TowardsA NewTheoryOf Finance:CanIslamicFina

This book is an attempt to discover a new theory ıf financial intermediationthat restores to the financial sector and financial institutions their originalfunction, and prevents them from causing crises in the real market. Thesuggested reform in financial intermediation would propose making financialintermediaries support the real sector of production and exchance instead oftrading financial assets and derivatives.

The proposed reform is inspired from the principles of Islamic finance, whichrequire finance to utilize sale, lease, and sharing contracts, and avoid playingwith debts' trading and virtual financing. If all the financial activities arerechanneled throught such contracts, the whole economy's saving and creditcreation would only be available to increase the amount of added valuecreated in the production and Exchange sectors. It would also maket hebanking activities the main focus and the only task performed by thefinancial institutions and financial sector.

The adoption of the Islamic finance methodology would make financialactivities socially and environmentally friendly, in addition to beingdevolopmentally-oriented. It will also re-ad-dress the allocation of humanand financial resources from derivaties and trading of debt to the real marketin the form of finance and human talent availability for research and actualincrease in the output of the real sector.

We present this book with the hope that it will make a real difference inchanging the direction of finance and economies around the world.All the 21 chapters are contributed by a selected team of my Ph.D. students.

Monzer Kahf