How Can Islamic Finance Help to Solve Financial Crisis

27 Oct

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The downfall in the globe financial program has given rise to intense queries about its radical flaws and its future prospects. There is a excellent concern to bring about reformations in the recent monetary system. Deleveraging is the name, provided to this downward spiral. It is the forced reduction of debt, accumulated by the households and the financial institutions. This leads to low drive of costs in the marketplace as much more assets are dumped in it. This situation accelerates deleveraging. Once this hideous cycle begins it gets such a momentum that even enormous monetary back up fails to hold it back.

The financial mangers, in addition to their excellent governance, want to locate out new ways to tackle such scenarios arise time to time. The executive education in economics, also, demands radical reformation in this viewpoint. Islamic finance can support resolve such crisis.

One particular of the main causes of economic recession is when banks give out income as loan in excess, without considerably prudence, in hope to get fixed interest from their buyers who take loans. By lending funds the banks get an unrestrained opportunity to earn cash out of funds. Hence, they treat income as commodity, which should be treated as medium of exchange for goods and services according to Islamic finance. This accumulated cash by the bank is further used in procurement of more funds by giving out much more loans and getting money via interest.

It so happens that some individuals who take loans but their organization flops or they fail to make excellent sufficient to spend back loan with interest, so they have to withdraw from their mortgage or let their property confiscated. Loss of income leads to loss of purchasing energy. The market experiences an all round reduction in economic activities when people lose buying energy.

On the other hand, these who take loan from banks and run their enterprise with good results, they charge on their merchandise or services for the added amount of interest, which they have to spend to banks. In this way they get it from their clients. This gives rise to inflation. Bank yet again succeeds in accumulating the money bubble to exploit by way of it further. This leads to all round recession in financial activities, even though a couple of must prosper.

This was the primary cause behind the economic crisis in the final decade according to economists. This was the result of the lack of of existing monetary method. Prof John Gray of Oxford University calls it, “virtual economic economic climate” that has enormous capability of disturbing the real finance as it was witnessed when Barings, the oldest of the Britain banks, went default in 1995. James Robertson is of the opinion that present cash and finance technique is not fair. It is ecologically destructive and economically inefficient. He raised concern about generating money out of funds. According to him generation of funds ought to be against true goods and solutions.

The remedy lies in the Islamic method of finance. But the foremost is the executive education requirements to be oriented to find out how to place it in appropriate practice. The funds is not a commodity, according to Islamic finance, but a medium of exchange for goods and services. When loan is to be taken, it can be provided as investment and creditor and the receiver of money can share the potential profit and loss. This way each parties will be partners in a joint venture and will generate actual funds out of exchange of goods and solutions.

This is what the Islamic finance method wants to establish in the economy. Islamic banking is distinguished in two methods:

It concentrates on the genuine goods and services.

It ensures just flow of money by profit and loss sharing

This gives fantastic stability to economy. Even if the economy enters into the recession the system based on profit and loss sharing helps safeguards the financial operators from accumulation of income via interest, therefore lessen the threat of bankruptcy and default.

16 Responses to “How Can Islamic Finance Help to Solve Financial Crisis”

  1. Salvador January 7, 2013 at 11:37 am #

    I’ve carried out market research on Islamic Finance and conventional finance about “so why do people choose Islamic/ conventional bank?”. I set numerous variables to grade. Now I must find which factor lead most in selecting Islamic/ Conventional Bank. Which record tool can help?

  2. Shanta February 18, 2013 at 8:10 am #

    i am comfused on bachelors,seeing a lot of scope in islamic banking!

  3. Leo February 21, 2013 at 11:21 am #

    Is it nothing more than an Inquisition with various Islamic sects fighting for control.

    If your answer is it was the CIA don’t bother. The Wars in the Mideast are older than the USA or the CIA

  4. Vanita February 21, 2013 at 11:21 am #

    The earlier and middle aged Islamic regimes had to bear costs ( admin costs, costs of waging war, policing, civil works construction costs etc.) to run the country or economy. What were the specific revenue sources?
    Any taxes?
    Can Zakaat be given to gevernment to finance the operating costs?

