World Financial Crisis: Lesson form Islamic Economics الأزمة المالية العالمية: الدرس شكل الاقتصاد الإسلامي

M. Fahim Khan (mfahim@gmail.com)
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M. Fahim Khan: Islamic Development Bank - Jeddah

Chapter 3 in Issues in the International Financial Crisis from an Islamic Perspective-05 قضايا في الأزمة المالية العالمية من منظور إسلامي, 2009, pp 19-24 from King Abdulaziz University, Islamic Economics Institute.

Abstract: Dr. Nejatullah Siddiqi, King Faisal Prize Laureate in Islamic Economics, has prepared a note to examine the relevance of Islamic economics today and whether it has a message for humanity in so far as its current financial problems are concerned? It is a very perceptive response from Dr Siddiqi which I appreciate very much. I am writing this note just to reiterate the position, taken by this forum of I-SIE, that if we need to draw lessons from Islamic economics, we need to look into the economics embodied in the institutional framework of Islam. No doubt, riba (interest, usuary) and maysir (gambling, speculative activities similar to gambling) are the major factors leading to the current financial crisis. Islam's prohibition of riba and maysir along with Islamic values and morals, and recognizing others' interest in one's economic fortunes, if adhered to, could not have lead the world to the present day financial crisis. Keeping individuals and Society free form financial and economic crises can clearly be seen as one of the objectives of such instiutions. The question, however, is how to do this now? Where to go from where we are now? Even if we can declare that taking and charging of interest in banking operations is prohibited, the question remains; what is the alternative? Current practice of Islamic banking has not provided any convincing alternative. With the Tawarruq made Shari'a compatible, the results can not be expected much different from those of interest based banking system.

Date: 2009
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