Islamic Finance

An Islamic economy has a particular ideology that contrasts with those of capitalism and communism. Communism was developed as a means of dealing with the problems of capitalism.

The idea of private property is the core of capitalism. The negation of this idea is the core of socialism. Complete freedom of ownership in capitalist societies has led to an increasing gap between the wealthy and the poor and has strengthened gigantic corporations and cartels. The price system and the desire for profits reign supreme in such societies. Communism has come to treat humans as machines, while in fascism, individuals lose their identities.

The civil law of France, the common law of the United States, and the Islamic legal system can be viewed comparatively with respect to their policies on contractual mistakes. An evaluation of the Islamic solution for dealing with mistakes suggests that it may not have much of a future in the modern world. Modern societies seek to enhance the security of transactions.

During the previous year emerging markets have outperformed developed markets, yet portfolios remain unbalanced and weighted towards the declining developed markets. These emerging market countries include Turkey, China, South Korea and India; as these markets have developed the populations have begun to experience higher standards of living.

Events beyond the control of contractually-bound parties can prevent fulfillment of contractual obligations. If the effect of the events is not so great as to discharge the parties from their obligations, then the contract may be judicially readjusted to enable fulfillment of the partie's obligations. Judicial readjustment can be examined in terms of the shari`a (traditional Islamic law) still applied in Arab states and the modern statutes of these states.

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Shari`a (the 'correct path') is a major legal system. Islamic revivalism has caused a return to shari`a in

Islamic law bans interest, and the Muslim world faces difficulties in its efforts to establish Islamic economies in a world so ridden with interest. Islamic banking and finance have particular techniques.