HOW ISLAMIC FINANCE MITIGATE FINANCIAL CRISES

The worldwide monetary crisis that occurred in 2007 is the most exceedingly awful monetary emergency since the Great Depression in 1929. Manifestations of the crisis have begun through the tight liquidity in the banking system in the United States and the collapse of large financial institutions and falling stock and bond prices in addition to the failure of many of the major business companies. After that, the impacts of the monetary crisis spread to Europe and other countries. The effect of this crisis transferred quickly from the money related segment to the production sectors. This can be considered as a failure of the ideology of capitalism which concentrates on the interest-based finance. Since the beginning of the worldwide money related crisis, many of the studies and reports show that Islamic fund have not been adversely worldwide budgetary emergency, similar to the case in regular back, particularly in the principal time frame when the crisis emerged. The reason for this, according to these studies and reports that Islamic finance did not use interest (usury) and this is what gives it an advantage over the traditional finance, as Islamic fund concentrate on trading the origins of the material and this is what makes them immune toward the impacts of the worldwide money related crisis.