Centre for Research on Globalisation (CRG)
IRmep International Fellow Tanya Cariina Hsu
…It was the best con game in town: get paid well for selling vast amounts of risk, fail, and then have governments fix the problem at the expense of the taxpayers who never saw a penny of shared wealth to begin with. There is no easy solution to this crisis, its effects multiplying like an infectious disease. Ironically, least affected by the crisis are Islamic banks.
They have largely been immune to the collapse because Islamic banking prohibits the acquisition of wealth via gambling (or alcohol, tobacco, pornography, or stocks in armaments companies), and forbids the buying and selling of a debt as well as usury. Additionally, Shari’ah banking laws forbid investing in any company with debts that exceed thirty percent.
“Islamic banking institutions have not failed per se as they deal in tangible assets and assume the risk” said Dr. Mohammed Ramady, Professor of Economics at King Fahd University of Petroleum & Minerals. “Although the Islamic banking sector is also part of the global economy, the impact of direct exposure to sub-prime asset investments has been low” he continued. “The liquidity slowdown has especially affected Dubai, with its heavy international borrowing. The most negative effect has been a loss of confidence in the regional stock markets.” Instead, said Dr. Ramady, oil surplus Arab nations are “reconsidering overseas investments in financial assets” and speeding up their own domestic projects. More