Islamic Finance

Islamic finance and economics use numerous Arabic words. Among the oft-cited ones are:_x000D_ · Halal (permissible)_x000D_ · Haram (prohibited)_x000D_ ·

Investment behavior and whether it will decline, uncertainty, and moral hazard are of note in a profit-sharing system. The utilization of a profit-sharing system may in fact lead to an increase in investment. Within these profit-sharing financial arrangements, both lenders and borrowers bear the risks.

An inductive approach to Islamic economics examining the degree of Islamic character of economic systems already in existence can be useful because it can show the importance of values in economic development and it lets Muslims benefit from the experience of other religions. The Western ideology of relativism, individualism, and competition is unusual in historical context and somewhat contradictory, partly because its proponents claim to be neutral while they nonetheless make value judgments.

A Riba-free primary financial market can achieve Pareto-optimality. The dominance of the mixed debt/equity system has some implications for deviation from informational efficiency. Risks normally associated with equity returns are definite indicators of risk-aversion on the part of investors.

The endogenous theory of money contrasts with the quantity theory of money and the Keynesian theory of money supply and demand. The endogenous theory of money is a fundamental element of the concept of money in Islamic economics. This theory not only fits the Islamic economy, it is also necessary to the setup of an Islamic capital market. The OIC and its member nations are responsible for bringing to fruition an Islamic capital market grounded in the endogenous transformation of the monetary systems of

Ethical values and moral concepts lie at the core of the Islamic system of zaka. Certain factors have troubled the international economy in the last half-century. A 'good life,' as understood in modern society, is not a life in which the necessities of life are plentiful; it is a life in which a person may enjoy many frivolous and unneeded industrial goods. The establishment of a prodigal ruling class is an affair that eventually leads, through a chain of events, to the decline of a people.

Pakistan's government has shown that it seeks to abolish riba (interest) from the nation's economy. At present, the government's State Provident Funds are kept in interest-bearing debts.

To look at Islamic banking's place in the economy, one needs to see both the historical and the technical sides of the picture. Muslims have recently become more spiritually conscious, and thus more anxious to implement an Islamic economic system in their countries. The problem of interest has always hurt Muslims, for they can neither invest nor obtain funds without getting stuck in the trap of this un-Islamic institution. Much can be learned from Egypt's experiment with an Islamic financial system in 1963. One account that system offered was a savings and credit account.

Islamic economics has certain values, precepts, and aims, and a certain system to implement. The Islamic pattern of life is grounded in the principles revealed by Allah. The values within the Islamic economy are drawn from this divine source. The