Abstract
This chapter examines the lessons learned from the global financial crisis of 2008 and how they can be applied to reshape the Islamic financial industry. It analyses some of the significant flaws in the current international financial system, with emphasis on how risk transfers result in irrational economic growth and banks’ excessive lending. It considers the inadequate risk management procedures of many financial institutions selling conventional financial products, along with transparency and disclosure issues. It also favours a shift to equity-based finance, which is more compatible with Islamic financial principles.