APPROACHES OF INNOVATION IN ISLAMIC FINANCE (ISRA-TR REPORT 2016)

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Year: 2016


We live in an ever-changing world where innovation is not a luxury but a must for survival. Virtually all of the economic growth since the 18th century is ultimately attributable to innovation (Baumol, 2002). Developing countries do not so much suffer from a lack of capital and physical inputs but rather from a general lack of innovative ideas. In this ever-changing world, the biggest risk is to stand still; but the stand-still strategy can cost dearly.

Islamic finance by nature is innovative. It links finance to the real world, which is dynamic and ever-changing by nature. Islamic finance there- fore helps the financial sector avoid the biggest risk it might face: trying to stand still.

From this perspective, conventional finance is inherently risky. Simply to lend money and collect more money is a repetitive stagnant transaction by nature.

Conventional finance lacks dynamism that characterizes the real world. It is no wonder that conventional banking has been described as “boring banking” (Nocera, 2012). 

 

Source:

ISRA THOMSON REUTERS ISLAMIC COMMERCIAL LAW REPORT 2016 (Pg 110 - 112)


 

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