The Stability of Islamic Finance

In the 1997 financial crisis, one of the worst hit countries was Malaysia.    At the time the Prime Minister Muhamad Mahathir.

1. Earlier Mahathir said: "Nowadays, in the so-called open economy, the rich countries have found a way of subverting the poor countries. Everything is in their favor. They have money, they can subvert us. We can work for 40 years to build up our economy, these people just come and rob us." Quoted in "Speculators 'Free to Hammer Ringgit,'" The Sunday Straits Times (Singapore), Aug. 17, 1997 page 21. His second in command, Deputy Prime Minister Anwar Ibrahim also saw dark forces at work: "It is clear that what we are experiencing now is a form of economic war being launched by a Western syndicate in the stock and money markets." Quoted in "Malaysians Told to Rally to Help Ringgit Rebound," The Straits Times, Sept. 5, 1997.

There were other countries that were devasted as well, such as Thailand. Malaysia is a Moslem country, with Islamic finance.  Why was it not spared the economic crisis?

Not all Islamic nations maintain the same set of rules.  some may be considered more liberal than the others.  One may speak of a "geography of Islamic finance."  Malaysia is considered the most liberal of the countries.  It would be interesting to see a list of financial instruments permitted by country and the relative stability of that country's finances.  One would expect the more conservative the Islamic finance, the more stable the economy.