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The global financial crisis and its implications for the Islamic financial industry

Edib Smolo (International Shari'ah Research Academy for Islamic Finance, Kuala Lumpur, Malaysia)
, and
Abbas Mirakhor (The International Centre for Education in Islamic Finance (INCEIF), Kuala Lumpur, Malaysia)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 23 November 2010

9743

Abstract

Purpose

The purpose of this paper is to review the evolution of the global financial crisis, draw lessons from it, and analyse its effect(s) on the Islamic financial industry (IFI).

Design/methodology/approach

Based on an extensive literature review, this paper aims to highlight, explain, and discuss the implications of the global financial crisis for IFI and suggest necessary steps for the future development of the industry.

Findings

The findings show that although the crisis had limited impact on IFI the major flaws of the capitalist financial system are relevant to the development of IFI. Without learning and applying the lessons from the crisis, IFI runs a risk of committing the same mistakes. Finally, greater attention should be given to the fundamental principles of Islamic finance in order to ensure the future development of industry.

Research limitation/implications

The effects of the global financial crisis are still being felt all over the world, and its implications on IFI have yet to be fully understood. Owing to unavailability of relevant data, an empirical study is needed to show the real effects of the crisis on IFI.

Originality/value

The lessons drawn in this paper will raise awareness among both academicians and practitioners about the inherent weaknesses of current financial practices. Furthermore, the paper highlights the major areas that need to be improved for the future development and success of IFI.

Keywords

Citation

Smolo, E. and Mirakhor, A. (2010), "The global financial crisis and its implications for the Islamic financial industry", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 3 No. 4, pp. 372-385. https://doi.org/10.1108/17538391011093306

Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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