RESEARCH ON ISLAMIC ECONOMICS AND FINANCE AND ROLE OF FAITH IN MARKETS AND SOCIETY IN POST MODERN SCIENTIFIC AGE
It is to be understood that 15 centuries ago, the institution of slavery was common in Arabs and when Islam spread, Islam took measures to get rid of the institution of slavery in a gradual process. Quran is very clear on freeing slaves in the later revealed verses. In verse 12 and 13 of Chapter Balad, Allah says: “And what can make you know what is [breaking through] the difficult pass? It is the freeing of a slave.”
This article discusses the major risks that Islamic banks face in their commercial operations and the tools with which they mitigate these risks.
On the social equality front, the one paying interest becomes a slave of those who lent him money since the burden gets bigger over time. This leads to dependency and leaves self-empowerment as mere fantasy and ultimately leads towards loss of self-identity, self-honor and destruction of humanity.
Recent evidence in behavioral finance and consumer psychology points to the fact that consumer information processing capabilities are limited and prone to error. Alias paradox and Ellsberg paradox are good examples of this phenomenon. Furthermore, ‘Ultimatum Game’ reflects the fact that people tend to look at their choice outcomes relatively. Prisoner’s Dilemma highlights the fact that choices by each player in a self-centric way are not necessarily going to be best for them either individually or collectively.
The two most important problems identified in a post-financial crisis look back are perverse incentives and de-linking of financial sector growth and activities with the real sector of the economy. Islamic finance principles by basing all financial products with real assets fill the gap and this feature alone is a very important risk management tool inbuilt into the system.
Science does nothing more than substantiating that the design, variety and balance in universe is more ‘complex, intricate and detailed’ than previously thought of before scientific advancements. In light of the scientific body of knowledge developed thus far, the assertion of chance argument for the origin and dynamic organization of this universe becomes all the more weak.
Famine, death from hunger and debt enslavement is the fact of life for the half of the people on earth not because that overall, the societies have scarce resources, but because the distribution of resources is inequitable as empirically proven by Nobel Laureate Amartya Sen and noted by Thomas Piketty in his recent book ‘Capital in the Twenty First Century’.
Studies in primary-data based religious choices or economic choices by religious persons can explain differences in social and economic choices between religious and non-religious groups, but measuring both the religiosity and its causal effect on behavior is difficult to establish. Furthermore, it is only a Godly endeavor to truly judge about religiosity.
Human welfare in Islamic worldview encompasses economic welfare, but comprises much more than that. The achievement of human welfare is sought in both aspects of human life, i.e. worldly life and eternal life hereafter.
Even though the principles like prohibition of Riba and Zakat are binding as rules, they also have an important economic rationale and function in economic matters of an Islamic society. Hence, the mandate of Islamic economics will be to explain their economic merit using experimental and observational data and by applying statistical and other suited techniques to establish certain analytical hypothesis.
Reflections on the Origins in the Post COVID-19 World (Paperback)
ISBN: 978-96923470-0-6 An engaging book to reflect on the origins and the deeper questions of existence and meaning in life in the light of knowledge from science, philosophy and faith as we live through and beyond the COVID-19 world.
$8.00
