Global Financial Crisis and Islamic Financial Products

Abstract

Collapse of the United States sub-prime mortgage market in late 2006 opened a new era for the world economy. After havingan average growth rate of 4.3 percent for the period of 2004-2007, world growth rate was stuck to an average of 2.2 percent between 2008-2015. While developed countries try to revitalize their economies by several unconventional monetary policies such as quantitative easing, forward guidance, and negative interest rates, emerging countries are in a rush to positively decouple from their peers in order to avoid unfavorable developments in global economic conjuncture. Still, world economy is struggling with weak investment, trade, and growth. Despite this gloomy global climate, Turkey gives a promising impression within the league of emerging economies with its expertise in crisis management. Although Turkish banking sector is the key strength of the economy, financial system should be deepened and enriched further as the economy tries to take steps to materialize the project of the Istanbul International Finance Centre. Considering the case of United Kingdom as an Islamic finance hub, it is quite clear that participating banking in Turkey could contribute more to the local conventional banking by its differentiated pool of tools. Besides, capital markets in Turkey could reach a larger audience by covering Islamic financial products in addition to the traditional range of products. A deeper and richer financial system could support the real sector by efficient allocation of resources. It can both strengthen the resilience of the economy toward potential downswings and contribute to the growth of the economy.