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Impact Of Global Financial Crises On Global Financial Stability And Need For An Alternative Financial System

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  • Muhammad Ashfaq

    (Rhine-Waal University, Germany)

Abstract

The main objective of this paper is to highlight the importance of the financial stability of the global fi nancial system particularly after the recent global financial crisis of 2008-09. The major causes of different financial crises possess the same pattern of greed among investors, inefficiency of government regulators, central banks and other stakeholders. They have miserably failed to fix the structural problems such as control of excessive debt lending, enforcement of eff ective regulations, prohibition of speculative business activities and unethical business practices in the global financial system. Islamic financial system, whose size of global assets crossed the mark of US$ 2.1 trillion by the end of 2015, which is relatively very small as compared to the conventional financial system, is rapidly growing as an alternative system. It prohibits unethical economic activities such as speculative derivative trading, uncontrolled excessive debt lending and promotes an interest-free financial system based on profit, loss and risk sharing principles. This paper concludes that global financial stability could only be achieved if proper corrective actions were taken. It also shows that the Islamic financial system was less affected by the recent global financial crisis compared to the conventional financial system because it imposes strict rules and prohibits investments in toxic assets.

Suggested Citation

  • Muhammad Ashfaq, 2016. "Impact Of Global Financial Crises On Global Financial Stability And Need For An Alternative Financial System," Poslovna izvrsnost/Business Excellence, Faculty of Economics and Business, University of Zagreb, vol. 10(2), pages 109-121.
    • Handle: RePEc:zag:busexc:v:10:y:2016:i:2:p:109-121
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    References listed on IDEAS

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