≡ Menu

Why Can Islamic Banks Survive in Times of Crisis?

There are several factors that cause sharia-based banks to remain relatively stable:

  1. Islamic Banks are more focused on conservative products and avoid exposure to high risk financial instruments.
  2. The principle of Islamic Banks is to maintain the banks’ primary function as a mediator between the parties that are in surplus of funds to those in deficit or in need of funds.
  3. Islamic banks only facilitate and finance real assets.
  4. Speculation and gambling is forbidden. Islamic banks are believed to not be affected by the crisis because its banking system is not involved in trade payables and there is no market speculation.
  5. Because of the profit sharing system, the bank’s management performance should always be considered. If the bank experiences losses then the losses will be borne also by the depositors.
  6. Islamic banks do not borrow funds on the inter bank markets, the funds are derived from their own deposits.
    It is free from speculative and derivative elements.

Read more at: http://www.amuslima.com/new-noteworthy-islam/why-islamic-banks-can-survive-a-financial-crisis-when-compared-to-conventional-banks/

{ 0 comments… add one }

Leave a Comment