Islamic finance shows banks the way forward



Published Date: 26 September 2008

THE spectacular collapse of Lehman’s, the problems at AIG and the takeover of HBoS by Lloyds TSB have led to central banks injecting liquidity into the markets and governments bailing out certain institutions, often at taxpayers’ expense.
The question is: are taxpayers and governments subsidising flawed institutions or indeed propping up an inherently flawed financial system which survives merely on the basis of confidence?

dequately capitalised from regulators’ perspective, nonetheless the market lost confidence in the bank and its share price plummeted.

It is of no surprise to see concerned leaders around the world address the issue of how to prevent such a disastrous situation happening again. Perhaps Islamic finance presents a solution.

Islamic finance has seen astounding growth with two new Islamic banks and a takaful (Islamic insurance) firm receiving authorisation in the UK.

Islamic finance is an industry based on principles of equity and financial justice.

Would such a banking catastrophe have occurred if Islamic finance principles had been followed? The answer is almost certainly no.


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