Islamic Finance and the New Financial System: An Ethical Approach to Preventing Future Financial Crises

6656792Global finance has learned many lessons from the financial crisis of 2008, but its future is still far from certain. Policymakers and economists know that, unless something changes, we may be on the path to another collapse — perhaps even more severe than the last.  The new book titled ‘Islamic Finance and the New Financial System’ published in 2015 claims to have the answer.  The book argues that incorporating Islamic financial principles may be the key to stabilizing the global economy and preventing future disasters.

Author Tariq Al-Rifai, a seasoned expert on Islamic finance and investments, analyzes financial crises and their antecedents, showing that, under the current system, boom-and-bust cycles are inevitable—and that their magnitude will only increase unless something changes. The book makes Islamic finance and its sound economic basis accessible to the mainstream. It removes the fog of myth and confusion industry outsiders have surrounding this growing financial method, outlining its history, analyzing its current state, and exposing its weaknesses. Tariq offers real-world solutions that can be adapted and adopted to create a new, more resilient financial 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. The 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 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 Tariq puts forth a compelling argument about what can be expected in the future. 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. The book is divided into three parts. Part I discusses the history of money, past financial systems and explores past financial crises. It then goes on to take an in-depth look at the global financial crisis of 2008, its causes and remedies provided by central banks, regulators and policymakers. These solutions, Tariq argues, will only make the next financial crisis worse, which is just around the corner.

Part II introduces the reader to Islamic finance and goes through its history and provides a detailed look at the prohibition of Riba. It goes on to give a good overview of Islamic financial instruments using real-world examples explaining their workings in a manner easy for anyone to understand. What is surprising, however, is Tariq’s candid criticism of Islamic finance while shedding light on some of the common misconceptions surrounding the industry, such as the association of Islamic finance with terrorism.

Part III combines the key findings from Part I and II in a practical manner to see how Islamic finance can solve some of the pressing financial issues facing us today. Tariq, however, does not stop there. He goes on to discuss some of the other solutions and ‘fixes’ proposed by other leading economists and thinkers to fix the financial system. The book is designed for anyone interested in learning about our financial system and its problems, regardless of their faith. It’s also an eye-opener for us to prepare for the coming crisis and gives us hope for the future.

The book is available for sale at the following outlets: