The role of Instruments issued by Islamic financial institutions in avoiding the occurrence of financial crises - the mortgage crisis as an example: an analytical study

Abstract

      This research aims to explore and analyze the role that Sukuk issued by Islamic financial institutions can play in avoiding financial crises, focusing on the global subprime mortgage crisis (2008) as a case study. The researcher used the descriptive approach in that (Analytical), as this approach is based on describing the process of issuing Instruments in Islamic financial institutions as well as analyzing all the different aspects related to this process. We have concluded that the Islamic securitization process is the best alternative to the traditional securitization process that causes the mortgage crisis, and it also provides an effective treatment to avoid the occurrence of global financial crises or limit their effects if they occur through several mechanisms, the most important of which are: transparency and financial disclosure - Sharia supervision and compliance with Islamic rulings - hedging against risks - prohibiting all forms of selling debt - prohibiting the derivatives system - prohibiting usurious interest - sharing profits and losses - encouraging real investments - moral and ethical commitment. As for its most important recommendations, countries should develop their financial markets in a manner that is consistent with Islamic law due to its effective role in avoiding the occurrence of financial crises as well as addressing the resulting effects if they occur.