The lending practices of the West led to the 2008 financial crisis, and "Islamic finance can succeed where the West has failed," the former Malaysian prime minister Dr Mahathir Mohamad said at a recent conference in Singapore, Channel News Asia reports.
Mohamad pointed to the lending practices of the West as the reason why the 2008 financial crisis happened, and said that this is where Shariah-compliant lending protocols can gain leverage, according to the report.
"Being unwilling to borrow large sums of money from the western banking system had hindered the progress of the Muslims, but now with the founding of Islamic banks, Muslims can borrow money in order to do business, but the borrowing is done in a slightly different way from the West," Mohamad was quoted as saying.
Shariah banking in general does not link lending activities with interest rates - something which some believe was a key factor in the near collapse of the banking system in 2008. With the advent of new Islamic banks and the growing aversion toward interest-linked assets, the culture of Shariah banking is set to boom over the next few years. At present, the Islamic finance industry has been growing at 15 to 20 per cent annually, and around 50 per cent of the population of the group of countries belonging to the Association of Southeast Asian Nations is Muslim.
Malaysia takes pride in being the centre of Islamic finance in Asia, with Singapore following closely. Hong Kong is also embarking on new offerings in a bid to become an Islamic finance hub.