INCEIF Knowledge Repository (INCEIF University)
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Democracy, economic development and maqasid al-Shariah
No full textThe statistics shows that of the richest top 20 countries in 2003, 19 were capitalist democracies. This article, thus, attempts to assess the potential association between economic development/ capitalism and democracy. In arguing for a positive nexus between the two, it also aims to locate the historical roots of this relationship. In doing so, the paper argues that Western capitalism historically evolved from market economy and capitalism developed under Islamic civilizations, which preceded the modern nature of Western capitalism by at least six hundreds years. It also argues that fundamental principles of modern democracy can be traced back to political structure of the initial Islamic community. Therefore, it asserts that Islam neither impedes nor objects to democracy and also contains many features of capitalism. In supporting these assertions, the paper introduces the concept of intergenerational Al-Ghazali Optimum and, therefore, argues that the most important values behind the political and economics success of the West can actually be found in a reinterpretation of maqasid al-Shari'ah
Corporate ethical identity disclosures: the perceived, the publicized and the applied in Islamic banks
No full textThe public’s perception about Islamic banks is that, they are ethical banks founded on religious precepts hence; they would be more transparent when compared to conventional banks, but our preliminary studies proves that perception to be wrong. This paper examines the levels of expected and actual ethical identity disclosures by Islamic banks using various dimensions of ethical identity disclosures for 21 banks in Bahrain and Malaysia. The main source of data is the annual reports of each bank for five consecutive years, 2007 to 2011. Data collected were analyzed using Ethical Identity Index (EII) model and Descriptive Analysis. Based on EII analysis, we found that, the aggregate actual applied disclosure in both Malaysia and Bahrain is only 51.7% of the expected industry benchmark. We also found that, the most applied disclosure levels in both countries is the debtor’s dimension (77.7%) and the least applied disclosure dimension is the environment disclosures (6.6%). Other important dimensions that might impact on Islamic bank’s future acceptance, profitability, growth, sustainability and reputation were less disclosed. Hence, we conclude and recommend for a collective effort and commitment by both regulators and Islamic bank’s management to ensure increased ethical disclosures to meet the public perception and expectations
Public sector funding and debt management: a case for GDP-linked sukuk
No full textDespite the huge amount of wealth in the hand of Muslims, most countries with Muslim majority population fall in the category of developing nations. The development of infrastructure has been proven to be an effective means for economic growth and poverty reduction. Usually governments have recourse to conventional debt financing to undertake infrastructure projects. However, this form of financing is unsuitable in an Islamic framework due to the prohibition of interest. Moreover, the recurrent sovereign debt crises over the last few decades stresses the importance of debt management that helps avoid the high costs of these forms of catastrophe. Debt indexation to some indicators from the real economy (like GDP or Commodity price) has been identified as an effective means for the reduction of sovereign default. Such an idea has the property of strengthening the linkage between the real and the financial sectors of the economy and allows risk sharing between the parties involved in the transaction. In spite of the convergence of such an idea with the spirit of Islamic finance, the Ṣukūk market has not yet taken advantage of it
Professionalizing the role of Shari'ah auditors: how Malaysia can generate economic benefits
No full textThe paper presents arguments on the need for inventing the profession of Shari'ah auditing and why Malaysia should take the lead to create an Association of Chartered Shari'ah Accountants and Auditors (ACSAA) that can result in long run economic benefits for the country. The paper also critically analyzes how accounting and auditing membership is being exported worldwide by few dominant players to generate economic benefits for their respective origin countries and how existing Islamic accounting and auditing qualification suppliers have failed to deliver and create holistic Shari'ah accountants/auditors required to serve in an ideal Islamic economy. The paper proposes 2 models through which ACSAA can be made a practical reality
Awqaf in history and its implications for modern Islam economies
No full textThis paper aims at analysing the relevance of the historical awqaf system for modern Islamic economies. The main argument focuses on the fact that the awqaf system has provided throughout Islamic history all the essential services at no cost to the state. Thus, a successful modernisation of the system implies a significant cut in government expenditure and all the associated benefits; including downsizing the state sector and a reduction and even an eventual elimination of riba. As far as the modernisation of the system is concerned, historical evidence indicates that the real exiting potential lies in the cash awqaf. It is envisaged here that two powerful Islamic financial institutions, the cash awqaf and mudarabah need to be combined. It is argued further that this combination should take place within the framework of Islamic banks and thus alter the portfolio of these banks in the desired direction, i.e. increasing the mudarabah/murabahah ratio
Permanent and transitory oil volatility and aggregate investment in Malaysia
No full textThis paper investigates the relation between aggregate investment and oil volatility and its permanent and transitory components for a developing country, Malaysia. In the paper, the components generalized autoregressive conditional heteroskedasticity (CGARCH) model is utilized to decompose conditional oil volatility into permanent oil volatility and transitory oil volatility. Respectively reflecting fundamental-driven and random shifts in oil volatility, they are expected to exert differential effects on aggregate investment. Adopting a vector autoregression (VAR) framework to allow feedback effects between aggregate investment and its determinants, the paper documents evidence supporting the adverse effects of conditional oil volatility, permanent oil volatility and transitory oil volatility on aggregate investment and real output. Interestingly, contrary to the findings for the developed markets (US and OECD), the real effects of permanent oil volatility tend to be stronger. These findings are reasonably robust to variable specification and measurements in the VAR system. Hence, there is an indication that heightened oil volatility accounts for the slumps in Malaysia's aggregate investment after the Asian financial crisi
The starry heavens above and the moral law within: on the flatness of economics
No full textResearch in various fields has demonstrated the inadequacy of the Max U image of man. To the extent that the model is responsible for major problems humanity is facing today, it needs to be revised. This note argues that ideas of religions, such as human dignity, personhood, stewardship, and empathy can enrich economics. A number of ideas of Islam, such as property-right rules, risk sharing, and rule-based market behavior are mentioned
Arab Spring and reorganization of the state
No full textAlthough "Arab Spring" is the name given to the latest events in the Middle East, I am of the opinion that the Arab world has just entered into a winter. Dictators are falling like leaves but it will take a while for the spring to blossom. Moreover, unlike in nature, the transition is not an automatic process. Spring will come only if certain pre-conditions are fulfilled
Proposal for innovation in the capital markets: esham
No full textHow does an Islamic state (or, for that matter, a corporation), borrow a substantial amount of capital from mostly Muslim savers or high net-worth individuals, and fast? In 1774, this was the question which the Ottoman Minister of Finance had to answer urgently. Defeated by the armies of Imperial Russia, Ottomans had to pay a huge war indemnity within a year. Moreover, since the borrowing had to be done by the government of the Caliph, it had to be Shari'a based
How inflationary are oil price hikes? A disaggregated look at Thailand using symmetric and asymmetric cointegration models
No full textThe present paper analyzes the inflationary effects of oil prices at the aggregate and disaggregated levels for Thailand using symmetric and asymmetric cointegration and error-correction modeling approaches. The cointegration test results suggest the presence of long-run relations between oil prices and the following price indices: aggregate consumer price index, non-food and beverage price index, housing and furnishing price index, energy price index, non-raw food and energy price index and transportation and communication price index. Meanwhile, food and beverage price index and raw food price index are not cointegrated with the oil prices. From the dynamic analyses, we uncover evidence for asymmetric adjustments of the aggregate consumer prices, the non-food and beverage prices and the housing and furnishing prices towards their long-run values. Further, the effects of oil prices on inflation are observed to be significant in all goods sectors in the short run. The largest impacts of oil price changes are on the energy price inflation followed by the transportation and communication price inflation and the non-raw food and energy price inflation