US and Europe: Spread Collapse of Japanese
of the US Subprime Asset Price Bubble
Mortgage CrisIs(2008) (1990s)
A
R
V
A
STI
R
M
Speculative Attack on
A
R
G
E
S
N
Mexican Economic Crisis:
currencies in the Europe-
ON
Speculative Attack and
an Exchange Rate Mecha- 2008
A
TI Default on Mexican
nism (1992-1993)
Debt (1994-1995)
U
STR
I
L
L
2000
1990
1980
TIMELINE
US Savings and Loans
Crisis (1989-1991)
Asian Financial Crisis:
Devaluations and Bank-
ing Crisis across Asia
(1997-1998)
Dr. Dinar
islamic finance under scrutiny
Islamic Finance, the interest-free, ethically driven alter-
native, has grown into a $1 trillion industry. London has
Argentine Economic
become one of the biggest centres for Islamic finance
Crisis: Breakdown of
Banking System
Russian Financial Crisis: in the world, with five Islamic banks, and the likes of
(1999-2002)
Devaluation of the Ruble
Deutsche Bank, Citigroup and HSBC offering products.
and Default on Russian
Debt (1998)
Like every other aspect of Muslim life, Islamic bank-
ing is governed by Sharia’a and its interpretation (Fiqh).
Latin America in Debt
Together, these provide the ethical framework outlining
Crisis - Beginning in
Mexico (1980s)
the essence of economic well-being and the development
of individuals. Fairness and honesty are an integral part of
Sharia’a law, and so are the prohibition of interest (riba),
uncertainty (gharar) and speculation (maysir).
Islamic financial products are all built around the
China, we will see the first “Islamic City” where everything is
concept of risk-sharing, which in summary includes
built and operates under the rules of Islamic law.
Musharaka (partnership contracts), Murabaha (cost plus
Currently, there is a fierce battle over the direction of Islamic finance), Ijara (leasing) and the much-maligned Sukuk-
Finance across the world. Two prominent figures in this debate bond that has been subject to increasing scrutiny after the
(and the university scene) are Tarek El-Diwany and Iqbal Khan.
recent events in Dubai.
Mr El-Diwany, writer of the book ‘The Problem with Interest’,
According to Reuters, approximately $4 trillion worth of
describes Islamic commercial banking as “a combination of
retirement savings were lost in 2008. Given this and other
usury and misrepresentation” whilst Mr Khan, CEO of Fajr
such examples, could risk-sharing be the way forward? A
Morgan Stanley Managing Director seemed to share that
Capital and founder of HSBC Amanah and Citibank Islamic,
view when I met him at an economic strategies debate at
emphasises that it is a gradual process which is “still matur-
Bloomberg earlier this year.
ing” and admits much is yet to be done. We live in uneasy yet
These are all principles on which Islamic Finance is built.
exciting times in the financial world. As the world begins to
Principles which are needed given the chaos and misery
regain its feet, will we witness the birth of a new era of Islamic the credit crisis has wielded, and are principles we should
finance? l all defend.
www.emel.com | emel magazine 77
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