The Global Financial Crisis

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Introduction The global financial crisis that has knockout the world economy has brought the most important economic recession, which has shattered the world as over 100 million more people are forced into poverty. Since the impacts of the crisis, which led to an increasing level of variation and higher population that is living distant lower the poverty line, academics and policymakers have been pointed for a new financial architecture that can be re-stabilize the financial system and avoid reoccurrence of the crisis, an economic system that is concerned with fulfilling basic human needs and creating opportunities for the poor. This paper hence presents Islamic finance (IF) as an alternative to conventional financial system and it is possible to provide clarification to the partial global financial crisis and prevents its reoccurrence. This paper is divided into several sections. Following introduction in Section 1, Section 2 discusses the causes of the global current financial crisis. Next, Section 3 examines the Islamic theory of finance and how it can or cannot provide a solution to the current crisis. Section 4 provides a critical analysis of what lies ahead for Islamic finance and managerial implications of Islamic finance. Financial crisis Financial crisis refers to disturbances in financial markets causing constraint to the flow of credit to families and businesses and as a result having opposing effect on the real economy of goods and services. The term is commonly used to define a range of circumstances in which investors unpredictably mislay substantial overall of their investments, and financial institutions unexpectedly misplace significant proportion of their worth. Financial crises contains stock market crashes, fi... ... middle of paper ... ...tional economy. The paper has claimed that truthful application of Islamic theory of finance is probably accomplished of solving crises from happening just because of the factors that contributed to the development and the indulge of the crisis are not allowed under the rules and guidance of Shariah. The papers determined by declaring that opportunities for Islamic finance are enormous, and challenges. It also recommendation to the transformation of Islamic financial paradigm into working policies and allowing institutions to be extremely serious intermediation, risk management and financial engineering within the framework of Islamic finance. Islamic finance policy originators must also struggle to transform Islamic finance model into working policies and form an enabling institutions to over whelm the challenge to perform Islamic finance at worldwide stage.

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