DUBAI // An interest-based global financial system is at the root of the global economic crisis, and there is an Islamic solution to the problem, experts at the Dubai Peace Convention said yesterday. "Since the decline of communism and the emergence of one superpower, the global financial system has been purely based on interest," said Dr Hussein Hamed, who is on Sharia boards of several banks and financial institutions, who is considered the father of Islamic finance and is an expert on Islamic banking. "Currency value has become interest-based and, therefore, when the crash happened, the only monetary system that was not affected was the interest-free Islamic system."
Mohammed Akbar, a Dawa scholar from India, suggested that the current woes were a symptom of a deeper problem with the capitalist system. "The bankers' panic of 1907, the 1929 Great Depression, the Black Swan event of 1987 as well as the dotcom crisis in 2000" all hurt the global economy and were all caused by capitalism, he said. According to speakers at the event, the problems can be solved using two major principles of Islam - the Quran and the Sunnah.
"Islam would, in a heartbeat, stop the spread of worthless debt notes," Mr Akbar said. It would also "terminate the system of interest which are the two underpinnings of the capitalist enterprise", he said. Dr Hamed said: "In the Islamic system, the monetary value of currency has to be valued with commodities - the value of gold is for gold, the value of silver is for silver, barley for barley and wheat for wheat.
"Therefore, depending on the availability of commodities, the value rises or drops. "The interest-based system is forbidden in Islam, and the economic systems are built within moral guidelines, so, therefore, a family would not lose their home because a banker has placed a floating rate on it." Mr Akbar, though, pointed out that the modern Islamic banking system was not operating at its full potential.
"Islamic banking has had to be subjected to the current global monetary model to operate," he said. "If the system runs on its own ethical values and under proper administration, it would represent an irrevocable setting for global recovery." Currently, European banking institutions and global players were borrowing from the Sharia-based system to correct the deviation in the markets, said Dr Hamed.
"Islamic banks are popping up in the UK. Sukuk is being practised in Germany and China. The world is realising its true value." firstname.lastname@example.org