Tag Archives: recession

global recession – spotlight on Islamic finance

Could this global financial crisis have been avoided if Western banks had been more open to incorporating Islamic principles in the first place ? according to experts the answer is yes.

Two Key principles in Islamic Banking :

1.Interest is Forbidden

2.Profits can only be made with tangible assets.

The global recession is said to have begun with sub prime lending which surfaced in the mortgage sector, where almost anyone was able to mortgage a house without having to prove that they can pay back the loans – in other words not being in possession of tangible assets, which could always have been there as something that can have been liquified if the need arose.

What happened in the subprime mortgage industry ? basically this was a large group of banks that allowed financing to people regardless of their credit and more often than not they could avoid proving income. They didn’t even have to bring money to closing (which inflated home values even more because people weren’t putting real money into buying these homes).

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