The Credit Crunch: An Islamic Perspective

Over the last few months, it has been widely accepted that the “credit crunch” is the biggest financial and economic crisis to hit the Western world since the Great Depression of the 1930s. Virtually every individual has been affected directly or indirectly by the market meltdown and, for the first time in recent history, leading Western commentators have questioned the viability of the capitalist system and the fractional reserve banking model. This article seeks to explain the root causes of the credit crunch from both a Western and an Islamic perspective, before proposing an Islamic solution. From a Western perspective,…