Islamic Finance has mainly replicated conventional finance methods inefficiently. It has thrived during periods of high oil prices, which allowed recycled petrodollars to implicitly subsidize its inefficient modes. As petrodollar flows end, the industry cannot afford the costs of its characteristic inefficiency. Reorienting the industry toward managing financial flows for Muslim charities and remittances can serve simultaneously the purposes of financial development, poverty alleviation, and combating criminal finance.
Mahmoud El-Gamal is Professor of Economics and Statistics at Rice University, where he holds the endowed Chair in Islamic Economics, Finance and Management. His publications include Islamic Finance: Law, Economics and Practice (2006) and Oil, Dollars, Debt and Crises (with Amy Myers Jaffe, 2010).
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