Islamic finance and its relevance to Canadian financial system

The study examines the concept of Islamic Finance and its relevance to the Canadian Financial System. Islamic Finance has been practiced successfully in the Muslim countries for the last few decades and is now migrating into the western financial system. An analysis of Islamic banks compared with conventional banks shows that Islamic banks are less volatile in terms of profitability indicators and more liquid. A comparison of Islamic mutual funds compared with conventional mutual funds shows that performance is as good as conventional mutual funds, given that they are passive funds they do not attract much trading costs. A study of development finance institutions like Aga Khan Development Network (a microfinance program) shows that a microfinance program rooted in Islamic finance can perform as efficiently (in fact better) compared to a conventional microfinance program. --P. iii.