Islamic finance: a non traditional approach to financial markets

Considering the current collapse of the financial markets and the much more important ones that have occurred in the past, perhaps the time has come to reinvent the attitude we should have when we treat with finance. The idea behind this thesis is to show how a mixed system, therefore integrated, between a traditional finance approach and an Islamic one gives a better response in times of crisis. Going deeper, this thesis continues the work carried out in my bachelor’s dissertation, where the two main issues touched were the sustainability of financial markets and market crises. The dissertation integrate knowledge acquired during the three years of my bachelor by an economic, legislative, and theoretical macroeconomics point of view, reviewed and integrated with an engineering perspective also. The five-chapter development covers all areas touched upon in the studies over the past five years. It starts with a chapter which analyses the history of Islam and the legislative aspects and then moves on to a second chapter linked to an economic, political, and macroeconomic analysis. In the third chapter we will see a comparison between the two systems (traditional and Islamic), and we will start talking about their integration from a theoretical point of view. We will also look on some crisis, both financial and cultural. In the fourth chapter we are going to look through the behaviour of various indexes, Islamic and non-Islamic like S&P500. This is to compare on a practical way the conduct of these two different worlds. In the last chapter we will see specific cases where Islamic finance is applied, focusing our attention to two countries: Saudi Arabia and Pakistan, for historical reasons that we will see along the previous four chapters. Necessary will be also insert some points regarding Iran. We will, indeed, analyse the main differences between these countries and try to understand which is the best approach for the Islamic side of our portfolio. Of course, the dissertation will have a certain geographic bound, meaning that perhaps, for our investment idea, the best perspective could be neither the Saudi or Pakistani one, but the one form Malaysia or Indonesia.