Abstract
The Islamic Finance organizes financial services in accordance with Islamic Law. The purpose of this paper is to identify the unique challenges facing Islamic finance in compliance with Islamic law in the ambit of conventional system of banking and finance, and putting the case of Islamic finance as a role model. Islamic finance has its basis in using transaction types which are in accordance with Shari‘ah principles like prohibition of rib┐, gharar (an unacceptable level of risk), maysir (gambling), and forbidden things, such as wine, blood and idols. The background of Islamic finance with its roots from the era of Prophet (PBUH) and a relationship in devising tools of financial transaction in comparison with conventional system are part of this study, giving an insight into Islamic financial Law. The concentration of Islamic finance has been in Persian Gulf and Southeast Asian countries in its phase of origin but later it expanded globally and shown high growth rates in international market. There are opposition faced by growth of Islamic finance on the grounds that it has a hidden agenda to counter US economic sanctions and having terrorist financing or political agendas. While the advocates deny all such assumptions and put the argument that it is an alternate method to generate capital and provision of navel business opportunities and economic progression.