able to be addressed in a manner acceptable under both Islamic and current US law. In these cases further negotiation between finance providers and regulators will have to take place to find a place for Islamic banking under the law, or perhaps to seek legislative changes that would grant changes appropriate to Islamic finance products. |
