Islamic Finance

Writers have recently theorized that the backwards" conditions in Muslim countries in the middle east are a sign that

This is an expanded bibliography of the version prepared for the conference on ' The Impact and Role of Islamic Banking in International Finance: Issues and Prospects' (June 28, 1985) by the American Institute for Islamic Affairs.

During the Medinan decade of the Prophets' time, the Muslims led expeditions in order to obtain booty. It is widely held that these expeditions enriched the Muslims. However, the cost of the expeditions themselves, the cost of living at the time, and the losses undergone greatly surpass the booty obtained. The basis for the economy must therefore have been agriculture, trade, and industry.

There has recently been a flurry of conferences and seminars sponsored by Muslim countries, such as Iran and Pakistan, and even world monetary agencies, such as the IMF and World Bank, on the issue of Islamic finance.

The author, using the trade history of Al-Baraka Kazakhstan Bank, discusses Islamic mainstream business which uses the standard instrument of murabaha , or cost-plus financing. He also discusses the joint venture occurring in Uzbekistan, sponsored by Dallah Al-Baraka Bank.

An explanation is given regarding the concepts of equity and morality which are at the root of Islamic banking. These values are key to of Islamic law. Profit-sharing schemes to promote and enhance the production process, contracts to conduct operations, and other topics are discussed, and an explanation is given as to why usury is prohibited. The final point made in the article is that accounting methods now being developed by Islamic financial institutions will ensure that such schemes and contracts continue to be fair and profitable to both parties.

This article is a critique of Indonesia's first Islamic bank, Bank Muamalat Indonesia (BMI). Although supposedly a pure Islamic bank, regulators worry the BMI's deposits are being used in risky investments. Also, BMI is viewed as a political ploy of President Suharto to build up support in traditional Islamic circles and depositors are unaware of this use of their funds.

Islamic banking is better suited than capitalism to avoiding the mistakes that have led the Western banks and their economies into their present financial troubles. Some partnership agreements and schemes allow lending without interest. Under such schemes banks receive a contractual share of the profits generated by borrowing firms, encouraging equity buildup as opposed to the accumulation of debt. Few Westerners take seriously a system of finance based on the sharing of risk and profit, rather than on the payment of interest.

The author discusses the Islamic banking practice and the alternative Islamic financial instruments to conventional banking. The aim of Islamic banks is rid the banking system of riba , or interest-oriented institutions by providing a comprehensive range of services which will serve as an alternative.

The First Ministerial Consultation on Industrial Cooperation among OIC states established a task force that in turn established an ad-hoc working group to develop guidelines for the initial selection of joint venture projects in