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Islamic Finance in the Global Economy$
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Ibrahim Warde

Print publication date: 2000

Print ISBN-13: 9780748612161

Published to Edinburgh Scholarship Online: March 2012

DOI: 10.3366/edinburgh/9780748612161.001.0001

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Conclusion: Islamic Finance and the Global Financial Meltdown

Conclusion: Islamic Finance and the Global Financial Meltdown

(p.247) Conclusion: Islamic Finance and the Global Financial Meltdown
Islamic Finance in the Global Economy

Ibrahim Warde

Edinburgh University Press

When it first appeared in the mid-1970s, Islamic finance was generally dismissed as an inconsequential epiphenomenon of the oil boom. Introducing the religious factor in what was perceived as a quintessentially secular area struck many as bizarre, and many critics asserted that the growth of Islamic banks was bound to remain stunted. However, in reality, Islamic finance experienced growth rates in the double digits, and has become a permanent feature of the global financial system. It did not, however, quite live up to its original billing. While it has come near to the structure of conventional banking, Islamic banking did offer an alternative. Islamic products, while lacking originality, retained their specific features. Islamic institutions warded off predatory transactions and vulture funds. And Islamic banks avoided investing and partnering with institutions belonging to non-halal sectors. Because of this, Islamic banks are criticised for being conservative and for upholding the Shariah law. At a time when conventional banking was transforming beyond recognition, Islamic banks remained conservative and ethical. These qualities served them and shielded them from the financial meltdown. In sum, as the financial crisis has brought about a rare moment of reflection and critical thinking, the logic of Islamic finance can no longer be dismissed out of hand. At the same time, it may be dangerous to overstate the virtues of Islamic finance and present it as a panacea, especially since its principles state what is permissible and not what is necessarily advisable. Islamic finance is still in its early stages of development and is still beset by tensions and problems.

Keywords:   Islamic finance, Islamic banks, global financial system, Shariah law, Islamic products

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