The principal objective of this work is to foster a better understanding of the essence of Islamic finance. For perhaps the first time - economists, practitioners, regulators, and students have an in-depth guide to the advanced concepts of Islamic finance, which has deep historical roots and a promising role in rethinking economics in the future. This book articulates an authoritative analytical approach to the theory and practice of Islamic finance.

This paper argues that risk sharing is an effective method of expanding participation of agents in economic growth and development and more effective sharing of fruits of prosperity than risk transfer that currently dominates financial systems. Kuala Lumpur Declaration of 2012, by a group of leading Shari'ah scholars and Muslim economists, considers risk sharing as the essence of Islamic finance, a litmus test of which is its ability to promote financial inclusion and asset-building capacity of the poor and thus better sharing of prosperity. The mobilisation of financial resources toward productive activities through risk sharing enables the Islamic financial system to actualize economic justice and social participation in an efficient manner. The asset-backed equity-financing nature of Islamic finance is conducive to financial system stability because returns, which can only be known ex post, and thus shared on the same basis, are not divorced from risk.