Restoring the Ethical Basis of Finance

Abdul Karim Abdullah

doi:10.12816/0009805

Article Details

Restoring the Ethical Basis of Finance

Authors:

Abdul Karim Abdullah

Publisher:

International Institute of Advanced Islamic Studies

Main Topics:

Islam, Bábism & Bahá"í Faith | Economics and Finance

Journal:

Islam and Civilisational Renewal 2014 vol.5 Issue 1, pp.84-95

Document Type:

Article

Publication Date:

1/2014

Document Language:

English

Document ID (Org No.):

59870

Frequency:

Quarterly

pISSN:

13940937

DOI:

10.12816/0009805

Descriptors:

Abstract:

 Contemporary finance, both Islamic as well as conventional, is beset by challenges. These challenges have more in common than would appear at first sight. In Islamic finance, problems stem primarily from the tendency to replicate conventional instruments, while maintaining formal compliance with the Shariah. In conventional finance, it is becoming increasingly clear that the use of fixed income securities (borrowing at interest) is producing a range of unwelcome macroeconomic effects. These effects impose additional costs on society. They include indebtedness, reduced efficiency in the allocation of resources, inflation, unemployment, uneven distribution of wealth and instability in the form of business cycles. To the extent that Islamic finance replicates the instruments of conventional finance, it can be expected to replicate any adverse macroeconomic effects of debt financing as well. Thus, the response to the problems caused by interest-based finance, as well as its replication in Islamic finance, is to supplant financing by lending at interest with financing on the basis of risk sharing. In other words, it requires restoring finance to its ethical foundations. The transformation of finance from lending to risk sharing, however, will require not only a supportive transformation in social outlook, but also appropriate changes in the regulatory framework.

Article Details

Restoring the Ethical Basis of Finance

Authors:

Abdul Karim Abdullah

Publisher:

International Institute of Advanced Islamic Studies

Main Topics:

Islam, Bábism & Bahá"í Faith | Economics and Finance

Journal:

Islam and Civilisational Renewal 2014 vol.5 Issue 1, pp.84-95

Document Type:

Article

Publication Date:

1/2014

Document Language:

English

Document ID (Org No.):

59870

Frequency:

Quarterly

pISSN:

13940937

DOI:

10.12816/0009805

Descriptors:

ISLAMIC ECONOMICS

FINANCING

USURY ITEMS

BANK NOTES

INFLATION

UNEMPLOYMENT

Issues

Article Details

Restoring the Ethical Basis of Finance

Authors: Abdul Karim Abdullah

Publisher: International Institute of Advanced Islamic Studies

Main Topics: Islam, Bábism & Bahá"í Faith | Economics and Finance

Journal: Islam and Civilisational Renewal 2014 vol.5 Issue 1, pp.84-95

Document Type: Article

Publication Date: 1/2014

Document Language: English

Document ID (Org No.): 59870

Frequency: Quarterly

pISSN: 13940937

DOI: 10.12816/0009805

Descriptors:

ISLAMIC ECONOMICS

FINANCING

USURY ITEMS

BANK NOTES

INFLATION

UNEMPLOYMENT

Issues

Authors:

Abdul Karim Abdullah

Publisher:

International Institute of Advanced Islamic Studies

Main Topics:

Islam, Bábism & Bahá"í Faith | Economics and Finance

Journal:

Islam and Civilisational Renewal 2014 vol.5 Issue 1, pp.84-95

Document Type:

Article

Publication Date:

1/2014

Document Language:

English

Document ID (Org No.):

59870

Frequency:

Quarterly

pISSN:

13940937

DOI:

10.12816/0009805