Introduction Islamic Banking and Finance - News Issue

Islamic banking and finance  

islamic bank and finance

Islamic banking and finance can be described as a system through which finance is provided in the form of money in return for either equity or rights to share in future business profits, or in the form of goods and services delivered in return for a commitment to repay their value at a future date. By now, a good deal of intellectual effort has been undertaken by a number of specialists in Islamic economics to explore different aspects of Islamic banking and finance. Even some conventional economists, intentionally or unintentionally, have dealt with the subjects, which may be considered closely akin to it. It is an undeniable fact that Islamic financial institutions have had only a marginal existence during the last 300 years.

 They did not get the same chance as western financial institutions to gradually evolve their institutional structure, tools and modus operandi to their full potential. Therefore, such evolutionary process of Islamic banking and finance must be done through serious intellectual work by economists rather than observing institutions at work. However, Islamic banking and finance has now been in the arena for more than a quarter of a century. It has taken a contemporary shape. Whether it has sufficiently approached the Islamic paradigm par excellence or not, is a different question. 

The philosophy of Islamic banking and finance is a set of theories and ideas related to its understanding. In this regard, we must :

First start with the rules of Islamic Shariah from which the very idea of Islamic banking has been drawn. 

Second, monetary and macro theory is required to explain why Islam considers dealing through the rate of interest as totally unacceptable, and the economy-wide consequences of such practice. 

Third, banking theory itself would be necessary to figure out the behavior of Islamic banking and finance as well as to assess its comparative performance.

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islamic banking and finance 

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References

Al-Jarhi, Mabid Ali (2003), "Islamic Banks & Universal Banks: Need For Leveled Playing Field", A paper presented to the International Seminar on Islamic Banking: Risk Management, Regulation and Supervision, organized by the Ministry Finance Indonesia, the Central Bank Indonesia and the Islamic Research and Training Institute, Jakarta, Indonesia, September 30.

Al-Jarhi, Mabid Ali (2001), "Enhancing Corporate Governance in Islamic Financial Institutions", paper presented to the IRTI-AAOIFI Conference on Transparency, Governance and Risk Management in Islamic Financial Institutions, held in Beirut, Lebanon, March 2001.

Al-Jarhi, Mabid Ali (1983), "A Monetary and Financial Structure for an Interest-Free Islamic Economy: Institutions, Mechanism and Policy", in Ahmed, Ziauddin et al., eds., Money and Banking in Islam, Islamabad: IPS & Jeddah: KAAU.

Al-Jarhi, Mabid Ali (1981) "The Relative Efficiency of Interest-Free Monetary Economies: The Fiat Money Case" in Khurshid Ahmad, (ed.), Studies in Islamic Economics, Leicester: The Islamic Foundation 1981.

 Al-Jarhi, Mabid Ali and Iqbal, Munawar (2001), Islamic Banking: FAQs, Jeddah: IRTI Occasional Paper # 4. Aoki, Masahiko (1994), "Monitoring Characteristics of the Main Banking System: An Analytical and Developmental View" in The Japanese Main Bank System, edited by M. Aoki and H. Patrick. New York: the Oxford University Press, 1994.

 Auffret, Philippe (2001), "An Alternative Unifying Measure of Welfare Gains From Risk-Sharing", World Bank, September. Barth, James R., Gerard Caprio, Jr., and Ross Levine (2000), "Banking Systems around the Globe: Do Regulation and Ownership Affect Performance and Stability?", NBER Conference on Prudential Supervision: What Works and What Doesn't, January 13-15, Islamorada, Florida.