Buying into the notion that a 'sub-prime' housing market led to the latest global financial crisis, they say developing new practices which can address the issues that led the world to the brink of collapse are a vital part of recovery.
Professor Martin Parker, Director of Research for the Management School, thinks a banking system consistent with the principles of Islamic law (Sharia) may be a solution so the university is hosting a conference to consider potential lessons from the Islamic Banking and Finance sector.
What would that mean? Concepts like term loans that return interest to banks would be forbidden and banks would be forbidden from investing in companies contrary to Fiqh al-Muamalat - Islamic rules on transactions.
Parker says, “It is important for everyone’s future that we study the current crisis in order that more sustainable financial practices can be developed. This conference is a contribution to that project.”
Unlike Christianity, Muslim countries and financial institutions are able to gather and ally using religious precepts without criticism from western political groups so Islamic banking has grown each year and exists in all 'Muslim' countries, including ones considered Christian. There's even a World Islamic Banking Conference, held annually in Bahrain each year since 1994.
Imagine the outrage in the U.S.A. if a Christian Banking Conference were held with government sponsorship and endorsements.
Despite the societal concerns of a fundamentalist approach to getting a mortgage for your home, the University of Leicester’s School of Management is hosting a conference to consider potential lessons from the Islamic Banking and Finance sector.
The conference, to be held on 2nd and 3rd July, will consider topics such as:
· Are Islamic banks more resilient than the secular/government ones in the west?
· Would the principle in Islamic banking that the transaction be free from interest and backed up by a tangible asset make it more robust than secular/government banks?
· Will globalization make the Islamic system vulnerable?
· Does the obligation of Islamic Financial Institutions on transparency make it less vulnerable ? Well, it isn't all that transparent. Islamic banks don't loan the buyer money to purchase a house, because that is against sharia, and instead the bank buys it and sells it to the buyer at a profit and lets the buyer pay in installments - but they can't call it a profit.
True, mark-to-market rules cannot apply and write downs won't occur, causing a false problem, if no one actually knows what a house is worth, since the buying price is set by the bank, but that isn't more transparent.
Not on the docket; will you be able to get a loan if you are not Muslim? And the IOR (Instituto
per le Opere di Religione), better known as the 'Vatican Bank', does pretty well too. It's unclear if Christian- and Jewish-controlled banks will get equal time in Leicester.
Conference coordinator, Dr Ibrahim Umar, said “This is an opportunity for economists, business practitioners, Islamic scholars, and private industries such as banking and insurance to come together to consider whether we can learn lessons from the Islamic system and, if so, what benefits might be achieved. It also gives us the opportunity to consider what potential situations or factors may have a detrimental effect in the future. The conference is open to both academics and practitioners. I hope that anyone who has something to add to the debate will attend.”
To reserve a place at the event, email Ann Byrom, ulsmtemp1 (at) leicester.ac.uk, for further details.
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