Islamic Finance

A seminar on Islamic banking planned by the International Association of Islamic Banks taking place in Islamabad was addressed by the Pakistani President, Mohammad Zia-ul-Haq. He spoke of Pakistan's move to a profit and loss sharing system. For the development of a new, interest-free economic system, a number of institutions sich as the State Bank and the Islamic Ideology Council are working on schemes. The Islamic economic system to be implement is one in which: 1. The sovereignty of Allah and man's position as His viceregent are recognized; 2.

Little research has been done on the study of the philosophy of Islamic economics. This philosophy would provide the bases, significance and future of Islamic economics and provide it with a school of economic thought that would support the Islamization of the economy exploring the functions and objectives make it into a field of study.

Scholars are entitled with the task of finding solutions to economic problems in the Islamic sources. This was simple when most of the population was agriculturalist. It became increasingly complex until it came to a standstill with colonization. Research on this matter has reemerged. The process of finding economic solutions in the Islamic sources, the fields it has come to encompass and the difficulties of applying Islamic norms to the modern day economy are explained.

In the Islamic economic order, human dignity takes priority over economic and social circumstances. Because people see everything that happens in

Michael H. Davies of London's Fox and Gibbons reviews Islamic Law and Finance, edited by Chibli Mallat. The book under review is published by Graham and Trotman.

While Western commercial bankers are concerned mostly with credit risk--the risk that loans may default--Western investment bankers are concerned mostly with business risk. Business risk is the risk that business ventures may fail. Islamic bankers must assume both types of risk. To cope with this dilemma, Islamic banks should not guarantee all the funds of its depositors. The various types of financing utilized by Islamic banks should be categorized according to the type of risk involved.

The author takes a technical and mathematical look at macroeconomics in an Islamic economy. Islamic economics is an extremely new field, reports the author, and thus it has not been very fully developed. The author demonstrates in the article that once the practice of interest is removed from an economic system, the macroeconomic landscape of the system changes radically. Particularly noted by the author are IS and LM schedules, as is the institution of zaka . The author shows in the article how the system of Islamic macroeconomics differs deeply from conventional economics.

The main thrust of the article is to provide readers previously unexposed to the topic with a basic introduction to the ideology of Islamic economics.

It is important to study the development of the social sciences through an Islamic perspective in opposition to that of the West. Issues of values and ethics were never treated as part of economic thought in the Western ideology. Around the 18th century a separation of scientific research and spirituality occurred in the West. In

Muslim countries have begun to take a renewed interest in their own religion. Many have decided to apply Islamic Law to their governments.