Global Financial Crisis 2008: Opportunities for Islamic Financezulkiflihasan
Quoted from Islamic Finance News
What’s obvious now is that capitalism is no longer governed by democracy. Rather, it exploits democracy. Incoming US president Barrack Obama says one of his priorities is making sure the plumbing works, meaning stabilizing the financial system. In the face of what has been said to be the darkest economic outlook for the US since the Great Depression, voters said the economy was overwhelmingly the most important issue in the election, and this was clearly an advantage to Obama. This is a crisis of capitalism and the reality is that when capitalism fails it has to be bailed out by the state. It is capitalist when it goes up and socialist when it comes down.
Sovereign funds were considered dirty money just a couple of months ago, but they are now being eagerly sought as a savior. Barclays is banking on them to get out of the quicksand. But these sovereign funds are being extra cautious, especially after they were derided when they attempted to move in a few months ago. It appears that US officials now realize what is needed to lure the sovereign funds from the Gulf: Islamic finance.
Hence the statement by the US Treasury Department that it is looking into the important features of Islamic banking that could help in tackling the current financial crisis. Deputy secretary Robert Kimmitt said: “Islamic banking is an important issue being discussed right now by experts both in the public and private sectors.” And this week, the department organized, together with Harvard, a forum on “Islamic Finance 101” for the public and private sectors, as well as Congress personnel.
The consequence of the crisis could be that as Gulf sovereign funds become more important, Islamic banking could play an increasing role in global financing, its expansion relatively unaffected by the financial crisis. This, of course, does not mean that Shariah compliant finance can suddenly present itself as a comprehensive alternative to capitalism. Instead, the current shift in perspective in Washington ought to be viewed as an opportunity for Islamic financial institutions to have joint investments with governments and other financing sources, including multilaterals, in funding the public works program that Obama has in mind to help generate economic activity in the US.
The point is that Obama is inheriting, as one report put it, an economic estate that has been pillaged by his predecessor. US public sector debt is well over US$1 trillion, equivalent to around 80% of US economic output. The nonpartisan Committee for a Responsible Budget estimates all the government economic and rescue initiatives, starting with the US$168 billion in stimulus checks issued earlier this year, total even more — US$2.6 trillion.
Obama faces the nation’s worst financial crisis in 70 years. The US presidency is powerful, but the economy is in such a mess that no one leader will be able to change things dramatically any time soon. However, he has had an electrifying effect not only on Americans but also the rest of the world. Banking on this impact, and driven by the pressing situation, will he be bold enough to accept the use of Islamic finance to help salvage the US economy?
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