Islamic Banks unaffected by the current financial crisis but what about BOM?

A number of experts and officials of Islamic banks and financial institutions have confirmed that Islamic banks have not been affected by the global financial crisis, and that any effects would be limited due to the nature of Islamic banking.

Islamic banking systems are safe by the current crisis due to the nature of Islamic banking especially that does not deal in debt trading and distances itself from market speculation that takes place in Western banks. Unlike most conventional banking system in Europe and America they rely on bonds or stocks which are not involved in Islamic banking. This distinguished fact is prohibited under Islamic Shariah law.

The financial scholars believe that if any institution which floats during this crisis the success of Islamic banking will lead to serious consideration of the economics of our banking system. However, it is inevitable that they will be affected to a certain degree as they are part of the wider global financial system and consequently will be affected by all global financial dealings, even if only in an indirect manner. Aljazeera Arabic News Channel revealed that Islamic banks to end the year successfully with the forthcoming announcements of their budgets because of the clarity of contracts and Islamic banking projects that are spread throughout the countries of the Islamic world.

However, predictions suggest that this crisis will take at least two to three years or more. Islamic economists believe that the banking system which inherited from the law could be and inevitable asset where Islamic banks positioned far from the current crisis. As far as investments concerns some of Islamic banks might be affected by this crisis due to their heavy dealings with various funds in Europe and America.

One could be our national bank in Maldives – The Bank of Maldives (BOM). The bank debts are one of the obstacles where public funds and their sovereign wealth funds in particular have been used in their lending market dealings. The economics of debt collecting has been a huge issue where lenders never payback the loans due to the autocratic systems inherited by the past regime. The local economists believe that the degree of the financial meltdown could be disastrous if the current government ignores viable alternatives to the current global economic system which continues to be hit by these crises.

The inherent factors within Islamic banking could immune the BOM by prohibiting of debt trading, taking precautions against money laundering, as well as the official and professional restraints upon which bank is based cautioning against embarking upon projects that entail financial difficulties and risks.

The atollcounselor believes that the big businessmen in Maldives played a significant role to turn the page into a financial calamity of our local banks due to their lending power (political motivations and selfishness) into their tangible assets where businesses are centered across Europe without aware of the dangers in such ventures in the conventional banking system. The bottom line is that speculation continues as to whether this crisis has reached its peak or if worse is yet to come.