Islamic Banks Weather Global Crisis
LONDON — Thanks to its ethical low-risk approach, Islamic banks have managed to weather the global financial crisis, achieving high growth rates in 2009, a new study has found.
“A conservative approach to risk and close links between the financial sector and real assets has helped shield the sector from the worst of the credit crisis,” Brian Caplen, editor of the Banker Magazine, said in the study cited by Agence France-Presse (AFP).
The study, commissioned by the London-based magazine and a unit of HSBC Bank, said Islamic finance institutions have overcome the crisis that harshly hit conventional banks.
A financial firestorm swept the US and the world in September 2008, after the demise of Lehman Brothers, one of the Wall Street giants.
It has knocked down many major companies worldwide, causing mounting job losses, falling household wealth and forcing consumers to hold back on spending.
The study attributes success of the Islamic banks to rules that forbid investing in collateralized debt obligations and other toxic assets that caused the financial crisis.
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.
