Islamic Finance and the Global Economic Storm

ISLAMICA:Why did the current global economic crisis leave Islamic finance relatively unscathed?

In nearly every market worldwide, Islamic finance is now attracting the attention of investors who only a year ago would not have given it the time of day.

Islamic financial centers are flourishing in Dubai, Bahrain, Singapore, and Malaysia. Over the last several years, the demand for Islamic financial instruments has been growing at a rate of up to 15 percent—Standard and Poor’s now estimates the potential Islamic market to be over $4 trillion. Here in the US, Islamic mutual funds are outperforming their conventional counterparts in the wounded US market. Clearly, investors are paying attention to Islamic finance for good reason.

But with all the added attention, Muslim investors should remember the virtue of humility. What goes up must come down, or as those in the investment community are fond of chanting, “past performance is no guarantee of future results.” Instead of rubbing salt in the wounds of conventional markets and jubilantly reiterating their failures—as some of us have been doing—Islamic financial institutions should acknowledge that its own system is not impervious to such disaster. We should learn lessons from recent events, and take the necessary precautions to prevent a similar crisis in Islamic finance...Read More