Friday, October 06, 2017

Islamic Finance and Economics

I had an interesting request at Asshole Consulting.  The client wanted my opinion on Islamic finance and economics.  The economics part was interesting because there is (what I believe) to be a politically/religiously motivated force on the part of Muslims to use "economics" as a means to spread Islam.  The handful of Muslim scholars/economists who advocate "Islamic economics" have used the financial crisis as a means to leverage Islam into economics, claiming western/capitalistic economics has failed, but communism has also failed, thus giving rise to demand for a "third alternative."  In the video I analyze their claims of this "Islamic economics" and then also explain how capitalism is the only real economic system out there as it is inherent to human nature.

The second part is on Islamic finance which is actually interesting and there are some lessons westerners/non-muslims can learn from it.  These lessons include frugality, non-speculation, the avoidance of debt, and financing legitimate concerns, not pie in the sky poppycock.  And it also highlights how using religious principles leads to more conservative lending standards, which would have prevented western banks from needing a bail out. 

Of course, if banks merely had lending policies AND FOLLOWED THEM, then you wouldn't have a theocracy lecturing you on how to lend, but that is a debate for another time.

1 comment:

Tucanae Services said...


I think the simple answer to the Islamic question is what is an asset? I suspect coinage was rare in the West of the period and probably more so in the Middle East. Barter was the primary mode of transaction. Which if that is the case then the Sharia rules make sense.