Economic Development and Islamic Finance
Islamic finance has been practiced in some form since the inception of Islam, its practice in modern financial markets became recognized only in the 1980s, and began to represent a meaningful share of global financial activity only around the begin...
| Main Authors: | , |
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| Format: | Publication |
| Language: | English en_US |
| Published: |
Washington, DC: World Bank
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/01/18146534/economic-development-islamic-finance http://hdl.handle.net/10986/15787 |
| Summary: | Islamic finance has been practiced in
some form since the inception of Islam, its practice in
modern financial markets became recognized only in the
1980s, and began to represent a meaningful share of global
financial activity only around the beginning of this
century. In recent years, significant interest in Islamic
finance has emerged in the world's leading conventional
financial centers, including London, New York, and Hong
Kong, and Western investors are increasingly considering
investment in Islamic financial products. The organizing
principle of Islamic finance in an Islamic economy is
transaction based on exchange, where real asset is exchanged
for real asset. By focusing on trade and exchange in
commodities and assets, Islam encourages risk sharing, which
promotes social solidarity. The features of an Islamic
economy will change the behavior of society. There will be
greater consultation; hence there will be no
impulsive-compulsive reaction in financial dealings. At the
same time, the labor force in an Islamic economy will work
under a rule of trust and full understanding of contracts
and obligations. Workers also share in the gains achieved
through the risk, based on productive efforts, which is a
better incentive system than a fixed wage. Workers will be
treated with respect, which reflects the importance of human
dignity in Islam. This paper is organized as follows:
chapter one discusses the epistemological roots of
conventional and Islamic finance. Chapter two provide a
perspective of conventional modern economists. Chapter three
provides a brief taxonomy of the foundational Islamic market
principles and evaluates them in the context of
institutional and behavioral economics in the context of
Knightian uncertainty. Chapter four accounts for finance and
development in Islam from a historical perspective. Chapter
five discusses the evolution of the concept of economic
development. Chapter six provide an Islamic perspective on
financial inclusion and argue that the core principles of
Islam place great emphasis on social justice, inclusion, and
sharing of resources between the haves and the have-nots.
Chapter seven addresses financial inclusion. Chapter eight
provide insight into Islam's perspective on social
safety sets and social insurance. Chapter nine examines
Islamic capital markets in a global context. Chapters ten
examines the problems of primary and secondary aspects of
the conventional stock markets and their critiques of
corporate governance. Chapter eleven give a realistic view
of the current state of affairs in Organization of Islamic
Conference (OIC) countries. Chapter twelve addresses key
economic policy challenges in the context of the Islamic
economic and financial system. |
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