Articles

As Islamic investments look for greater returns, Western banks are called in as agents to manage funds and to perform transactions. Western and conventional banks in the

An integrated macroeconomic model of an Islamic economy may be developed using the framework of an investment model. An Islamic ethical-value system and profit-sharing contracts can guide investment behavior. The typical firm's investment decision emerges from a dynamic inter-temporal maximization exercise over an infinite time horizon. Application of calculus can help one to arrive at the optimal investment/employment criteria for a firm.

The behavior of a single seller in an Islamic environment is not marked by greediness. Rather, the single seller seeks primarily to please God, not to maximize profit. Profit is only one of the single seller's motives, as he is expected to sacrifice part of his profits for the social good when social priorities require him to do so. The situation is formulated in its deterministic setting to derive the optimally necessary conditions. A family of utilities in the Cobb-Douglas form should also be considered.

The Pakistani State Bank governor, Muhammad Yaqub, has identified two issues facing the banking system of the country. One, the condition of banks, more actutely of nationalized commercial banks. Two, the state of savings. After Moeen Qureishi, the caretaker prime minister, exposed the defaults of many loans made by banks, the state of the banking sector came under much question. Yaqub rightly criticized Qureishi's move, which created doubts about banks before their privatization.

As wealth stemming from oil found its way into Gulf hands in the 1970's, the amount of money Muslims had in the banking industry increased. Whereas devout Muslims had long kept money in conventional banks without taking any interest payments, the idea came to some believers that interest-free banking ought to be offered. The Islamic banking industry borne out of this sentiment now holds between $50 and $80 billion in deposits.

The Islamic Development Bank (IDB) has moved to treble its capital of 2 billion Islamic Dinars (ID; one ID equals one SDR of the IMF) in order to meet the increased demand for trade and project finance in the organization's member states of the Middle East, Africa, and Asia. The decision by the 45 member Jeddah-based organization to increase the authorized and subscribed capital of the IDB was made last December. The move was decided on at the Islamic Heads of State summit in Dakar, Senegal.

Islamic idealism has some practical aspects.

Shari`a (Islamic law) is theoretically the inexorable expression of divine will, but it has rarely been treated as such in practice. Pakistan has from its inception debated the role of

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.

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.