The Role of Islamic Finance in Shaping the New Financial Order
Assoc. Prof. M. Kutluğhan Savaş ÖKTE

Abstract
The global financial crisis provided an opportunity to test the strength of the Islamic financial system and to discuss the question of whether it represents an alternative to the conventional financial system. Such a crisis would have avoided under an Islamic financial system because most, if not all, of the factors that caused it were absent in the Islamic financial system. Islamic finance is among the fastest growing segments in international financial systems in recent years with an estimated annual growth rate of 20 percent and total assets of more than $1 trillion. Global finance is at a crossroads now. As the existing international financial system experiences its worst crisis since the Great Depression, it is the correct time to look for alternatives. Islamic economics and finance offer a more efficient alternative to the Western approach with its emphasis on equity, risk-sharing, and participatory economic growth. There is no room for excessive leverage and speculation in the Islamic financial system. Also, there exists a close link between finance and real economic activity. This paper argues that Islamic finance entered a new era after the global financial crisis and that it could play an important role in redesigning the global financial order. However, at its current stage of development it is difficult for the Islamic financial system to assume a significant role in ensuring the health and strength of the international financial system in the near future.

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