Describing the Islamic financial system simply as interest-free does not do justice to the system... more Describing the Islamic financial system simply as interest-free does not do justice to the system. Promotion of entrepreneurship, preservation of property rights, transparency, and the sanctity of contractual obligations, which are crucial to any sound financial system, describe its essence. Today, Islamic financial and banking activities have reached an impressive size of over United States (U.S.) 250 billion dollars, as compared to a meagre U.S. 6 billion dollars in the early 1980s. Market participants and policy makers are increasingly paying attention to its potential and how to take advantage of the opportunities presented.
Financial development and improved access to finance (also referred to as financial inclusion) is... more Financial development and improved access to finance (also referred to as financial inclusion) is likely not only to accelerate economic growth but also to reduce income inequality and poverty in a country, a growing body of evidence indicates. Despite the essential role played by financial services in the progress of efficiency and equality in a society, 2.7 billion people (70 percent of the adult population) in emerging markets still have no access to basic financial services, and a great many of the them come from countries with predominantly Muslim populations (Demirgüç-Kunt, Beck, and Honohan 2007). In conventional finance, financial access is especially an issue for the poorer members of society, including potential entrepreneurs. They are commonly referred to as “nonbanked” or “unbankable,” and in the case of potential entrepreneurs, they invariably lack adequate collateral to access conventional debt financing. While access to finance may be important for economic growth, th...
This paper identifies a major lacuna in the conceptual development ofIslamic financial market ope... more This paper identifies a major lacuna in the conceptual development ofIslamic financial market operations. It argues that in the absence of awell developed benchmark that would facilitate macro- and micro-leveldecision making with regards to cost of capital and opportunity cost ofinvestments in comparative projects of similar risk, Islamic financialinstitutions are relying on interest rate-based indices such as the LondonInter-Bank Offer Rate (LIBOR) to make lending decisions. The authorcontends that this is clearly unacceptable since Islam disallows a predeterminedor fixed rate of capital. The paper then proposes a benchmarkbased on Tobin’s q theory of investment. The author further maintainsthat unlike existing alternatives which are limited to macro-levelapplications only, the q-based benchmark would be useful for firms andbanks (micro-decisions) as well as governments and institutions(macro-planning).
Book Reviews 441 Book Review Islam and Economic Development By Muhammad Umer Chopra, The Internat... more Book Reviews 441 Book Review Islam and Economic Development By Muhammad Umer Chopra, The International Institute of Islamic Thought and Islamic Research Institute, Islamabad, Pakistan, 1993, 166 pp. Islam and Economic Development is another ...
bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su r... more bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Produced by the Research Support Team
A framework of business ethics in Islam can be developed by identifying key virtues that are the ... more A framework of business ethics in Islam can be developed by identifying key virtues that are the preferred character traits of a human being. This chapter discusses select virtues that have direct implications on any economic, social, business, or financial activity such that a decision taken in light of such virtues would be ethical. By embracing and living the virtues and avoiding vices, an ethical economic and financial system could emerge that is just as well as efficient. Key virtues such as recognition of the unity of creation, striving for justice, preservation of rights, sanctity of contracts, truthfulness, and trustworthiness form the foundation of theory of ethics in Islam. The emphasis is on the internalization of these virtues such that the resultant economic and financial system optimizes the social and economic welfare of the society.
Describing the Islamic financial system simply as interest-free does not do justice to the system... more Describing the Islamic financial system simply as interest-free does not do justice to the system. Promotion of entrepreneurship, preservation of property rights, transparency, and the sanctity of contractual obligations, which are crucial to any sound financial system, describe its essence. Today, Islamic financial and banking activities have reached an impressive size of over United States (U.S.) 250 billion dollars, as compared to a meagre U.S. 6 billion dollars in the early 1980s. Market participants and policy makers are increasingly paying attention to its potential and how to take advantage of the opportunities presented.
Financial development and improved access to finance (also referred to as financial inclusion) is... more Financial development and improved access to finance (also referred to as financial inclusion) is likely not only to accelerate economic growth but also to reduce income inequality and poverty in a country, a growing body of evidence indicates. Despite the essential role played by financial services in the progress of efficiency and equality in a society, 2.7 billion people (70 percent of the adult population) in emerging markets still have no access to basic financial services, and a great many of the them come from countries with predominantly Muslim populations (Demirgüç-Kunt, Beck, and Honohan 2007). In conventional finance, financial access is especially an issue for the poorer members of society, including potential entrepreneurs. They are commonly referred to as “nonbanked” or “unbankable,” and in the case of potential entrepreneurs, they invariably lack adequate collateral to access conventional debt financing. While access to finance may be important for economic growth, th...
This paper identifies a major lacuna in the conceptual development ofIslamic financial market ope... more This paper identifies a major lacuna in the conceptual development ofIslamic financial market operations. It argues that in the absence of awell developed benchmark that would facilitate macro- and micro-leveldecision making with regards to cost of capital and opportunity cost ofinvestments in comparative projects of similar risk, Islamic financialinstitutions are relying on interest rate-based indices such as the LondonInter-Bank Offer Rate (LIBOR) to make lending decisions. The authorcontends that this is clearly unacceptable since Islam disallows a predeterminedor fixed rate of capital. The paper then proposes a benchmarkbased on Tobin’s q theory of investment. The author further maintainsthat unlike existing alternatives which are limited to macro-levelapplications only, the q-based benchmark would be useful for firms andbanks (micro-decisions) as well as governments and institutions(macro-planning).
Book Reviews 441 Book Review Islam and Economic Development By Muhammad Umer Chopra, The Internat... more Book Reviews 441 Book Review Islam and Economic Development By Muhammad Umer Chopra, The International Institute of Islamic Thought and Islamic Research Institute, Islamabad, Pakistan, 1993, 166 pp. Islam and Economic Development is another ...
bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su r... more bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Produced by the Research Support Team
A framework of business ethics in Islam can be developed by identifying key virtues that are the ... more A framework of business ethics in Islam can be developed by identifying key virtues that are the preferred character traits of a human being. This chapter discusses select virtues that have direct implications on any economic, social, business, or financial activity such that a decision taken in light of such virtues would be ethical. By embracing and living the virtues and avoiding vices, an ethical economic and financial system could emerge that is just as well as efficient. Key virtues such as recognition of the unity of creation, striving for justice, preservation of rights, sanctity of contracts, truthfulness, and trustworthiness form the foundation of theory of ethics in Islam. The emphasis is on the internalization of these virtues such that the resultant economic and financial system optimizes the social and economic welfare of the society.
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