The Looming International Financial Crisis : Can the Introduction of Risk Sharing in the Financial System as Required by Islamic Finance, Play a Positive Role in Reducing Its Severity ?

2017 ◽  
Vol 25 (2) ◽  
pp. 1-13 ◽  
Author(s):  
M. Umer Chapra
Keyword(s):  
Financial Crisis ◽  
Risk Sharing ◽  
Financial System ◽  
Islamic Finance ◽  
Positive Role ◽  
International Financial Crisis

The global financial crisis and Islamic finance: a review of selected literature

2015 ◽  
Vol 6 (1) ◽  
pp. 94-106 ◽  
Author(s):  
Abdou DIAW
Keyword(s):  
Financial Crisis ◽  
Risk Sharing ◽  
Global Financial Crisis ◽  
Financial System ◽  
Lessons Learned ◽  
Islamic Finance ◽  
Regulatory Body ◽  
Content Type ◽  
The Global Financial Crisis ◽  
The Way

Purpose – This paper aims to critically analyze the opinions of Islamic economists about the global financial crisis to examine: their views on the causes of the crisis, the juristic and economic assessment they make of these causes and the lessons learned and the way forward. Design/methodology/approach – The paper critically reviews selected writings of prominent Islamic economics on the recent financial crisis. Findings – Most of the authors reviewed acknowledged the technical mistakes put forth by many conventional analysts as causes of the crisis. However, they have showed that the adoption of the principles of Islamic finance would have prevented most of those mistakes. The way forward, therefore, for both Islamic and conventional finance is, inter alia, greater reliance on risk sharing to inject more discipline in the system; the establishment of a strong and comprehensive regulatory body to safeguard the resilience of the system; and the integration of Zakat, Awqaf and other voluntary institutions into the financial system to cater for the financial needs of the poor. Practical implications – The importance of integrating the voluntary institutions into the financial system is to make it more inclusive and more equitable. Originality/value – This paper is the most comprehensive literature review on Islamic finance and the global financial crisis.

scholarly journals نحو قراءة موضوعية لكتابات غير المسلمين عن التمويل الإسلامي في ضوء الأزمة المالية العالمية: وِلمْ بويتر أُنموذجاً

2014 ◽  
Vol 20 (78) ◽  
pp. 104-75
Author(s):  
أحمد مهدي بلوافي
Keyword(s):  
Financial Crisis ◽  
Islamic Finance ◽  
International Financial Crisis ◽  
Mortgage Crisis ◽  
The Subject ◽  
Muslim Scholars

تهدف هذه الورقة إلى عرض وتحليل أنموذج من كتابات غير المسلمين عن التمويل الإسلامي في أعقاب أزمة قروض الرهن العقاري الأمريكية، وما تبعها من أزمة عالمية، وذلك من أجل رسم معالم منهجية في تناول الموضوع تسهم في تزويد الباحثين في حقل الاقتصاد والتمويل الإسلامي بأدوات تساعد على توخي الموضوعية، والدقة، والأمانة في النقل والتناول، والبعد عن الطرح "الأيديولوجي"، أو العاطفي الذي يستند إلى قناعات ومواقف مسبقة لا يسندها الدليل العلمي، ولا الواقع العملي. This paper aims to present and analyze an example from the writings of non-Muslim scholars about Islamic finance in the wake of the American mortgage crisis, and the subsequent International financial crisis, in order to identify some methodological milestones in understanding the issue, and to provide researchers in the field of Islamic economics and finance with instruments that would help to exercise objectivity, accuracy, and honesty in handling the writings on the subject, and to avoid "ideological", or emotional readings based on preconception ideas and position void of scientific or practical evidence.

On building social capital for Islamic finance

2015 ◽  
Vol 8 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Adam Ng ◽  
Mansor Ibrahim ◽  
Abbas Mirakhor
Keyword(s):  
Social Capital ◽  
Financial Development ◽  
Risk Sharing ◽  
Design Methodology ◽  
Empirical Studies ◽  
Financial System ◽  
Islamic Finance ◽  
Investment Opportunity ◽  
Content Type ◽  
Practical Implications

Purpose – The purpose of this paper is to set forth seven broad recommendations and 15 specific initiatives within a four-dimensional framework for the development of social capital in Islamic finance, particularly the stock market, given its role as the first best means of risk sharing. Design/methodology/approach – The four-dimensional framework comprises dimensions of principle and value, trust-reinforcing regulation, investment opportunity and infrastructure, as well as reputational intermediaries. Findings – A web of multi-pronged initiatives that are mutually reinforcing is proposed considering the multifaceted dimensions of social capital and the various possible transmission channels by which social capital can influence the financial system. Practical implications – While empirical studies have demonstrated the importance of trust and ethics in financial development, the pressing issue remains how social capital, including trust and ethics, can be developed to achieve a trustworthy, ethical and efficient financial system. This paper attempts to address this concern. Originality/value – This paper provides a framework for building social capital in Islamic finance.

Financialised ethics, economic security and the promise of Islamic finance

2021 ◽  
pp. 205789112110347
Author(s):  
Jikon Lai
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Developing World ◽  
Financial System ◽  
Moral Character ◽  
Economic Security ◽  
Islamic Finance ◽  
Contributing Factors

The character and state of a financial system are important contributing factors to the performance, stability and security of any economy, something which has been repeatedly demonstrated during times of financial crisis. While assessments of earlier financial crises tended to focus on shortcomings in the governance of financial sectors, not least when crises occurred in the developing world, many have noted issues with the moral character of the industry, and the attendant processes of securitisation and financialisation, in the wake of the transatlantic financial crisis of 2007–2008. Against these recent criticisms, Islamic finance was pitched as a more ethical, stable and secure alternative. Although the ideas that inform the development of Islamic finance might hold the promise of a more ethical alternative to conventional finance, the industry itself has not been immune to processes of financialisation and securitisation, which have arguably undermined the market's initial promise.

