As bank shares plunge and the world markets see-saw, one arm of banking riding out the storm in calmer waters is the Islamic financial sector.
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Islamic banks have been sheltered from the financial meltdown
Islamic finance complies with Sharia law, which forbids making interest, or money from money.
In essence, far less exposure to the elements that have driven banks and mortgage lenders wild.
In the past year, the Dow Jones Islamic Titans 100 index has fallen 7%, whereas the FTSE 100 index has plunged by three times that amount.
Some believe that if banks in the West followed the principles of Islamic banking, the recent economic meltdown would not have happened.
“Islamic banks don’t rely on lending, they’re not involved in derivatives and the short selling of shares is strictly forbidden,” says Brian Kettell, senior lecturer in Islamic banking and finance at the London Metropolitan Business School, who took part in our Web Chat on the subject.
“There is no investment in banks paying and receiving interest and so they’re not exposed to interest rates.”
Under Sharia law, wealth should be generated by legitimate trade and the investment in assets.
