Islamic Finance and the New Financial System - Islamic Finance

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Islamic Finance and the New Financial System

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Can Islamic finance save the global system?

Islamic Finance and the New Financial System describes how the adoption of Islamic finance principles in future regulatory decisions could help prevent future shocks in the global financial system. Using illustrations and examples to highlight key points in recent history, this book discusses the causes of financial crises, why they are becoming more frequent and increasingly severe, and how the new financial system will incorporate elements of Islamic finance – whether deliberately or not. With an introspective look at the system and an examination of the misconceptions and deficiencies in theory vs. practice, readers will learn why Islamic finance has not been as influential as it should be on the larger global system. Solutions to these crises are thoroughly detailed, and the author puts forth a compelling argument about what can be expected in the future.

Despite international intervention and global policy changes, the financial system remains in a fragile state. There is an argument to be made about integrating Islamic finance into the new system to facilitate stronger resilience, and this book explains the nuts and bolts of the idea while providing the reader with a general understanding of Islamic finance.
- Understand the key principles of Islamic finance
- Examine the history of the current financial system
- Discover how Islamic finance can help build a new debt-free economy
- Learn how Islamic finance theory doesn't always dictate practice
Although Islamic finance is a growing market, it is still a foreign concept to many. Those within the Islamic finance circles wonder why the system has yet to gain broader appeal despite its ability to create a strong and well-balanced economy. Islamic Finance and the New Financial System provides clever analysis and historical background to put the issues into perspective.
About the Author ix

Acknowledgments xi

Introduction 1

PART ONE Financial Crises and the Current Financial System

CHAPTER 1 A Brief History of Financial Systems and the Birth of Money 7

CHAPTER 2 Past Financial Crises and Their Causes 23

CHAPTER 3 The Global Financial Crisis of 2008 51

CHAPTER 4 Solutions Create More Problems 73

CHAPTER 5 The Next Financial Crisis and the New Financial System 87

PART TWO The Islamic Financial System

CHAPTER 6 Overview and History of Islamic Finance 97

CHAPTER 7 The Key Principles of Islamic Finance 117

CHAPTER 8 Islamic Financial Instruments as Alternatives 139

CHAPTER 9 Criticisms, Shortcomings, and Misconceptions of Islamic Finance 159

PART THREE The New Financial System

CHAPTER 10 Preventing Future Crises—Real-World Solutions from Islamic Finance 181

CHAPTER 11 Evaluating Alternative Solutions 197

Conclusion 207

Notes 209

Index 223
TARIQ ALRIFAI has been involved in Islamic finance for more than 18 years. He is an active public speaker on Islamic finance around the world and a leading authority on Islamic funds and investment products. He has written for publications such as Euromoney Books and the Harvard University Forum on Islamic Finance, and was a contributing author of Contemporary Islamic Finance: Innovations, Applications and Best Practices, published in 2013. He is often quoted in print and electronic media, including the Financial Times, Bloomberg, Reuters, and CNBC Arabia.

Tariq was previously the Global Director of Islamic Indices at S&P Dow Jones Indices. He also served as Vice President of UIB Capital, a U.S.-based private equity firm. Prior to this, he was Vice President and Manager of HSBC Bank's Islamic Finance Program in the United States. In 1996 Tariq founded Failaka Advisors, which was the first-ever organization to monitor and publish research on Islamic funds. Tariq holds an MBA from DePaul University in Chicago and a bachelor's degree in international business from St. Cloud State University in Minnesota.