Hety Budiyanti
This chapter provides a brief analysis of financial crises from a theoretical point of view. It examines approaches that regard financial crises as a disturbing factor of a generally stable real economy (Marx, Schumpeter, and The Keynesians which are part of the neoclassical economics paradigm). It also examines behavioural finance since many theories believe that financial crises sometimes appear to be driven by irrational factors and behaviours. I address the issue of the relevance of all these theories for the present crisis and draw some policy implications. Thereafter, it discusses the Islamic financial system as an alternative to the conventional financial system to mitigate the occurrence of a financial crisis. The prohibition of riba, maysir, and gharar transactions offers a solution to the financial crisis from speculative bubbles and crash. The principle of equity financing in Islamic economics is a solution to the financial crisis from the sovereign default. Despite the significant development of the Islamic financial system, it only shares a small portion of the world’s financial assets. Some challenges facing the Islamic finance industry will also be addressed. © 2025 selection and editorial matter, Erhan Akkas; individual chapters, the contributors.
State University of Makassar, Makassar, Indonesia
