I became interested in Islamic finance around 2008. This was a year where banks were announcing losses of unprecedented scale, countries were nearing default on bonds, and just as one crisis subsided another emerged. I happened to be working with Barclays bank in Pakistan at that time and was able to witness much of the turbulence in the banking industry firsthand. It was just not clear to me how the banking system was collapsing, and why so many banks in the United States and Europe had so much exposure to the real estate sector in the United States. I was also curious as to why the financial systems of China and ASEAN countries were not facing the same crisis. What also amazed me is how a credit freeze in the United States and Europe caused companies to cancel orders from factories and put the rest of the world in an economic slowdown. I realized that much of the buying power of the United States and Europe depended on debt, and much of the growth in emerging markets depended on this debt-based buying power.

Since 2008, China began to realign its focus and reduce its dependence on U.S. and European demand and is now cultivating domestic and regional demand. China has not grown alone, and it has helped its regional neighbors grow as well, much like how the United States in the post–World War II era grew in economic might and helped its European allies to do the same.

Amid all the confusion and this transition of economic power, Islamic finance seemed to offer an alternative. ...

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