Monetary policy influences the real economy through various channels, including bank lending. Currently, Malaysia is operating under dual banking systems: conventional and Islamic banking. The latter has the distinctive feature of interest-free. Hence, this study aims to empirically explore the relevance of Islamic banks’ financing in channeling the monetary policy effects to the real economy.
We investigate the differences in banks’ responses to monetary policy shocks across bank size, liquidity, and type, i.e., conventional versus Islamic, in Pakistan between 2002:III and 2010:I. We find that following a monetary contraction, small banks with liquid balance sheets cut their lending less than other small banks. In contrast large banks maintain their lending irrespective of their liquidity positions. Islamic banks, though similar in size to small banks, respond to monetary policy shocks as large banks.
Mainstream economics postulates the concept of scarcity as a defining notion, while heterodox economics denies the proposition of scarcity. In contrast, there is no clear stand among Islamic economists towards the concept of scarcity. This paper explores the concept of scarcity ideologically and examines empirically the effect of scarcity thinking on human wants. The concept of scarcity is one of the unresolved issues in Islamic economics.
The more recent literature on Islamic economics is largely about Islamic financial instruments and institutions. It might give the impression that the main difference between conventional and Islamic economics is in the instrumental part, rather than fundamental aspects. Islamic economics is not about the prohibition of certain goods and services. It is a vastly different economic system whose answers to the core economic questions vary significantly. As is currently done, mimicking conventional economics and finance is only creating Islamic economics and finance by name.
The sustainable development of Islamic economics as a discipline depends also on methodological development that provides a clear direction on how to appraise economic theories and provide evidence of its reliability. This paper attempts to study the methodology of Islamic economics in two ways: (1) by examining the works by scholars in their specific writings on this subject, and (2) by observing the writings on Islamic economics, banking and finance to see how Islamic economists develop their discipline.
There is substantial evidence that the development of the discipline of Islamic economics is currently in crisis. In this article we argue that the main reason for this is that most
The changing political scene in North Africa is resulting in a much greater interest in Islamic finance and what it has to offer. The modern practice of Islamic finance started in Egypt with the Mit Ghamr experiment of 1963. This project had a strong focus on development and provided micro-savings and micro-loans before microfinance was conceptualized as such in the 1970s. Nowadays, Egypt has the potential to develop a new homegrown model focused on development that could avoid cosmetic “Islamic” finance.