An interesting article appeared on smh.com.au this week: Islamic finance rides the storm. This is not the first time I have read about the rapidly growing industry of Islamic finance, but in light of the world financial crisis that is unfolding, and the Islamic finance industry's resilience to the turbulence of plummeting world markets, perhaps this is a good time to peer outside our dominant capitalist model to see how else things could be done.
There are several relational elements of Islamic finance (pulled from the article) that are appealing, such as:
- the partnership between the lender and borrower is arranged such that the risk is shared, and therefore the lender does a better job at evaluating the risk before granting loans
- interest is not charged because it is considered immoral as it does not take into account how changes in the value of the loan's security can affect the borrower
- the short sale of shares is not permitted because it stops traders profiting from assets they don't own
- depositor know their money will not be invested in unethical industries
Readers who know more about financial markets and systems - any reflections in light of the credit crunch would be most appreciated. As would anyone who knows of examples of alternative, and perhaps Christian motivated, financing arrangements?