The collapse of the global financial system gave rise to intense questions about its radical defects and its future prospects. There is a concern to bring about reforms in the current monetary system. Deleveraging is the name given to this spiral. It is the reduction of the debt accumulated by households and financial institutions. This leads to low market prices drive as the most active are dumped in it. This acceleration of the debt situation. Once this ugly cycle starts it gets such momentum that even huge monetary backup is unable to retain it.
Economic managers, in addition to their good governance, need to find new ways to tackle such situations occur occasionally. The training of senior leaders in economics, he also need radical reform in this perspective. Islamic finance can help resolve this crisis.
One of the main causes of the economic recession is where banks give ready money in excess, without caution, in the hope of obtaining fixed the interest of their clients who are ready. By lending money, banks gets unbridled possibility of earning more money. Therefore, they deal with money as a commodity, which must be considered as a means of exchange of goods and services according to Islamic finance. Money accumulated by the Bank is still used in acquiring more money by providing more loans and receiving money at interest.
It is than some people taking loans but their business flops or they do not do enough the loan interest, therefore they must withdraw from their mortgage or let their confiscated property. Loss of money led to the loss of purchasing power. The market has a general reduction in economic activities when people lose purchasing power.
On the other hand, those taking loans from banks and run their business successfully, they charge to their products or services for the additional amount of interest, that they have to pay to the banks. In this way they get their customers. This gives rise to inflation. Bank succeeded again by accumulating the money bubble to operate more through it. This led to the global recession in business, even if some should prosper.
This is the main reason behind the financial crisis of the last decade, according to economists. This was the result of the absence of good governance of the current financial system. Prof John Gray of the University of Oxford from it is called, "financial virtual economy" which has a huge ability to disturb the real finance as it was seen in the Barings, the oldest British banks, went by default in 1995. James Robertson is of the opinion that money this and the funding system is not fair. It is destructive, environmentally and economically inefficient. It raises concerns about the generation of money more money. According to him, generation of money must be against real property and services.
The solution lies in the Islamic financial system. But the most important is that the training of executives must be oriented to learn appropriate practice. Money is not a commodity, according to Islamic finance, but a medium of exchange of goods and services. When the loan is to take, it can be given as a creditor, the investment and money sink can share the profits and potential losses. In this way, both parties will be partners in a joint venture and will generate money out of the exchange of goods and services.
This is what the Islamic finance system is put in place in the economy. Banking Islamic differs in two ways:
• It focuses on the actual goods and services.
• It ensures the fair flow of money through the sharing of profit and loss
This gives the stability of the economy. Therefore, even if the economy goes into recession, the system based on the profits and losses, guarantees assistance shared financial operators of the accumulation of money at interest, to minimize the threat of bankruptcy and default.
The Madinah Institute for Leadership and entrepreneurship (MILE) provides executives and leaders potential high everywhere in the world of executive education to discover new dimensions in Leadership development, good governance, Telecom training, HR performance and various other management practices to help grow their career in business.
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