Islamic Finance

An Islamic economy operates under a certain ideology and has as its central relationship the one between the individual and the community. In order to understand the Islamic economy, one needs to understand some of

Professor Ahmed al-Naggar of the International Association of Islamic Banks gave an interview to Economic Outlook in which he discussed the basic principles of Islamic banking. He explained that money in

A survey conducted by the IMF analyzes the Islamic banking system as a whole. It closely examines the principles under which the system operates, such as profit-and-loss-sharing, and the impact of this system on the mobilization of savings, the allocation of scarce resources through banks, investments, and monetary policy. It also looks at the differences between interest and profit are different and the means of financial intermediation in an Islamic economy. An investment auctioning system is an alternative to profit-and-loss-sharing.

An outline of the historical development of Islamic banking and a brief review of the pillars of Islamic economics are provided. The highlights of thinkers on Islamic banking that have been printed over the years regarding Islamic banking are recapped and mentioned. The particular area of interest in the world is

A macroeconomic model for Malaysia for the period 1970-1985 has been developed. It estimates the effects of economic indicators on the product market, the labor market, and the financial sector. Also considered are the effects these indicators have on the consumption and investment functions of the Malaysian economy. The model can subsequently be restructured using critical Islamic macro-indicators, such as zaka expenditure and profit, an indicator that replaces interest. The macroeconomic results can be estimated using statistical interpretations within a Keynesian econometric framework.

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The prohibition of interest and how such a prohibition alters the entire financial system raise some issues. The role of banks and the optimal debt contract merit some examination. There are at least two models of bank-firm relationships: the Anglo-Saxon model in which secrecy between borrowers and bankers is the norm; and the German-Japanese model in which the bank and the firm are more closely linked and the success of the lender and the debtor are mutually related. Each relationship model has its strengths and weaknesses.

The Organization of the Islamic Conference (OIC) adopted a mechanism to promote mutual efforts through joint ventures. The Islamic Development Bank (IDB) has a role in this, and the development bank's operational results are of note. People run into problems with the existing financial style of the bank. Several suggestions may help them operate the bank more effectively in the future.