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The Recent Crisis: Lessons for Islamic Finance

Author

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  • Mirakhor, Abbas
  • Krichene, Noureddine
Abstract
The current view defines financial crisis as the collapse of the financial asset market. It is said to be triggered when asset markets no longer validate expectations of continuously rising returns on financial assets. Invariably, financial crises have involved the banking systems. Signs of the crisis are said to be: (a) large economic imbalances, particularly significant current account deficits; (b) asset price inflation; (c) rising leverage; and (d) slowing pace of economic growth. The consequences of financial crisis are considered to be: (a) a large reduction in income and employment; (b) a substantial rise in the growth of public debt; and (c) a prolonged period of recovery. There is now a consensus that the current global financial crisis was triggered by the collapse of asset prices in the sub-prime mortgage sector of the US financial sector, which then became the epicentre of the global crisis. For this reason, analysis of the crisis has to start with the financial structure of the latter system and the conditions that led to the crisis.

Suggested Citation

  • Mirakhor, Abbas & Krichene, Noureddine, 2009. "The Recent Crisis: Lessons for Islamic Finance," MPRA Paper 56022, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56022
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Asadov, Alam & Masih, Mansur, 2016. "Home financing loans and their relationship to real estate bubble: An analysis of the U.S. mortgage market," MPRA Paper 69771, University Library of Munich, Germany.
    2. Singh, Ajit & Sheng, Andrew, 2011. "Islamic finance revisited: conceptual and analytical issues from the perspective of conventional economics," MPRA Paper 39007, University Library of Munich, Germany, revised 10 Apr 2012.
    3. Shaukat, Mughees & Mirakhor, Abbas & Krichene, Noureddine, 2013. "Fragility Of Interest-Based Debt Financing: Is It Worth Sustaining A Regime Uncertainty?," MPRA Paper 56362, University Library of Munich, Germany.
    4. Mirakhor, Abbas, 2009. "Islamic Economics and Finance: An Institutional Perspective," MPRA Paper 56017, University Library of Munich, Germany.
    5. Achraf Haddad & Anis El Ammari & Abdelfettah Bouri, 2019. "Are the Islamic Banks Really more Profitable than the Conventional Banks in a Financial Stable Period?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(9), pages 994-1018, September.
    6. Mirakhor , Abbas & Shaukat , Mughees, 2012. "Survival of the Interest Rate Based Debt Financing System," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 6(4), pages 1-26, July.
    7. Ascarya & Ugi Suharto, 2021. "Integrated Islamic Social and Commercial Finance to Achieve SDGs," Springer Books, in: Mohd Ma'Sum Billah (ed.), Islamic Wealth and the SDGs, chapter 0, pages 105-127, Springer.
    8. Samir ESSID & Ines Ben HAMOUDA Ep. Ben BRIKA, 2012. "Mesure des inégalités de revenus : Une analyse comparative," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 3(1), December.
    9. Mirakhor, Abbas & Ng, Adam & Dewandaru, Ginanjar & Hamid, Baharom Abdul, 2017. "Is the regime of risk transfer sustainable? Impossible contract and inequality," Research in International Business and Finance, Elsevier, vol. 41(C), pages 16-19.
    10. Rahajeng, DIAN, 2013. "The Role of Islamic Banking System as the Milestone towards Indonesia Micro Economy Development," MPRA Paper 50465, University Library of Munich, Germany.
    11. Muhammad Ashfaq, 2016. "Impact Of Global Financial Crises On Global Financial Stability And Need For An Alternative Financial System," Poslovna izvrsnost/Business Excellence, Faculty of Economics and Business, University of Zagreb, vol. 10(2), pages 109-121.
    12. Sheng, Andrew & Singh, Ajit, 2012. "The Challenge of Islamic Finance," MPRA Paper 53044, University Library of Munich, Germany.
    13. DIAW, Abdou, 2011. "La crise financière mondiale et la finance islamique: une revue de la litérature [The global financial crisis and Islamic finance: a review of selected literature]," MPRA Paper 32754, University Library of Munich, Germany.
    14. Ascarya Ascarya & Ugi Suharto & Jardine A. Husman, 2022. "Proposed model of integrated Islamic commercial and social finance for Islamic bank in Indonesia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 115-138, March.
    15. Shumi Akhtar & Maria Jahromi & Tom Smith, 2017. "Impact of the global financial crisis on Islamic and conventional stocks and bonds," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(3), pages 623-655, September.
    16. Rahman, Matiur, 2019. "Islamic banks with mutuality and neutrality: A balance-sheet-based theoretical framework," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 3-8.

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    More about this item

    Keywords

    Islamic finance; financial crisis;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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