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The global financial crisis and Islamic finance: a review of selected literature

Abdou DIAW (Al-Itqan Conseil et Formation en Finance Islamique, Dakar, Senegal)

Journal of Islamic Accounting and Business Research

ISSN: 1759-0817

Article publication date: 13 April 2015

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Abstract

Purpose

This paper aims to critically analyze the opinions of Islamic economists about the global financial crisis to examine: their views on the causes of the crisis, the juristic and economic assessment they make of these causes and the lessons learned and the way forward.

Design/methodology/approach

The paper critically reviews selected writings of prominent Islamic economics on the recent financial crisis.

Findings

Most of the authors reviewed acknowledged the technical mistakes put forth by many conventional analysts as causes of the crisis. However, they have showed that the adoption of the principles of Islamic finance would have prevented most of those mistakes. The way forward, therefore, for both Islamic and conventional finance is, inter alia, greater reliance on risk sharing to inject more discipline in the system; the establishment of a strong and comprehensive regulatory body to safeguard the resilience of the system; and the integration of Zakat, Awqaf and other voluntary institutions into the financial system to cater for the financial needs of the poor.

Practical implications

The importance of integrating the voluntary institutions into the financial system is to make it more inclusive and more equitable.

Originality/value

This paper is the most comprehensive literature review on Islamic finance and the global financial crisis.

Keywords

Citation

DIAW, A. (2015), "The global financial crisis and Islamic finance: a review of selected literature", Journal of Islamic Accounting and Business Research, Vol. 6 No. 1, pp. 94-106. https://doi.org/10.1108/JIABR-03-2012-0015

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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