Islamic Financial System as an Alternative

Today, the ongoing financial crisis, the world economy on a broad yet unforeseeable implications.  How much impact from the crisis of the Islamic countries and Islamic financial system more robust against attacks whether the financial expert tells Vanessa Steinmayer. 

During the financial crisis that shook the foundations of the global financial system busy.  Islamic countries were affected by this situation how do you think


Vanessa Steinmayer: Global, no country in our world of almost not possible to isolate itself from the crisis.  But some countries than others will be heavily affected by the final.  “Islamic world” is not in the cultural sense, as in economic terms, does not have a homogeneous order.  Islamic world between the countries, such as $ 300 an extremely low per capita income has fallen from Nigeria, over 60 thousand dollars with the average income in Qatar is located extending from differences in the economies.

Apart from these two extremes of the average income in Southeast Asia which has a fast rise, and so far found in, for example, in 1997, he survived a financial crisis, partly by self-interest, albeit lessons from countries like Malaysia have got.  In fact, these countries are prepared for a crisis similar to 1997, experienced vendor, but a time of crisis to reach the real sector and the decrease in import demand in industrial countries, together with

The direct impact they crisis. The poorest countries with underdeveloped financial markets, financial crisis, such as have a chance of not being directly affected, but they also feel the impact of high food and fuel prices.  But the financial crisis itself, the most highly developed capital markets that are affecting their countries precisely the richest

Countries in the gulf of Iran.

Can you be more specific

Steinmayer: The United States as the financial economy, as they are very closely linked, some large investors suffered great losses here.  However, the financial crisis we are living now in the U.S. and Europe will not have to think that size, because most of the banks in the Gulf countries have a presence more than nominal capital.  Most of these countries will slow down economic development, but their belief in the U.S. and Europe will recover more quickly from the old.  Main export products of oil and natural gas is still here, in the real sector, for example, less than in Europe will be affected.  Although oil prices fall, but in this case, the weakening dollar is slightly offset.

Fluctuating oil prices during the addition of as many oil-exporting countries created reserves.  The origin of the crisis, unlike in the U.S. of having strong macroeconomic fundamentals as well as the balance of payments also give more.

Islamic banks will bat if, barely have collected money that banks put small investors, including all the investors their money loses. Islamic banks to start in the past, such events came. So far in Germany, applications, although any Islamic bank licensed inability reason this … “But in the Gulf region and in the past successfully achieve differentiation and have been converted to financial centers of the country, the main export product is still compared to the oil crisis that the country will be affected more than to be an irony of fate as I see.  The other hand, whether obtained from the accumulated reserves of oil trading in a financial crisis due to melting obvious.  Gulf countries, affected more than expected so far.

Emerging financial markets of the Gulf region, U.S. and Europe do more prepared?

Steinmayer: Actual as to be better prepared because of the high capital rather than bank rate, I think.  On the other hand it was organized as a forward-looking policy is not in my opinion, I think this situation has reached the region’s prosperity as a result of rapid and large output.

 Really prepared for a financial market, a well-functioning of the banking supervisory authorities, rating agencies, such as good work condition and the institutions they work well need to do, because the crisis in the U.S. just this reason that institutions were to fail.  These institutions in countries of the Gulf region so far there are in the undeveloped condition.  Central banks also not independent.

All the effects of the financial crisis can not be cut yet, and various financial derivative instruments, or their Brothers’la Lehman who, what percentage of the information processed, but slowly comes to light.  Investors in the Gulf countries also subprime’a (editor’s note guarantee low mortgages) to invest.  During this time many investors in a similar way-how to make a financial investment vehicle they did not have a clear idea, because it was announced to be a safe investment.

Beyond that, some banks in the Gulf countries have made transactions with Lehman Brothers and many investors lost money.  Beyond that investors in these countries and bank guarantee will be included as one of the volunteers do not have to fund losses.

What are the principles of Islamic finance scheme?

Steinmayer: Actually, an Islamic finance scheme is currently not available.  Of course, as are theoretical, while the process of how an Islamic economic order and the related finance should be in how the structure found in the literature are abundant.  The most prominent feature of Islamic finance scheme, interest-free work requirement.  But this means that, not lack of capital for a price of course.

The Western system, some Islamic finance structures side by side existence today, was already true in the case of interest ….” Islamic law very loosely defined and interest in the economic sense is far from being met: Islamic law, according to the fixed interest rate cut for capital is the price.  This definition prohibiting interest, but to trade release are based upon the Koran. 

Yet Islamic scholars to make a distinction between interest and trade reached a consensus.  In this context, “Islamic loans”, banks particularly desirable product for formal as a buyer emerge and that profit as the share of payment to depositors offered for sale in in the form of jobs. Economic perspective interest loan with no difference between no, but Islamic law in considering a difference, because a sale here, so a trade is a process, not a credit transaction.

The financial crisis on the agenda at the moment are considered within the framework of Islamic law, in accordance with each loan transaction process to stop behind a real necessity as an interesting point comes to our face.  One of the triggers of the crisis in financial derivative instruments in Islamic finance scheme allowed, nor with the money if the money can not sell.  In this scheme the sale of receivables would not be possible.

