Future outlook of asset-backed Islamic financial system

The Islamic finance industry size is 300 billion USD and expanding at 15 percent a year. It prohibits interest, which is also prohibited in Bible. Islamic financial institutions have been largely sheltered from present crisis, which has resulted in $400 billion losses. USA, France, Germany & India have good potential.

The Islamic financial system is based on a set of values, such as transparency & cooperation. In the past three decades, the number of Islamic financial institutions has risen above 300, spreading amongst 75 countries. The size of Islamic financial system is 300 billion dollars and expanding at 15 percent a year. The system forbids the levying or payment of interest, preferring shared ownership and splitting of profits.

Economic experts assert that the system of financial derivatives, which is based on ‘interest’ or ‘usury’, cannot bring real development. “Financial derivatives create only money, with no real value, causing inflation and moral decadence. The current global financial crunch is an example that it has several fundamental problems,” said Haris Ahmed, BDE, Academy for International Modern Studies (AIMS), United Kingdom. “There is a global need for a radical and structural reformed financial system, and the Islamic financial system is the best answer. The Islamic financial system is based on the principles of Islam, and offers an alternative which could reduce risks. Islamic banks don’t buy credit but manage concrete assets, which shelters them from the difficulties that American and European banks are experiencing. In the Quran, it is clearly mentioned in many places. For example, in 2:275 Allah (God) says ‘Those who charge riba are in the same position as those controlled by the devil’s influence.’ This is because they claim that riba is the same as commerce. However, Allah permits commerce, and prohibits riba. Thus, whoever heeds this commandment from his Lord, and refrains from riba, he may keep his past earnings, and his judgment rests with Allah. As for those who persist in riba, they incur Hell, wherein they abide forever”.

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