Islamic Banking Lessons for the Financial Sector

The financial crisis that started with the demise of Lehman Brothers in 2008 and almost brought the world economy to its knees has prompted many international financial institutions to do some serious soul-searching. As they try to strengthen their capital and reduce their risk operations, whom should governments, regulators and financial bosses turn to for inspiration? A good place to start would be to study those banks that have performed best since the crisis ¿ many of which, ironically, were shown to be ¿underperforming¿ in 2006, during the heady days of the housing boom. In this sense, Islamic banking is a good test case. The authors, who all have extensive experience in the Middle East, analyze how faith-based values have shaped some of the unconventional products and services that Islamic banks offer, and they highlight the challenges these banks face as they expand their presence to Western countries. Might there be useful lessons for conventional banks as they reconceptualize and rebuild their damaged institutions in the wake of the crisis?