Hundreds of delegates from across the Muslim world gathered in Indonesia’s capital Jakarta on Monday for the fifth World Islamic Economic Forum. Indonesian President Susilo Bambang Yudhoyono called on Muslims and non-Muslims to join together to meet the challenges of the current financial crisis.
Islamic banks are less affected by the current financial crisis
Islamic banks and businesses run according to the principles of Sharia, Islamic law, have not been as badly affected by the current economic crisis as other banking institutions.
President Yudhoyono said on Monday in Jakarta that the West could learn from Islamic financial institutions.
Malaysian banking expert Mohammed Ridza recently said at a conference in Australia that Islamic banking was becoming increasingly popular and that there was “rising demand for Sharia-compliant investment from an estimated 1.6 billion Muslims worldwide.”
“Islamic assets are set to be 1.4 trillion US dollars by the year 2010 at the latest;” he added. “And it is projected that the Islamic financial system will soon be managing approximately 4 percent of the world’s economy. There is strong global demand by even conventional financial institutions.”
Prohibition of usury
The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of usury or interest. Any investments have to be made in accordance with Sharia too. There can be no investment in alcohol, pork or anything forbidden by the Koran. Islamic financial institutions invest predominantly in raw materials, energy and real estate.
The high-risk, highly-complex banking based on derivatives that triggered the global banking system’s current crisis are unthinkable in the Islamic system.
Michael Scully from Melbourne’s Monash University recently explained why on Australian radio: “If you’re going to follow Islam you need to behave in an ethical manner towards your customers. Some of the predatory lending that was done by US financial institutions, particularly in the subprime area, is not something you would anticipate an Islamic bank doing.”
Apart from the Islamic banking system and the global financial crisis, the Economic Forum in Jakarta will concentrate on the climate change, renewable energies and food security. The forum, which takes place annually, is set to last two days.
Organisers hope it will change the global perception of the Muslim world from a zone of conflict to one where trade and investment are lucrative and worthwhile.