International Journal of Economics, Management and Accounting
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The Market Institution and the State in Islamic Economics: From Past to Present and Future
Full text linkThe market institution determines mutual cooperation, division of labor and coordination among producers and consumers. Free functioning of the market institution supplies information and knowledge to buyers and sellers thus enabling them to make economic decisions for their transaction according to the purchasing power of buyers and the amount of marketable goods and services. Free market institution enables buyers and sellers to use their resources efficiently. The market institution has played crucial roles in arranging balanced relations among demand and supply. The free market does not deceive buyers and sellers. Obstacles created by the state political or capitalist monopolistic powers prevent the market institution from functioning efficiently in providing the right information to sellers and buyers to establish balance between supply and demand. The free market has paved ways for effective mobilization of human and natural resources, whereas the controlled market either by bureaucratic or capitalist monopolies has hindered economic development by wasting and leaving idle some human and natural resources. Islamic economics emphasizes the crucial role of free market institution in arranging a suitable atmosphere for buyers and sellers to meet at a platform called the market. In Islamic economics, one of the main economic duties of the state is to arrange this suitable atmosphere for free functioning of the market institution. Within the limited framework of this article, we will try to give some brief theoretical information about the role of the state in establishing an atmosphere for free market institution functioning in the economic history of the Muslim world. The main duties of the state concerning the free market institution in our time will be evaluated and discussed according to the main economic principles of Islamic economics
Rethinking the Structure of Islamic Economics Science: The Universal Man Imperative
Full text linkThe end of value-free economics presents a positive outlook for Islamic economics. Nonetheless, progress is only viable when this discipline has a solid scientific structure. Thus, this paper aims at highlighting the economic man imperative in projecting Islamic economics as a normal science. This paper first explores Islamic economics’ current state of readiness to fulfill its promising future. Unfortunately, the authoritative view is that Islamic economics is not in proper order. Consequently, Arif’s (1985a and 1985b) Islamic economics scientific structure is utilized to locate that stage which requires serious improvement. At the basis of micro-foundation stage, the economic man imperative emerges out of this identification exercise. Thus, the most important implication here is the replacement of homo Islamicus with the concept of ‘universal man’ which proffers several significant advantages. Apart from the other stages in the structure, this ‘universal man’ needs immediate refinement to strengthen the edifice of Islamic economics science
Foreign Aid and Human Welfare: A Quantile Regression Approach
No full textThis paper investigates the impact of foreign aid on human development as measured by the human development index (HDI). We apply quantile regression approach for the data from 124 developing countries covering the period 1980 to 2013. The findings show that in general, aid is positively associated with the human development index. The impact is much greater in countries with low level of human development. Similarly, we find statistically positive impact of aid on HDI income, health, and education indices. The results imply that since aid is positively related with HDI, and HDI is universally accepted as a quantitative measure of human development, then aid can significantly contribute to promoting human welfare
Modern Economics and the Islamic Alternative: Disciplinary Evolution and Current Crisis
Full text linkMainstream economics has come under scathing criticism from various circles of thought. Within the territory of the discipline, there is a contestation. While one faction (supporters) considers economics a science, engaging with the real world, providing tools for solving fundamental problems to guide policy, another faction (critics) considers it to be under the sway of ideology (of capitalism and free markets) in which arid mathematical formalism is regarded as an end in itself, having no or harmful practical policy implications. Various communities of scholars have emerged that advocate alternative heterodox approaches to the subject, Islamic economics being one among them. In this context the present paper will attempt to provide an account of the recent history of modern economics and shed light on the present state of its crisis. The paper will also attempt to enquire into recent progress and the present state of Islamic economics as an alternative paradigm to mainstream economics. We attempt to answer the question that irrespective of the crisis in mainstream economic thinking, why did the alternative perspective of Islamic economics fail to make a long-lasting mark in academic circles and why did a Kuhnian paradigmatic shift fail to occur within economics? Lastly the paper will point out various theoretical and methodological roots of the present crisis of mainstream economics, which should not be ignored by Islamic economists when formulating the basis of Islamic economics
The Informal Economy: A Neglected Area in Islamic Economics
Full text linkThe informal economy has been neglected by Islamic economists. The neglect means the Islamic economic system being rebuilt is confined only to state and market domains. That existing paradigm is myopic. To understand and solve the real-world economic problems, we need to recalibrate and also focus on the informal economy. The purpose of this study, therefore, is to review the conception of the informal economy. With a better understanding of the concept, we hope that rebuilding of Islamic economics can become more holistic in approach. The informal economy is unique according to countries. The economic, political and cultural aspects have a strong influence on the dimensions of the informal economy. Based on the extant literature we also have identified the determinants of informal employment. The evaluation of the factors identified in this study reveals that government policies and efficiency, poverty issues, gender inequality, education and religiosity are the determinants of the informal sector employment. We then call for future research in Islamic economics to be geared toward understanding and addressing issues in the informal economy
Aid Effectiveness in OIC Member Countries: Beyond Economics Indicators
Full text linkThis paper examines whether official development assistance (ODA) is an effective tool for human development and progress of recipient OIC (Organization of Islamic Cooperation) member countries. The paper estimates the impact of aid on social indicators rather than on economic growth. It measures the impact of ODA classified by sectors on the components of Human Development Index (HDI): standards of living, life expectancy, and education indices. It controls for the magnitude of civil violence, population growth, foreign direct investment, income, urbanization and regime type; whether a regime is democratic or autocratic. It utilizes annual data between 2002 and 2015 for OIC member countries. Results indicate that ODA is an effective tool for human development, having a greater and a more efficient impact on human development than other development instruments included in the analysis. We also find that civil violence is a powerful deterrent of HDI. Based on these results, the paper suggests increasing ODA, particularly, to health and education sectors, and intensifying efforts to prevent and reduce civil violence as well as monitoring and managing post-conflict states to cope with the risk of relapsing into conflict
Efficiency and Ownership Structure: Evidence from Rural Banks in Indonesia
Full text linkThis paper aims at examining whether ownership structure, which is represented by ownership concentration and type of ownership, affects the technical efficiency of both Islamic and conventional rural banks in Indonesia. First, this study estimates the efficiency score of Islamic and conventional rural banks using Stochastic Frontier Analysis (SFA). The findings suggest that the gap of efficiency level holds among the Islamic Rural Banks (BPRS), yet unobservable in the case of their conventional counterparts (BPR). Management of BPRS is under a big question as the results also indicate that the Islamic microfinance institutions’ inefficiency is getting more severe over time. Second, by using Generalized Linear Model (GLM), this study points out that ownership concentration can explain the inefficiency of BPRS. Relationship between ownership and efficiency appears in cubic polynomial, instead of traditional linear form. It shows that expropriation and alignment effects are jointly embedded in the BPRS. This allows derivation of minimum and maximum turning point of BPRS ownership, which would be very beneficial for policy recommendations