Towards a Meeting-Point Between Islamic Finance and Globalisation

This article focuses on the conditions that should be met for financial globalisation to achieve maximum risk-sharing. The author suggests that the Islamic prohibition of debt-based finance and simultaneous promotion of risk sharing are consistent with the fundamental purpose of Islamic teachings, i.e., the unity of mankind, itself a corollary of the fundamental Islamic axiom of the Unity (tawhid) of the Creator. He then discusses the rules and norms of behaviour prescribed by Islam for individuals and collectivities that meet the conditions for maximum risk-sharing. He also refers to a historical episode of globalisation from the Middle Ages, where trade, finance, investment, and production were based on partnership and equity finance and explains how and why this episode witnessed finance evolve until the dominance of debt-financing which has lasted to the present. Toward the end, the author brings the ideas about the prospect for the convergence of conventional and Islamic finance to conclusion: he argues that their growth could lead to worldwide increase in investment, employment, and economic growth, reduce inequality and poverty, and increase global welfare.