The world economy is currently facing a
severe global crisis that has spilled from the financial
sector to the real economy. The crisis can be traced back
to July 2007 with the liquidity crisis due to the loss of
confidence in the mortgage credit markets in the United
States. The hope was that the crisis would be restricted to
financial markets, with few repercussions on the real
economy and the rest of the world. This hope was shattered
in September 2008 as the crisis entered an acute phase,
with strong downward fluctuations in the stock markets,
substantially reduced rates of economic growth, and
accompanied by increases in unemployment. The severity of
this crisis has led to the evaluation of the foundations
of the capitalist financial system and the search for ideas
and solutions.Islamic economists contend that Islamic
finance has an alternative that would prevent the
recurrence of a similar crisis. This paper tries to note
the main causes and the impacts of the financial and
economic crisis.In addition to discuss the belief that the
Islamic finance is a viable alternative to the ailing
global financial system.