Is the Interest Policy Responsible for the Global Financial Crises?

Is the Interest Policy Responsible for the Global Financial Crises?

ÖZSOY, İsmail
YABANLI, Aydın

Interest represents the allocation of an unearned and imaginary income, which is assumed to have been born out of the exchanges of derivatives on the basis of their nominal values. This is one of the main reasons for the recent financial bubble resulting in the global financial crisis in 2008. This paper first aims to define interest from the Islamic perspective in the light of the Koran and the Prophetic tradition. In addition to the interest of debt which is known by all, the prophet Mohammad taught the mankind another kind of interest, that is ‗interest of exchange‘ that appears in the exchanges of goods, different foreign currencies, and financial derivatives. Then, the paper primarily aims to examine the role and the place of interest mechanism in the crises, particularly in the 2008 Global Financial Crisis.

Conference or Workshop Item
PeerReviewed

2010-06

181