Reviewing a little bit of the backlog of articles I have that I passed over in the past few weeks, I found two that I think get at an important but difficult topic with Islamic finance: how open Islamic finance is to non-Muslims. The first article was one from Rushdi Siddiqui discussing somewhat controversial comments from Badlisyah Abdul Ghani, CEO of CIMB Islamic, that conventional banks should not be allowed to issue sukuk (except for multilateral development banks).
Rushdi counters with a number of good articles about why scholars have allowed conventional banks to issue sukuk and for Islamic banks to use conventional banks as counterparties for their commodity murabaha. Another article comes from Faizy Syed, who focuses his article on India, with reference to other countries where Muslims are in the minority, is more concerned with the role Islamic finance can play within non-Muslim majority countries.
I have a slightly different view from either, but that does not mean it is necessarily contradictory of their perspectives. Islamic finance is in fact present in many countries whose Muslim minorities may be too small to support an indigenous Islamic finance industry, and in many of these countries the Islamic finance industry is not focused on the local market. For example, Ireland and Luxembourg, are often held up as Western nations trying to attract Islamic finance. However, they are no more interested in attracting Islamic finance for a domestic purpose except to bolster their status as offshore locations to facilitate international finance.
These countries all see Islamic finance as no threat, and really no different in purpose in the economy from conventional finance and see the potential to expand their market share compared to the Cayman Islands, Guernsey or Bermuda as low-tax-rate countries that are also used to faciliate international transactions. Both Ireland and Luxembourg are viewed as attractive because of their experience serving as domiciles for UCITS directive compliant funds offered across the European Union.
While in that sense, Islamic finance has integrated itself in the international financial market, which is good for its development (something that Rushdi mentioned as well). However, the other idea that is often expressed is that Islamic banks because they are guided by Islamic principles are therefore beneficial for all people, including non-Muslims. I think the connection is more tenuous there. Most Islamic (retail) banks operate to provide Muslims with Shari'ah-complaint financial services, which is good on its own by promoting greater financial market integration for Muslims.
There are also widely cited examples, such as the high penetration of Islamic banks in the non-Muslim population in Malaysia. In many cases this has arisen because Islamic banks can offer cost-competitive products and may also include some provisions (such as non-recourse mortgages in some countries) that conventional banks choose not to. This is the best way I think for Islamic banks to expand their take-up by non-Muslims.
One of the least effective, in my opinion, is to say that Islamic banks were insulated from the financial crisis by virtue of their inherent 'better-ness', or by repeating claims that Islamic banks are just 'better' than conventional banks (even while the Islamic banks are replicating the conventional banks' business models with higher fees). There are many intriguing possibilities for Islamic finance that are appealing to many non-Muslims (like me), but they are based on specific cases, not broad generalizations.
One of the things that allowed the financial sector to take over the American (and to some degree global) economy before the financial crisis (as measured by the share of total profits generated by financial institutions compared to the economy as a whole) was that it believed it was (to borrow from Goldman Sachs' CEO Lloyd Blank phrase) "doing God's work". That it was inherently productive to the economy as a whole. Instead, the correct description is that finance has a purpose which is productive for society as a whole (allocating capital to productive enterprises). When it strays from this role (for example, by encouraging subprime mortgage lending to fill securitizations and re-securitizations, or by contributing to a real estate bubble topped off with newly created islands shaped like palm trees), it is not acting productively.
There is nothing inherently better about Islamic finance than conventional finance, and asserting its superiority compared to conventional finance as if the two could be compared each as a single monolith, is a fruitless discussion (and one that is unlikely to expand its appeal for non-Muslims who may not really understand what Islamic finance even means). There are good products and bad products and the former can offer something to everyone that will help finance return to its productive roots and perhaps also improve it. The latter, however, are not any better than the bad conventional products, or really any worse. It is just that the conventional financial industry has a much greater reach so the bad products in conventional finance spread faster and more widely and thus have a much greater impact on the global economy.
Instead, the path forward, if creating finance that is good and beneficial for all, is to ask "can Islamic finance offer a product that is cost competitive with conventional finance, and which offers something of value to consumers that conventional finance does not?". If so, let's proceed post-haste. If not, there may still be value (e.g. integrating Muslims into the financial system), but just recognize that the potential for the product to get widespread appeal among non-Muslims. It is not necessarily a bad thing to develop a product that may only appeal to Muslims, if it can bring them into the financial system in a way that benefits them. But this is a far cry from the idea that Islamic finance in its entirety is inherently better than conventional finance and therefore should appeal to all people.