  5. Miquel March 23, 2013 at 2:15 pm #

    I know drinking is against Islam theory. But I think, with the increasing number of tourists and expatriates working in the country, a bar in Dubai could make a lot of money.

    Let me know about the legal procedures and the finances required to start one (buying property and hiring people for work there).

  6. Issac April 26, 2013 at 5:14 am #

    I dont understand finance at the best of times and this is even more confusing.
    So basically you are still paying the interest, its just dressed up.
    Interest is interest just cos you put halal/islamic infront of it doesnt make it all right.

  7. Renato June 14, 2013 at 7:26 pm #

    Hi, I’ve confirmed my admission in a Malaysian University named – INCEIF, for course titled – Chartered Islamic Finance Professional. This is a professional course, which is equivalent to a Masters degree. I would like to know, as per Malaysian immigration policy, will my wife/ spouse be able to stay with me in Malaysia with a spouse visa during my 2 years education period? I’ve all the documents with me as a proof of our marriage.
    Thanks for any good answer.

  8. Karlyn June 19, 2013 at 4:09 pm #

    I love the idea of full-timing in an RV with my family but the cost is prohibitive to purchase outright in cash. My understanding is that rv’s don’t fall into either the car or home loan category and are considered a “luxury” item…but what if this luxury is your primary home, making it more of a necessity? And because we’d be doing it, in part, to save money, it’s certainly not a luxury from my point of view. I contacted only one bank so far, Bank of Whittier, and they responded telling me that they don’t offer such loans and they don’t know of any other Islamic financing resource that does. I’m hoping that someone might happen to see my post and have knowledge of a resource that can suit our needs! Thanks!
    P.S. – not sure why this posted me as asking from the UK..I’m in the US

  9. Bruce June 25, 2013 at 5:04 am #

    An Islamic leader said something like “Islam is now re-taking Europe without a single shot being fired”. What do you think about this comment?

  10. Thomasena June 25, 2013 at 4:47 pm #

    Go Banking and Finance then get my CFA , or major in Islamic Finance ?
    They say there are a lot of vacancies in Islamic Finance unlike the usual banking ?

  11. Izola June 25, 2013 at 4:47 pm #

    How can Muslims protect them and not turn theses groups in. How can they finance the groups that kill their wives and children?

  12. Joyce June 25, 2013 at 7:24 pm #

    I’m talking about the traditional Islamic views here, what it says in Islamic scriptures.

  13. Hoa June 29, 2013 at 6:44 am #

    Iran claims that it is an Islamic country, and a Shia one in particular. However, they provide every kind of support to Armenia, country with a Christian majority of population, that occupies more than 20% of the territory of Azerbaijan, a country with a (Shia) Muslim majority of population.
    Thaqalayn Hadith, provide what source to you? Even Azeri leaders made many news statements about it. Iranians even sell their (Shia) Muslim brothers and sisters for political gains, what kind of an Islamic Republics Iran is?

  14. Fidel July 2, 2013 at 1:14 pm #

    I know that Sharia forbids interest. However, I am unclear as to how an Islamic bank actually makes money. Thanks!

  15. Rod July 3, 2013 at 7:19 pm #

    They are violent to their own people, not tolerant or respectful of other religions, and are brutal towards women. How many people do they threaten with death over things like cartoons or anything they find offensive? Since they are not tolerant of others, why do we allow them into this country where they only seek to take away our freedom? We didn’t let Nazi’s come over and spread their hate. Maybe if they called themselves a religion we would all be speaking german. If there were only a small few who were radical, then where do the terrorists obtain all their financing from?

  16. Leonard July 17, 2013 at 5:37 am #

    I would like to make contacts with islamic finance professionals and students from world wide to share knowlege.

    if any one interested to share knowledge with me, please leave me your email address.

    i am looking to contact you soon.

    Thanks.

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