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  1. Islamisation of Knowledge: Problems, Principles and Prospective click
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  4. The Balance Sheet of Western Philosophy in this Century click
  5. Man between Two Laws: A Qur’anic Perspective in Understanding Self and Understanding the Other click


Fiscal policy in an Islamic economy and the role of zakat PDF Print E-mail

Mohammed B. Yusoff

This study incorporates zakat into a simple macroeconomic model of an Islamic economy and analyzes the role of zakat in the national income determination. The reduced form aggregate consumption function suggests that the determinants of consumption are: Zakat expenditure, taxes, income and asset holdings of individuals. Zakat could be used as a counter-cyclical policy through discretionary and non-discretionary fiscal policy. Discretionary fiscal policy is carried out by varying the disbursement of zakat to the recipients. During the expansion phase of the business cycle, the government reduces zakat expenditure to close the inflationary gap. This action helps increase the zakat surplus, in the Baitul-Mal. Likewise zakat expenditure could be increased by using the zakat surplus accumulated during the boom periods, when the economy is in the down-swing to spur aggregate spending and economic activities. Therefore, zakat could complement taxation and government spending as tools of stablization policy.  Full text in PDF

Conceptualisation of the second best solution in overcoming the social failure of Islamic banking and finance: Examining the overpowering of homoislamicus by homoeconomicus PDF Print E-mail

Mehmet Asutay

The phenomenal growth of the Islamic banking and finance (IBF) industry has been remarkable since it came into existence just over thirty years ago. However, a closer reading of this positive development indicates that the IBF industry does not necessarily share the aspirations of Islamic economics, which aims at creating a world order in which the moral economy of Islam with its authentic value system can exist. In other words, the Islamic economic system aspires for the development of Islamic economics and financial institutions founded upon homoislamicus, agents concerned about social justice and human-centred economic growth and development. This indeed indicates the divergence between the aspiration of Islamic economics and the world of IBF. After highlighting and analysing the tension areas between the two and the reasons and sources of this apparent divergence, this paper argues that IBF needs to move into its third stage of development through the institutionalisation of social banking as a second best solution in overcoming the social failure of IBF and in creating value-added for capacity building and social justice.  Full text in PDF

A critical appraisal on the challenges of realizing maqasid al-shariaah in Islamic banking and finance PDF Print E-mail

Asyraf Wajdi Dusuki and Abdulazeem Abozaid

Islam harbours an economic vision that holds the key to a social order capable of providing social justice along with economic prosperity. This vision is deeply inscribed in the objectives of shariah, also known as maqasid al-shariah. Consequently the doctrine of Islamic economics entered debates over the social-welfare role of Islam. It has somehow pursued the goal of restructuring economies according to perceived Islamic teachings and principles. Its most visible practical achievement is the establishment of Islamic banks meant to avoid interest and promote Islamic norms of economic behaviour and ultimately realizing the noble objectives of shariah. This paper examines the challenges of the proper realization of maqasid al-shariah in Islamic banking and finance. These challenges cover various issues: the proper understanding of maqasid al-shariah in Islamic economics; the methods of implementing maqasid al-shariah in Islamic banking and finance; the potential conflicts between macro maqasid and micro maqasid; and the possible abuse of maqasid al-shariah to justify certain financial contracts which in fact contradict the shariah texts. The paper analyses these challenges and provides examples from the current practices of Islamic banks and financial institutions.  Full text in PDF

Islamic banking and finance: Between ideals and realities PDF Print E-mail

Abdul Rahim Abdul Rahman

Islamic banking and finance as an industry is growing at an unprecedented rate. Currently, there are about 270 Islamic banks worldwide with a market capitalization in excess of US$13 billion. The assets of Islamic banks worldwide are estimated at more than US$265 billion and financial investments are above US$400 billion. Islamic bank deposits are estimated at over US$202 billion worldwide with an average growth of between 10 and 20 per cent. Furthermore, Islamic bonds are currently estimated at around US$30 billion. In addition, Islamic equity funds are estimated at more than US$3.3 billion worldwide with a growth of more than 25 per cent over seven years and the global Takaful premium is estimated at around US$2 billion.

Islamic finance is founded mainly on the prohibition of riba’. Thus, the main aim of Islamic banking and finance is to provide an Islamic alternative to the conventional system that is based on riba. As an alternative to riba, the profit and loss sharing arrangements are held as an ideal mode of financing in Islamic finance. It is expected that this profit and loss sharing will significantly remove the inequitable distribution of income and wealth and may lead to a more efficient and optimal allocation of resources as compared to the interest-based system.  Thus, it will ensure justice between the parties involved as the return to the bank on finance is dependent on the operational results of the entrepreneur (Siddiqi, 2001).  Full text in PDF

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