Credit crunch may spur Islamic finance

The fast growing Sharia financial system may receive a further boost as an alternative to capitalism amid the credit crunch and banking crisis, Islamic academics and clerics believe.

Already said to be worth $US300 billion ($A498 billion) and expanding at 15 per cent a year, the Islamic system forbids the levying or payment of interest, preferring shared ownership and splitting of profits.

The global economic meltdown shows "the need for a radical and structural reform of the global financial system. The system based on the principles of Islam offers an alternative which could reduce risks," Hatem al-Naqrashawi, head of theological studies at Doha University, told AFP.

"Islamic banks don't buy credit but manage concrete assets which shelter them from the difficulties that American and European banks are experiencing," explained Abdel Bassat al-Shibi, managing director of Qatar International Islamic Bank.