Islamic finance is a fairly young industry. It’s only 30 years old. When I first began looking into the industry back in the late 1970s, the asset size was about US$50 million. The industry has now grown to reach US$1 trillion. This growth is a good sign; however, in order to progress further we need to learn lessons from the recent financial crisis and explore the path that we would like to travel in order to bring the industry forward.
Financial crisis happens when market expectation of rising return is not met. This is usually referred to as “bubble burst”. The expectation of continuous rising return will pump air into the asset bubble and when the bubble has been stretched to the maximum, it will burst and deflate the hot air in the bubble, bringing prices down with it.
