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To what extent can Islamic financial principles be used to prevent financial crises? - A 2008 Financial Crisis case study

Alisic, Halima LU ; Salihu, Anitë LU and Dinc, Betul LU (2024) IBUH19 20241
Department of Business Administration
Abstract
The 2008 financial crisis exposed significant weaknesses within the global financial system which were mostly attributed to the practices of financialization. This thesis explores the potential of Islamic finance principles to prevent financial crises while offering a more stable and equitable financial framework. A qualitative approach was used in order to conduct interviews with various professionals in the Islamic finance field, enabling an exploration of the ethical and practical distinctions between conventional and Islamic finance. Key findings highlight the resilience of Islamic banks during the 2008 crisis, attributed to their adherence to Shariah principles, which prohibit interest (riba), excessive uncertainty (gharar), and... (More)
The 2008 financial crisis exposed significant weaknesses within the global financial system which were mostly attributed to the practices of financialization. This thesis explores the potential of Islamic finance principles to prevent financial crises while offering a more stable and equitable financial framework. A qualitative approach was used in order to conduct interviews with various professionals in the Islamic finance field, enabling an exploration of the ethical and practical distinctions between conventional and Islamic finance. Key findings highlight the resilience of Islamic banks during the 2008 crisis, attributed to their adherence to Shariah principles, which prohibit interest (riba), excessive uncertainty (gharar), and speculative activities (maysir). The study underlines the benefits of asset-backed financing and profit-sharing models, which align financial activities with the real economy and therefore promote long-term stability. By suggesting that the ethical framework of Islamic finance offers a practical alternative to conventional financial practices, this research contributes to a more widespread discussion on financial crisis prevention. (Less)
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author
Alisic, Halima LU ; Salihu, Anitë LU and Dinc, Betul LU
supervisor
organization
course
IBUH19 20241
year
type
M2 - Bachelor Degree
subject
keywords
Islamic finance, Financial Crisis, Real assets, Agency theory, Financialization, CSR
language
English
id
9166788
date added to LUP
2024-08-07 17:25:39
date last changed
2024-08-07 17:25:39
@misc{9166788,
  abstract     = {{The 2008 financial crisis exposed significant weaknesses within the global financial system which were mostly attributed to the practices of financialization. This thesis explores the potential of Islamic finance principles to prevent financial crises while offering a more stable and equitable financial framework. A qualitative approach was used in order to conduct interviews with various professionals in the Islamic finance field, enabling an exploration of the ethical and practical distinctions between conventional and Islamic finance. Key findings highlight the resilience of Islamic banks during the 2008 crisis, attributed to their adherence to Shariah principles, which prohibit interest (riba), excessive uncertainty (gharar), and speculative activities (maysir). The study underlines the benefits of asset-backed financing and profit-sharing models, which align financial activities with the real economy and therefore promote long-term stability. By suggesting that the ethical framework of Islamic finance offers a practical alternative to conventional financial practices, this research contributes to a more widespread discussion on financial crisis prevention.}},
  author       = {{Alisic, Halima and Salihu, Anitë and Dinc, Betul}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{To what extent can Islamic financial principles be used to prevent financial crises? - A 2008 Financial Crisis case study}},
  year         = {{2024}},
}