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Vatican promotes Islamic finance in face of global crisis

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Vatican says Western banks should look at rules of Islamic finance to restore confidence amongst clients

“The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service” the Vatican’s official newspaper Osservatore Romano said in an article on Mar 4, 2009.

Author Loretta Napoleoni and Abaxbank Spa fixed income strategist, Claudia Segre, say in the article that “Western banks could use tools such as the Islamic bonds, known as sukuk, as collateral”. Sukuk may be used to fund the “‘car industry or the next Olympic Games in London,” they said.

They also said that profit share, gained from sukuk, may be an alternative to the interest. They underlined that sukuk system could help automotive sector and support investments in infrastructure area.

Islamic sukuk system is similar to bonos of capitalist system. But in sukuk, money is invested concrete projects and profit share is distributed to clients instead of interest earned.

The article also said that profit share, gained from sukuk, may be an alternative to the interest, underlining that the sukuk system could help automotive sector and support investments in infrastructure area.

Using the Islamic sukuk system, money would be invested in concrete projects and profit share – instead of interest earned – is distributed to clients.

The Osservatore’s editor, Giovanni Maria Vian, said that “the great religions have always had a common attention to the human dimension of the economy” Corriere della Sera reported.

Scanned Copy of the Osservatore Romano (in Italian language)

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Written by S Ibrahim

Mar 14, 2009 at 1:02 pm

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