The Relevance Of Risk Sharing For Modern Economies

The purpose of this study is to confirm and demonstrate that risk sharing policy is practical and viable alternative to the conventional system. This study is an archival research, including inspection of documents held in libraries and on-line. Within this framework, statistical data, audio and printed materials provide the source for analysis. This study found that in 1933-1935, Germany instrumentalized the principle of risk sharing to fund the Work-Creation Programs –a national agenda that successfully improved domestic labour market condition. Practical Implications from this study are twofolds: First, the finding abrogates the current misconception that Islamic finance is difficult, impractical, and not viable. Second, for policy makers, the study laid out another reason of why risk sharing principle should be adopted into economic policy. It is the first study that demonstrates, based on historical record, the Islamic financial principles of risk sharing was implemented into the macroeconomic policy of Germany 1933-1935. The aptness of risk sharing to the national economic policy in Germany 1933-1935, which has protected the country against depression and provided millions of jobs to its people, provides an academic support for the direction of current Islamic financial system towards risk sharing.