Why Islamic Finance is Panacea for Addressing Crisis in Financial Markets

Financial crises are common within the modern financial system. The world has witnessed several significant financial crises since the '80s. In most cases, these crises have always led to an economic crisis that causes significant turbulence and severe sufferings for people around the world. The historical overview indicates that the frequency of occurring financial crises—from local to global as well as small to large—has increased over the last 50 years. One of the reasons for the increase in occurrence is that even internal disasters in the financial sector of one country nowadays can spread to other countries through interconnected global financial system, the consequence is huge financial losses all over the world. Such as what happened during the 2008 global financial crisis, where US domestic grown financial flaws propagated to the world. Nowadays, it becomes normal that under the integrated world monetary framework at regular intervals, approximately within 10years, a significant monetary emergency is coordinated around the world. Above this backdrop, the current paper searches what could be the alternative or remedy to the contemporary crises prone financial system. In this context, the paper discusses how the theoretical and practical applicability of Islamic finance principles can counteract the causes related to the reoccurrences of the financial crisis. It also presents the origin, evolution of core tenet of Islamic finance that distinguished it as different from the conventional finance practice