Vatican Recommends Islamic Finance
The Daily Vatican newspaper, â€˜Lâ€™Osservatore Romano, reported that Islamic banking system may help to overcome global crisis, Turkish media reported.
The Vatican said banks should look at the ethical rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis.
â€œThe 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,â€ the Vaticanâ€˜s official newspaper Osservatore Romano said in an article in its latest issue late yesterday.
Author Loretta Napoleoni and Abaxbank Spa fixed income strategist, Claudia Segre, say in the article that â€œWestern banks could use tools such as the Islamic bonds, known as sukuk, as collateral.â€ Sukuk may be used to fund the â€œâ€™car industry or the next Olympic Games in London,â€ 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.
Pope Benedict XVI in an Oct. 7 speech reflected on crashing financial markets saying that â€œmoney vanishes, it is nothingâ€ and concluded that â€œthe only solid reality is the word of God.â€ The Vatican has been paying attention to the global financial meltdown and ran articles in its official newspaper that criticize the free-market model for having â€œgrown too much and badly in the past two decades.â€
The Osservatoreâ€™s editor, Giovanni Maria Vian, said that â€œthe great religions have always had a common attention to the human dimension of the economy,â€ Corriere della Sera reported today.