Islamic finance is based on an Islamic economy that is backed by assets. At the center of this is an asset backed currency. As long as we base our dealings on fiat money, we will never experience Islamic finance as it was meant to be.
Dubai, United Arab Emirates (PRWEB) February 28, 2014
With over 1.6 billion Muslims around the world and an Islamic economy measured at $8 trillion, it is only a matter of time before a global gold-based currency is back on the market, says Ethica Institute of Islamic Finance. Muslims consider fiat currency — the kind backed only by a government — to be problematic because it is not based on a physical commodity like gold or silver. For many Muslims, a gold backed currency is an idea whose time has long since come.
There have been regional efforts in South East Asia and North Africa to use gold based currencies, but a global currency eludes the world’s Muslims. Such a currency need not undermine the dollar or the euro given the general acceptance of these currencies, but it would provide many with an alternative. With currencies like Bitcoin already fast gaining acceptance, it is not long before smaller currencies begin to supplant the traditional mainstays.
“Islamic finance is based on an Islamic economy that is backed by assets. At the center of this is an asset backed currency. As long as we base our dealings on fiat money, we will never experience Islamic finance as it was meant to be. Governments, regulators, and scholars should work together to create a global, gold-based currency,” said Ethica’s spokesperson.
Experts say that because the fractional reserve banking system enables banks to lend money they do not possess – often much more money – economies are always caught in a precarious bubble of varying size and consequence. This bubble is based on the creation of ‘wealth’ without a commensurate creation of assets. Dubai, with its stated ambition to become the capital of the Islamic economy, and Abu Dhabi, with the respect it commands regionally as a cash rich hydrocarbon center, would be well suited to jointly launch a parallel gold-based currency based on a gold dinar.