The Moralisation of Contracts: An Islamic Persperctive

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In the wake of the 2008 Global Financial Crisis (GFC), perhaps the greatest downturn of the global economy since 1929, many Islamic financial professionals were ready to claim that history had proved the divine footprint of Islamic Finance principles and Shari’ah at large. Not a single Islamic Financial Institution (IFI) was impacted by the collapse of subprime mortgage bonds and the cascading effects it generated at a systemic level among the network of banks which were exposed to highly leveraged markets blighted with toxic assets, derivatives and all sorts of complex financial devices which were structured in Western countries and which shifted the object of their investments too far from the real economy.

Today Islamic Finance assets are worth $2.2 trillion dollars worldwide and are forecast to reach nearly $4 trillion by 2022 (The Business Debate, May 2018). Targeting a market of approximately 1.6 billion Muslims around the world and offering their services to non-believers as well, Islamic Finance firms have reached Western countries, with major European hubs in France, Germany and the UK. They are currently competing, albeit quietly and not always holistically, with conventional financial institutions (The Economist, October 2018).

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