22/09/2026
PRESS RELEASE NO. 09/2026
FINANCIALIZATION AND INFLATION
When Finance Expands Faster Than the Real Economy
The Global Islamic Unity Forum (GIUF) calls for urgent attention to the growing influence of credit, financial institutions and asset markets over
the real economy.
Credit is essential to economic development when it finances factories, infrastructure, businesses, productive investment and employment. The
danger arises when credit increasingly finances the purchase, refinancing and trading of existing assets, particularly property and financial assets, rather than expanding productive capacity. This
process is known as financialization.
Financialization can create an illusion of prosperity:
More Credit → Higher Asset Prices → More Collateral → More Borrowing → Greater
Indebtedness.
GDP may continue to grow because borrowing generates consumption, construction and
financial services. But rising GDP does not necessarily mean a corresponding increase in the
economy's productive capacity.
Building a new factory creates productive capacity. Repeatedly refinancing an existing asset at
a higher valuation does not. Building new homes increases supply. Driving up the price of
existing homes does not.
When financial claims grow faster than the real economy, asset prices and debt can rise
together. Households then require larger loans to acquire homes and other necessities, while
an increasing share of their income is committed to debt servicing.
The consequence is ultimately felt in the purchasing power of ordinary people.
When money and credit expand faster than the production of real goods and services, prices
rise. When wages fail to keep pace, real purchasing power falls. A person may have a higher nominal income and a more valuable house, yet be poorer in terms of what that income can
actually buy.
Inflation, therefore, is not merely a statistic. It is a reduction in the purchasing power of human
labour and household income.
GIUF CALLS FOR ACTION
GIUF calls upon the Government, Bank Negara Malaysia, financial regulators and financial
institutions to stop measuring economic health by GDP and asset values alone.
GIUF demands:
1. CREDIT TRANSPARENCY
Publish clearer data showing where new credit goes—into productive investment, consumption,
new housing, asset purchases or refinancing.
2. CREDIT QUALITY, NOT CREDIT QUANTITY
Monitor credit growth against real production, real wages and household income, rather than
treating expanding loan books as economic progress.
3. CURB ASSET-PRICE INFLATION
Examine how credit policies contribute to property and financial-asset inflation and the resulting
affordability crisis.
4. PUT THE REAL ECONOMY FIRST
Give greater policy priority to credit that creates new productive capacity, employment and
essential goods and services, rather than merely increasing the prices of existing assets.
5. MEASURE WHAT MATTERS TO PEOPLE
Make real wages, household purchasing power, housing affordability and debt-servicing
burdens central indicators of economic well-being.
Finance must serve the economy. The economy must serve the people.
The real test of economic growth is not how large financial balance sheets become, nor how
high property and financial assets are valued. It is whether ordinary people can afford a home,
feed their families, educate their children, obtain healthcare and save for their future from the
fruits of their labour.
When finance expands faster than the real economy, financial wealth may rise while the people become poorer.
GIUF calls for an economy where credit creates productive capacity—not merely higher prices;
where finance serves society—not the other way around.
Financialization may make the numbers bigger. Inflation makes the people poorer.
Abdul Rahman Othman
Chairman
GLOBAL ISLAMIC UNITY FORUM (GIUF)
22 September 2026
