Abstrak 
Why Does Nobody See The Financial System As A Whole?
Dian Masyita
Universitas Padjadjaran, Submitted to the Moral Values and Financial Markets: Islamic Finance Against Financial Crisis 18th-19th November 2009, Milan, Italy Organised by: FEEM, Italy & Durham Islamic Finance Programme, Durham University, UK
Bahasa Inggris
Universitas Padjadjaran, Submitted to the Moral Values and Financial Markets: Islamic Finance Against Financial Crisis 18th-19th November 2009, Milan, Italy Organised by: FEEM, Italy & Durham Islamic Finance Programme, Durham University, UK
a complex system, global financial crisis, Islamic banking and finance, Risk Management, system thinking paradigm
Why did no-one see the credit crunch was on its way? This question came from Queen Elizabeth, when she visited The London School of Economics in November 2008. This question has been an inspiration to start this paper. The next question emerges “Why does nobody see the financial system as a whole?” Using system thinking, system dynamics paradigm and theory of feedback system, this paper tries to enrich the understanding of how financial systems work: what drives them and causes the behavior. This paper describes the cause of global financial system, the relations among actors in the financial systems. Understanding the role of regulators, mass media, derivative financial products, greedy or unethical people, conflict of interest of rating agency, incentive matters, misplace reliance on risk management model is critical for developing intuition about the evolution of the financial system which simultaneously stimulate the global financial crisis overtime started more than 75 years ago. All those critical factors are relatively recognized and prevailed in the implementation of Islamic banking and finance system nowadays. Many lessons can be learnt from this financial contagion since Islamic banking and finance system has inevitably been a part of the international financial systems. Moreover, since the majority of Islamic banking and finance products are still debt-financing, short-term oriented, Islamic banking and finance are vulnerable affected to financial contagion.