Islamic economics and the global financial system: Towards a just and equitable framework

This study explores the potential of Islamic economics to contribute to a more just and equitable global financial system. The current global framework, largely driven by interest-based mechanisms and speculative practices, has been criticized for fostering inequality, financial instability, and exclusion. Islamic economics, with its emphasis on risk-sharing, prohibition of riba (interest), asset-backed financing, and ethical investment, offers a distinct paradigm that prioritizes justice, equity, and social welfare. The research employs a mixed-methods approach, combining a critical review of literature with comparative analysis of financial performance in countries that have integrated Islamic finance into their economies. Case studies from Malaysia, the Gulf Cooperation Council (GCC) states, and select African nations provide empirical insights into the effectiveness of Islamic finance instruments such as Sukuk, Murabaha, and Takaful in fostering financial inclusion and stability. The findings suggest that Islamic economics can enhance resilience against financial crises, promote inclusive development, and offer ethical alternatives to conventional finance. However, challenges such as regulatory harmonization, limited awareness, and integration within global financial markets remain significant barriers. The study concludes that aligning Islamic economic principles with global financial reforms could play a pivotal role in advancing a more balanced and equitable financial order. Future research should focus on innovative policy frameworks and digital transformation to scale the impact of Islamic finance in the global economy.