KUALA LUMPUR — With many conventional banks crumpling and going for bankruptcy in the current global financial crunch, the booming Islamic banking industry has largely escaped the fallout.
"Islamic banking has, thus far, remained positive, despite the current challenging global financial environment," Zeti Akhtar Aziz, Malaysia Central Bank Governor, told Agence France-Presse (AFP) on Monday, October 20.
A financial crisis swept the US last month after the collapse of Lehman Brothers, the fourth-largest investment bank, and the financial woes of a number of Wall Street giants.
This triggered a domino effect across the world leaving conventional banks short of credit.
Western government have since pumped billions of dollars into their troubled banks to keep credit flowing and prevent a complete financial meltdown.
"In the current financial turmoil, it is interesting to note that Islamic financing may have prevented a majority of the mess created by the conventional banking and financial institutions," Kuwait Finance House said in a recent report.
"The outlook for Islamic financing is bright and will likely take the lead in terms of providing funding for major projects as the conventional banking system reevaluates its business model."
The rules of Islamic banking and finance read like a how-to guide on avoiding the kind of disaster that is currently gripping world markets.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Transactions by Islamic banks must be backed by real assets -- not shady repackaged subprime mortgages.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
-balik la ke ajaran islam, nak meniaga pun ikut la sunnah nabi.. insyaallah ader kajayaan-
"Islamic banking has, thus far, remained positive, despite the current challenging global financial environment," Zeti Akhtar Aziz, Malaysia Central Bank Governor, told Agence France-Presse (AFP) on Monday, October 20.
A financial crisis swept the US last month after the collapse of Lehman Brothers, the fourth-largest investment bank, and the financial woes of a number of Wall Street giants.
This triggered a domino effect across the world leaving conventional banks short of credit.
Western government have since pumped billions of dollars into their troubled banks to keep credit flowing and prevent a complete financial meltdown.
"In the current financial turmoil, it is interesting to note that Islamic financing may have prevented a majority of the mess created by the conventional banking and financial institutions," Kuwait Finance House said in a recent report.
"The outlook for Islamic financing is bright and will likely take the lead in terms of providing funding for major projects as the conventional banking system reevaluates its business model."
The rules of Islamic banking and finance read like a how-to guide on avoiding the kind of disaster that is currently gripping world markets.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Transactions by Islamic banks must be backed by real assets -- not shady repackaged subprime mortgages.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
-balik la ke ajaran islam, nak meniaga pun ikut la sunnah nabi.. insyaallah ader kajayaan-
