Central banking policies and procedures in an Islamic economy

Central banks usually have three purposes: to issue a country's currency; to shape monetary policy; and to lend the government money in dire emergencies. A central bank in an Islamic economy will, like other central banks, seek economic expansion and try to smooth economic fluctuations. The ideas of 'Adl (justice) and Ihsan (benevolence) guide the central bank. Justice is a concern in achieving growth. The central bank's role includes advancing and developing interest-free operations. It should lead the fields of leasing, profit sharing, and other Islamic practices. The central bank helps allocate funds to where they should be primarily directed. It uses cash reserve requirements and liquidity ratio regulation to affect the money supply. Open-market operations are also a possibility. The central bank may promote incentives to save. Despite the relative freedom of individual banks, the central bank in an Islamic economy can be quite influential.