Islamic Finance, in the Age of Black Swans and Complexities, for a Multipolar World

Abstract

The recent financial developments have given rise to a developing consensus that the Unipolar economic growth regime dominated by U.S, Japan and few European centers, is under great stress. The consensus takes into consideration the present financial complexities, stresses and strains, and the ensuing uncertainty surrounding the sustainability of the unipolar regime, which has given way to a shift towards a multipolar economic setup. Scholarship has already hinted on not only better trade and investment opportunities, but also on a much more resilient global economic growth that such a shift can bring. However, there are some major obstacles that need to be overcome in order to reap fully the desired benefits of multipolarity. Continuation of debt-based financing regime (the hallmarks of which are risk transfer and risk shifting) will not necessarily allow the benefits of emerging multipolarity to accrue to the world economy. The new system can be more effective with a new regime of financing. Indications are that almost all emerging countries in Asia are actively considering risk sharing via Islamic finance as a possible alternative. Key