Promoters of Shariah-Compliant Finance have been falsely bragging about their insulation from the global financial crisis.
But the truth is slowly starting to leak out. Shariah-Compliant Finance has been hit by the global financial crisis, just like almost all other sectors. Part of this can be explained by the fact that many of the so-called “interest-free” products that SCF promotes are really just convoluted constructs designed to hide conventional products behind a cloak. Part of it can also be explained by the inability of Shariah-Compliant products to take advantage of hedging mechanisms that can control and reduce risk. Finally, there is simply no getting around the fact that all assets have suffered in the global downturn and no sector–or belief system–is immune.
Despite this evidence, Islamists continue to spread the myth that “Islamic finance” can weather the economic storm in order to promote the spread of Shariah around the globe: