International relations expert at The Australian National University (ANU), Dr Susan Harris-Rimmer, has called on the G-20 summit in Turkey this November to put a stronger economic focus on Islamic finance.
Dr Harris-Rimmer, who has spent 18 months researching Islamic finance at the G20, will present her findings at Harvard University's 2015 Institute for Global Law and Policy conference. She believes the sustainable principles of Islamic finance make it less vulnerable to major crisis.
"We're so focussed on stopping wars that we forget an economic crisis can harm people as well," Dr Harris-Rimmer said.
The Global Financial Crisis (GFC) of 2008 caused the near-collapse of some of the world's largest financial institutions. Housing markets suffered, resulting in evictions, foreclosures, prolonged unemployment and the GFC played a significant role in creating European sovereign-debt crisis. In Australia, the dollar depreciated rapidly as the crisis intensified, declining by over 30 per cent.
According to Dr Harris-Rimmer, proponents of Islamic finance laid the blame for the GFC on the loose risk-management principles of the western finance system.
"They saw it as unethical banking practices that happened in such a systemic way that it came out of the financial sphere and hit people in the real economy. This can't really happen in Islamic finance. Every transaction is based in the real economy so you don't build this kind of financial bubble," she said.
She believes the three Muslim-majority nations represented in the G20, Turkey, Saudi Arabia and Indonesia, must do more to work together for Islamic finance to be given serious consideration at the summit. Malaysia is also attending the Turkey G20 Summit as chair of ASEAN.
"They don't work together. That was one of the interesting findings I made," she said. "Even though they have similar attitudes towards the causes of the financial crisis and the solutions, they're not caucusing."
Beyond the G-20 summit, Dr Harris-Rimmer would like to see more diverse voices in some of the world's governing finance bodies, such as The World Bank and The International Monetary Fund (IMF).
"They're Western Europe and American dominated and don't allow for the emerging economies to have sufficient say," she said.
"People from other parts of the world deserve to have a system that represents their interests. Western finance doesn't have all the answers or else we wouldn't have gotten into the mess we're in."
Dr Harris-Rimmer will present her research findings at the second biennial IGLP Conference on Tuesday. The event will showcase innovative thinking about global law and policy by scholars from around the world.