IslamicFinance.de

Islamic finance is based on growth of assets, not financial engineering, and this organic growth makes it different from Western debt constructs, Justice and Development (AK) Party parliamentarian and economist has said.
Ibrahim Turhan, member of Turkish parliament for AK Party from Izmir, made the remarks in an interview with Anadolu Agency on the sidelines of the Second International Islamic Finance and Economics conference in Istanbul on Thursday.
Turhan, who is also an economist and former chief executive officer of Borsa Istanbul, said: “One of the principal causes of financial crisis of 2008-2009 was the vast market that had grown up for securitized instruments.
“These involve debt which is made to seem less risky using insurance or derivatives, so that the relationship between the debtor and the debt is no longer direct. Because it broke down that relationship, the quality of securitized instruments deteriorated.” Islamic finance, on the other hand, used instruments based on actual assets, so the quality of the instrument cannot be changed, Turhan said. “This preserves the direct relationship between debtor and creditor, and this moral approach to finance could provide a viable solution for many issues in global finance,” he explained.
In his speech to the conference, Turhan said that preserving the direct relationship between debtor and creditor is part of the moral approach of Islamic finance.