The other hand, an Islamic financial system is not possible to guarantee the investors, because Islamic law, a portion of the capital to take on the owner’s risk is part of the investment.  If an Islamic bank will bat, barely have collected small investors put money into banks, including all the investors lose their money.  Islamic banks in the past, such events per came.  So far in Germany, although applications for any reason, this inability of Islamic bank licensed.  The reason for this is one of only a limited number of financial products and therefore can provide a bank license requirement could not fulfill the second as there is no assurance that any investor.

In addition to the western financial system will there be a separate Islamic Finance system

Steinmayer: Interest completely independent from any country failed to establish a system and personally I believe it impossible.  Some countries such as Pakistan and Sudan tried it failed and a large library.  For this reason, the Western system, side by side, the presence of some Islamic financial structures are nowadays already become reality.

Iran’s job a bit easier compared to other Islamic countries, because the Shia law in question in accordance with specific applications: for example, according to this law, a Muslim from a Muslim, even a father and son can take even the interest.  These rules today the central bank could receive in the form of interest from other banks is interpreted.  This situation of course makes the economy a little relaxation, because the interest rate mechanism to distribute the amount of money available.

Defended the use of an Islamic economic system, other countries, the ten years since the Islamic economic system is working to place step by step and this will also suggest the need for time.

Steinmayer: “Especially the permanent agenda, take advantage of legal gaps in the implementation issues in light of the Islamic financial system-at least on the propaganda-shape with a better solution as I do not see …” is de facto an independent look at Islamic finance to place the order as possible, but I do not think that after that a to survive financially as a niche, even showing a little growth a realistic assumption.

 With the presence of understanding to continue to work well in Malaysia.  The expression of many banks in this country going to exaggerate a little one-on-one haram halal section also are available.  If we are to use a different expression profiles for different clients have different financial products offered.  In an economy that is a natural process extremely.

 Islamic financial products beyond the religious reasons conventional financial products stand against the distance, the worst cases the accumulation of storage under the cushions or are frequent in the current account of the person holding the capital to be mobilized as a very important function to fulfill.  Quota is usually mild, especially the accumulation of the developing countries, this may be a very important phenomenon.

Offers various investment opportunities in the Islamic world.  Many Western banks have the power to pay for Muslim believers, as investors struggled to win and in this context, “according to sharia” product offers.  “Sharia according to the concept of” what does it mean in this context?  This is actually just a label?

Steinmayer: Yes, really a label but must not be perceived as a label immediately label fraud.  Of theologians, “riba” means the interest of Muslims who believe that an alternative interpretation that can occur.  Investments in mutual funds according to Sharia most popular products.  These funds allowed only in the Islamic sense companies are taken.  Alcohol, pork and related companies located here is not porno.  However, the tourism sector also began to accept dubious now, in the same way, they served alcohol during the flight as airlines companies.

Activities in finance and insurance sector companies that perform these funds do not participate, mainly because these revenues are derived from interest.  Beyond that, the rate of foreign financing, capital does not exceed one-third of companies are allowed.  Usually at the beginning of the Fund, each fund and supervise a certificate Referring board includes scholars.  Noteworthy point is, companies or ethical issues such as environmental reasons, these funds, it does create a criteria for inclusion in.

Islamic funds, however, that ethical funds are not necessarily.  Extreme conservative interpretations of Islamic scholars to settle these funds are a safe alternative.  However, at this point is useful to be careful: Islam is the performance of these funds does not contain information about the course.  Such a fund’s administrative costs are higher than conventional funds in the long run I think they would show a worse performance.

That is an Islamic financial system, especially at the moment we are experiencing a decline in the face is not immune and bring about an alternative is not serious, right?

Steinmayer: No, it does not constitute a serious alternative, because it can offer only a limited number of financial products.  Islamic loan products to be sustainable even higher transaction fees.  Islamic financial products, tailored to the needs of depositors, to be creative and to come a moment to look into these creative spaces is legal, which I do not think this was my business logic.

Real estate market caused a credit crisis, with output from the Islamic finance could create within the structure of such a thing exists in a country of course we accept.  Numerous Islamic loan payment difficulties lehdarının fall If we are to assume, that an Islamic bank may remain in a difficult situation and even the conventional banks is a greater difficulty because the Islamic banks, at least the theoretical risk that the process also has undertaken.  A crisis resulting from the real sector of an Islamic financial system would probably tumble much more quickly, because there is no assurance that the loan guarantees.

Salt and pepper an existing system, although proven spiraling out of control, and therefore also with a system that collapsed today it is easy to compare.  Occupy our agenda at the moment the crisis is the end of turbo-capitalism, but may not necessarily mean that the end of capitalism.

Particularly benefit from continuous space about the agenda the law in the light of the practices of Islamic financial system, at least on the form of propaganda as I do not see a better solution-with.

Morality and responsibility has more to have a system that is more important.  Muslim countries, the economy was included little more downside of Islamic ethics, but the Islamic world have ethical awareness is not the only religion or philosophy.  You can find and use around the world.

Interview Elena-S.  Eilmes

Translated from the German Ogün Smoke

The field of economics education at the University of Tübingen weighted Dr Middle East.  Vanessa Steinmayer, Ruhr-University Bochum doctorate research at the Institute of Development Policy and Development (Institut für und Entwicklungspolitik Entwicklungsforschung) did.  Since 2003, the United Nations Secretary-General of the Addis Abeba ago worked as an economist, from 2007 in Bangkok passed.  “In South Africa, the Islamic Economy” in 2004 and his doctoral studies, published from Hans Schin publisher.