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Islamic finance tenets as a crisis moderator It is now official: the global economy entered an era of recession.

All over the world, heads of states and official people are talking about lower economical growth rates than previously announced. Some are even predicting negative growth. Obviously, some dark economical days are ahead of us but at least there is a system left! In fact during the first days of the crisis, experts were questioning the possibility of the financial crash leading to a general collapse of the world economical order. The main priority of the responsible parties was then to avoid a complete economical meltdown. They evidently succeeded and now their main concern is to try and minimize as much as possible the effects of the crisis and to make sure that such a situation will not occur again. To reach this objective, governments, central banks, regulating agencies and alike entities are trying to set the new rules of the game and put in place systems that will force players to abide by the new regulations. In this search for a way out, the Islamic financial system looks very appealing to some specialists. It appears as relatively shielded against the type of financial crisis the world is currently going through. Islamic banks and funds are suffering from the international conjuncture and even though the stock markets of the countries using mainly Islamic financial techniques dropped like all their international counterparts, there isnt till this date any major Islamic financial institution drifting and in need of an outside intervention to avoid bankruptcy. Some analysis are highlighting this situation and using it as an argument to affirm the preeminence of the Islamic financial system. For them, the proper solution to the crisis rests in the implementation of the Islamic financial system, i.e. the rules of the Sharia. They argue that the sub-prime crisis that triggered the financial debacle cannot possibly happen in a Sharia led system because the transactions involved are almost breaking all the Sharias main prohibitions: the use of interest rate (Riba), ignorance of one of the parties of some parameters of the situation (Jahala) leading to incomplete information and ambiguity (Gharar), speculation (Qimar), benefiting from the hardship of one of the parties (bay al mudar), etc. Besides all the cultural obstacles, the main limit to the implementation of Islamic financial rules as an ultimate solution to the crisis resides in the effectiveness of such a measure. Following each major economical crises, sets of rules and procedures were created and enforced to avoid the recurrence of such tragedies. They have never been ultimate solutions, new crisis emerged a few years or decades even after the implantation of the new rules due to loopholes left by the legislators. In fact, the solution is not related to rules and laws per see but to a change of mindsets as regulations are the reification of philosophical beliefs. Hence, the stakes of the crises are not only financial and this facet of the situation was highlighted a few days ago by President Georges Bush who affirmed that the present turmoil should not be considered as the result of a failure of the capitalistic system. The fact that a president feels the urge to make such a declaration tends to prove that an increasing number of people are establishing a link between the multiplication of economical and financial crisis and the ethics of capitalism. The central tenet of the contemporary financial system is the absolute right of the individual to maximize his benefits. Under such a framework, the system of sub-primes is absolutely logical and normal while it cant take place in a Sharia led system as it uses a benchmark the benefit

(maslaha) of the financial and economical operations for all stakeholders. This principle stems out of the belief that God entrusted the World to Man who must manage it for the best benefit of everyone (istikhlaf). This very brief comparison between the roots of the two financial systems seems to support the opinion saying that Islamic finance might be THE solution leading to a sounder financial system. The problem with this line of reasoning is its aspect la Huntington that divides the world along cultural fronts; one party being better than the other and meant to replace its opponent. Moreover it blurs any possible perspective of dynamic relations between the two fields and it leaves submission and confrontation schemes as being the only possible models of interaction between Islamic and Western finance. Yet some links seem obvious. Islamic finance is already using western techniques while part of the decisions taken recently by the world regulators resembles some rules of Islamic finance. In fact, Western financial technical know-how is undeniable while Islamic finance just proved that its ethic may shield the system from its excesses. Hence, cooperation and cross-fertilization appears as being the most logical configuration between the two to ease the frequency and the consequences of financial crisis.

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