ISLAMIC FINANCE AS AN ETHICAL ALTERNATIVE IN THE GLOBAL FINANCIAL SYSTEM

Abstract

The recurring crises in the global financial system have intensified debates about ethics, social responsibility, and sustainability in conventional finance. Events such as the 2008 financial crisis, growing income inequality, and speculative practices have exposed structural weaknesses in interest-based, profit-driven systems. These challenges have prompted the search for alternative financial models that integrate ethical and social considerations with economic activity. Islamic finance has emerged as a value-based system that aligns financial objectives with moral and social principles derived from Sharia (Islamic law). Rooted in the Qur’an, Sunnah, and Islamic jurisprudence, it emphasizes justice (‘adl), fairness, accountability, and social welfare (maslahah). Key principles include the prohibition of riba (interest), gharar (excessive uncertainty), and maysir (speculation), alongside risk-sharing, asset-backed financing, transparency, and contractual clarity. Financial instruments such as profit-and-loss sharing (mudarabah, musharakah), zakat, waqf, and socially responsible investments promote inclusion, equitable wealth distribution, and ethical accountability. By linking finance to tangible economic activity and discouraging speculative behavior, Islamic finance contributes to systemic stability, reduces financial risk, and fosters sustainable development. This study examines Islamic finance as a practical ethical framework capable of addressing moral deficiencies in conventional finance, offering a globally relevant model for justice, financial stability, and socially responsible economic growth.