Islamic Finance and Limited Purpose Banking (LPB)

2020 ◽  
pp. 100-116
Author(s):  
Edib Smolo
Keyword(s):  
Public Interest ◽  
Financial Crises ◽  
Risk Sharing ◽  
Global Financial Crisis ◽  
Financial System ◽  
Islamic Finance ◽  
History Of ◽  
Comprehensive Reform ◽  
Two Sides ◽  
System Operating

The saying that “history repeats itself” is best manifested in capitalist financial system operating worldwide. It seems people are not learning lessons from the history of financial crises. Leading economists and capitalist gurus are warning about an inherently fragile capitalist financial system and about an urgent need to do something about it before it is too late. After the recent global financial crisis, Kotlikoff proposed the most radical and the most comprehensive reform of the existing financial system. His proposal became known as the Limited Purpose Banking (LPB). Kotlikoff's proposal runs hand in hand with the aspirations of the pioneers of Islamic finance. He envisioned a financial system that is based on risk sharing, cooperation, and overall public interest (maslahah). In short, the idea of the LPB – after certain modifications and minor adjustments – can be applied in developing a true Islamic financial system. Thus, it can be said that the LPB and Islamic finance are two sides of the same coin.

scholarly journals International financial crisis and bank statization in Germany

2010 ◽  
Vol 6 (2) ◽  
pp. 541-564
Author(s):  
Roberto Chacon de Albuquerque
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Financial System ◽  
State Control ◽  
International Financial Crisis ◽  
Banking Institutions ◽  
Market Stabilization ◽  
Legal Strategies ◽  
Banking Institution ◽  
Hypo Real Estate

Facing an international financial crisis that could lead its own financial system to the brink of collapse, the German government needed to show political will in order to save financial institutions in risky situations. This article analyzes the legal strategies used to rescue the financial system, including the statization of banking institutions as an ultima ratio. Prior to the bank statization established by the Rescue Takeover Act, the Financial Market Stabilization Act foresaw an increase in the capital of financial institutions by means of state control without statization. This last act, nonetheless, has not been considered enough to avoid the collapse of a banking institution that is relevant for the whole financial system such as Hypo Real Estate (HRE).

scholarly journals THE ROLE OF INTEGRATED ISLAMIC COMMERCIAL AND SOCIAL FINANCE FOR CURBING CREDIT CYCLES AND ACHIEVING MACROPRUDENTIAL OBJECTIVE

2018 ◽  
Vol 3 (2) ◽  
pp. 139-180
Author(s):  
Arif Widodo
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Risk Sharing ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Markov Switching ◽  
Banking System ◽  
Islamic Finance ◽  
Credit Cycles ◽  
Credit Cycle

It is widely believed that Islamic finance is inherently stable since the principle of risk-sharing and linking the financial to real counterpart in particular through its social finance are applied, hence the financial stability may successfully be attained. If mimicking the conventional finance, Islamic model will probably be facing instability, following the financial cycle. There has been a growing literature discussing credit cycle in mainstream perspective since 2008 global financial crash. However, it is quite rare to find study, in macro context, on credit cycles and the effectiveness of integrated Islamic commercial and social finance in achieving macroprudential objective: curtailing excessive credit. This study is designed to empirically examine the characteristics of cycles stemming from conventional and Islamic credit whether both have similar trend and also to investigate how the integrated Islamic commercial and social finance may be effective to hamper such cycles. By employing Hodrick-Presscot Filter, Markov Switching and Vector Error Correction Model, this study demonstrates that, in terms of cycle, Islamic model cycle has certain similarities with conventional counterpart since it functions under similar financial environment despite the fact that Islamic has less amplitude compared with conventional credit. Both credit and financing cycles tend to grow rapidly (excessive) several months before global financial crisis happened in 2008. This means that, in a dual banking system, credit and financing boom may precede financial crisis. Moreover, it is apparent also that the integrated Islamic finance is proven to be effective in curbing credit growth due to the effectiveness of both macroprudential instrument applied in banking sector and social finance in safeguarding financial stability. Keywords:  Credit cycle, Macroprudential policy, Markov Switching, HP filter JEL Classification: E32, E51, G29

scholarly journals Deteksi Dini Krisis Lewat Profit And Loss Sharing (PLS)

2020 ◽  
Vol 6 (1) ◽  
pp. 1
Author(s):  
Khairul Umam Khudhori ◽  
Loni Hendri
Keyword(s):  
Financial Crisis ◽  
Early Warning ◽  
Financial Stability ◽  
Financial System ◽  
Islamic Finance ◽  
Finance System ◽  
Library Research

Abstract: Financial crisis is a danger that always haunts financial stability of every country. Islamic finance as the new comer also gets into this trouble. Fortunately, Islamic finance system is stronger than conventional facing the crisis. This strong may come from its principles that support it. This paper uses a library research to examine the PLS system and it benefits to financial stability. The finds of this paper are Islamic financial system is more stable than conventional one, and  PLS system can be used as the early warning of financial crisis. 

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