Spring Break
Islamic finance may be right in time of recession
Bryan Murphy
Issue date: 4/2/09 Section: Commentary
Interestingly, Barack Obama and his financial advisors seem to be following Allah's que, here - debt forgiveness and the reworking of "underwater" mortgages have been integral elements in the bailout plans. Perhaps the Qur'an is right - to give up an unworkable loan as charity may well be better, both for the "soul" and for the economy, than to press the world down upon a crown of foreclosures.
As the wealth of America and the Eurozone buckles under the strain of its own greed and addiction to "riba," there is some impressive evidence that Islamic finance is doing much better than the world average, especially in the insurance industry, where the Western model has taken a crippling blow. As American giants like A.I.G. have crashed and burned, the Islamic insurance industry, which has grown at over 25 percent annually since 2004, is expected to keep growing, at 17 percent per year. The Islamic financial industry as a whole currently controls about $650-750 billion in funds, and it has been rising at more than 15 percent per year for quite some time.
Of course, it's easier to grow faster, percentage-wise, when you're smaller. But, hey, $750 billion isn't that small. And the cause of the current meltdown was, indisputably, a "defective governance framework" controlling world finances - as rightly noted by Ahmed Mohamed Ali, president of the Islamic Development Bank.
"The major selling proposition of Islamic finance is its strong ethical foundation," Ali added, and it was this "character-and-integrity-based governance" that would allow for financial stability.
Remember Alan Greenspan's staunch opposition to credit-derivatives regulation? Clearly, Western financial "experts" have been very wrong as of late - and maybe, just maybe, Islamic financial experts are right.
As the wealth of America and the Eurozone buckles under the strain of its own greed and addiction to "riba," there is some impressive evidence that Islamic finance is doing much better than the world average, especially in the insurance industry, where the Western model has taken a crippling blow. As American giants like A.I.G. have crashed and burned, the Islamic insurance industry, which has grown at over 25 percent annually since 2004, is expected to keep growing, at 17 percent per year. The Islamic financial industry as a whole currently controls about $650-750 billion in funds, and it has been rising at more than 15 percent per year for quite some time.
Of course, it's easier to grow faster, percentage-wise, when you're smaller. But, hey, $750 billion isn't that small. And the cause of the current meltdown was, indisputably, a "defective governance framework" controlling world finances - as rightly noted by Ahmed Mohamed Ali, president of the Islamic Development Bank.
"The major selling proposition of Islamic finance is its strong ethical foundation," Ali added, and it was this "character-and-integrity-based governance" that would allow for financial stability.
Remember Alan Greenspan's staunch opposition to credit-derivatives regulation? Clearly, Western financial "experts" have been very wrong as of late - and maybe, just maybe, Islamic financial experts are right.
Viewing Comments 1 - 4 of 4
Doug
posted 4/02/09 @ 5:12 PM EST
First, muhammed was a gifted psychopath--not a prophet. Thanks to the 1st Amednment I'm allowed to make that assertion.
Next, according to the dictates of islam, there can be no cafeteria-style implemntation of the barbarity known as sharia; it's all or nothing. (Continued…)
larry barr
posted 4/03/09 @ 1:48 PM EST
I love the sound of a hammer hitting the nail squarely on its head.
johniee rockets
posted 4/03/09 @ 2:11 PM EST
Interesting article and perspective. Three years ago, if you started talking about Iqtisad ('equilibrium' or 'economics' in Arabic, sometimes loosely translated in economics parlance as 'socialism') and Sharia law interpretations in economics, you would have been called an Islamic fundamentalist. (Continued…)
Ben
posted 6/07/09 @ 4:31 AM EST
YEs we could have avoided the current economic contraction. But we would have also avoided all of the economic progress since the BC's. Then we would all be living like the [expletive removed by administrator] that is the Taliban run mid east. (Continued…)
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