Islamic Finance: A Therapy for Healing the Global Financial Crisis

Islamic Finance: A Therapy for Healing the Global Financial Crisis
Miranti Kartika Dewi, Faculty of Economics, University of Indonesia
Ilham Reza Ferdian, International Islamic University Malaysia

Abstract: "Global financial crisis which hit many too-big-too-fail countries and financial institution in the world was mainly made happen by debt securitization. Derivative instruments resulted from this process obviously were not backed by real asset. When any party came up with investment on these instruments, the investment would never support the development of real sector economy, instead, it just worsen the situation by creating bubble economic. This condition becomes more harmful when the securitized debts default. This practice is strictly forbidden according to Islamic finance principles. It has inherent risk management tools to prevent the crisis. This paper attempts to examine the root of the financial crisis and find the solution from Islamic finance principles."

Islamic Finance: A Therapy for Healing the Global Financial Crisis