Why the Islamic Financial System has the Strength to Mitigate the Current Financial Crisis - Dissertation Example

The present financial crisis has been held to be a consequence of the failure of the financial systems being followed in various segments of the world. From the evaluation of perceptions of the people across the world, it has been evaluated that they urge towards identification of an appropriate alternative to the present financial system. They desire for an alternative that holds strong prospect of avoiding financial crisis in the future. Following the search for a perfect alternative, it was observed that the Islamic financial system is argued to be the best answer to the present problem of the international economy.

Various economists purported that Islamic financial systems bear strong possibility of becoming successful alternative to the present financial system. For critically evaluating the argument, various sources have been reviewed through library search. The findings have been analysed through primarily qualitative approach and presentation of quantitative data about the effectiveness of the Islamic financial system. The findings suggested that although the Islamic financial system holds strong prospect to evolve as the most effective financial system of the world, comprehensively it cannot be implemented in the International market.

This is because the Islamic financial system is still challenged with certain loopholes, the presence of which can hinder its effectiveness. Evidences have been provided in this research study with respect to the Islamic banking system’s effectiveness in certain portion of the world such as that of Malaysia while at the same time evidences have also been provided of its inefficiency in certain other parts of the world such as that of Pakistan and Middle East. Table of Contents Chapter One: Introduction 5 1.

1Background of the Research 5 1.2 Problem Statement 7 1.3 Aim, Objectives and Research Questions 9 1.4 Structure of the Dissertation 10 Chapter Two: Literature Review 11 2.1. Introduction 11 2.2 Origins of Islamic Banking and Finance 12 2.3. Islamic Financial System 14 2.4. The Islamic Financial System and the Crisis 16 2.5 Strength of the Islamic Financial System 22 2.6 Weaknesses of the Islamic Financial System 26 Chapter Three: Research Methodology 28 3.1. Overview of Research Philosophy & Approach 28 3.2. Research Strategy 29 3.3. Validation of Data Source 33 3.4. Validation of Data Collection & Data Analysis Process 33 3.5. Limitations of the Research Process 34 Chapter Four: Findings, Analysis and Discussion 36 4.1. Introduction 36 4.2. Critical Evaluation of the Facts about Islamic Financial System 37 4.

3 Empirical Evidence of Effectiveness of Islamic Financial Systems in other Counterparts of the World 44 Chapter Five: Conclusion & Recommendation 59 5.1. Overview 59 5.2. Facts Generated from the Research Study 59 5.2.1. Challenges Faced by the Islamic Finance System 59 5.2.2. Strengths of the Islamic Finance System that Helped it Survive the Financial Crisis 61 5.2.3. Reasons behind the Growth in Islamic Finance 63 5.3. Recommendation for Future Works 64 6.0. References 66 7.0. Bibliography 81 Chapter One: Introduction 1.

1Background of the Research According to the verse of the Great Allah (swt) about Islamic nation, “You are the best of the nation raised up for mankind because you enjoin what is right and forbid the wrong and believe in Allah”. The Islamic nations are blessed with the trait of being the world’s best nations brought up from humanity.1 The nation understands its responsibility well that people need to be aggressive in rising against immorality and unfairness. One of such wrong deeds, observed by the Islamic nations, is the economic coercion and injustice that is adversely affecting the world.

2 The recent financial crisis initiated within the