Industry Expert Argues for New Generation Financial System: West needs to meet the East

thefinalcrash toby-birch-hugo-bouleau

  • Industry Expert Argues for New Generation Financial System
  • Toby Birch Says Islamic Finance Has a Key Role to Play in the Future

Speaking ahead of the 15th Annual World Islamic Banking Conference (WIBC 2008), Toby Birch – the investment guru who predicted the global financial crisis, and who is a keynote speaker at the forthcoming conference – says there are opportunities for systemic change within the midst of the current global economic crisis.

Mr. Birch argues that: “It will be the dawn of a new and better structure for the global financial markets if we all join together against a common enemy – a decaying old system that has become increasingly impractical in these current times.”

Drawing from historical experiences, according to Mr. Birch, will be a good place to start if the global financial system is to regain its feet, drawing on best practices from the several models: “We need an economic model that re-emphasises the positive elements of capitalism and a banking system that is symbiotic and not self-seeking. Fairness, balance and altruism in finance may sound Utopian or old-fashioned but we are in desperate need of some ancient acumen. The current global financial landscape needs not just an overhaul of the mechanisms but a thorough rethinking and a fundamental new generation remedy.”

Islamic philosophy may offer a beacon of light in the midst of the global credit slump, according to a leading authority on the subject. Toby Birch (Hugo Bouleau), who predicted the world financial crisis in his book, The Final Crash, believes the West has a lot to learn from Middle Eastern business practices. He said ethical investments guided by the principle of Islamic Sharia holy law led the way towards a sustainable economic future.

What we must get used to is a more symmetrical and harmonious system, based on  transparency. The problem we have in the West is that banks are very dominant and control people through lending. If something goes wrong, such as a mortgage, the homeowner loses their house. But in Islamic Sharia law, charging interest is forbidden. The bank would lose money and would also help out the homeowner. It’s a slow way of growing business, but ultimately a more sustainable one.

Islamic mortgage holders pay rent rather than interest and banks match loans with deposits, charging fees rather than interest margin to pay for their services. The method may sound like semantics but there is a crucial difference: it avoids the creation of credit which is inflationary for the economy and ultimately self-destructive for the bank. In this form of finance there are no guarantees or deposit protection schemes but lending is far more responsible.

Source: Al Bawaba – Syndication: RIBH


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