IS ISLAMIC FINANCE LESS RISKYTHAN CONVENTIONAL FINANCE?
If both systems are equally competitive in terms of returns and performance, but Islamic finance is deemed less risky, it would make sense for many conventional finance users to switch preferences. Given the severe negative effects of past financial crises in the conventional system, adopting Islamic finance to some extent makes economic sense. But is Islamic finance really less risky than conventional finance?
Yes, It Is
The US subprime mortgage crisis caused several large international banks to collapse and brought many others to the brink of it. Yet to our knowledge, no Islamic banks have failed as a result of the mortgage crisis.
One explanation is that Islamic finance requires the ...