Articles on Islamic Economics
If the government wishes to align the government finances in a way that converges with IFI principles, the government may need to work to eliminate conventional debt and adopt raising funds using productive investments only.
Inclusivity, equitable distribution of resources and socio-economic mobility do not determine Shari’ah compliance or validity. However, these visionary goals are the aspirations of many people in academics and public at large. The realists contend that the visionary objectives of equitable distribution of income will be taken care of in the long run by Islamic social finance institutions, such as Zakat and Waqf. Islamic banks as one part of Islamic finance ecosystem will continue to serve the short term financing requirements of clients and for which debt based Islamic modes of financing are the suitable options.
Islamic economics principles discourage excessive spending and encourage sharing resources with wider community through Sadqa, Waqf and Riba-free Qard. This can provide more resources at the disposal of poor and needy and for the social causes which are working for the educational and health related needs of poor and needy. Therefore, this can help in tackling poverty, hunger, low levels of schooling and under-provision of health services.
Many professionals today experience a dilemma where they must make a choice between being good humans and being good at their job. They are left to wonder how the principles of love, generosity, fairness, reciprocity, and trust that they know to be true about life in general, do not apply at work. Some resort to the unfortunate conclusion that cold selfish behaviour is “natural” for human beings in economic situations. This is false. One of the prime reasons for moral listlessness at the workplace lies buried in mainstream economic theory.
Mainstream economics treats altruism as ‘impure’. It looks at altruism in the paradigm of pursuing self-interest. Economists like Andreoni reason that altruism can be explained through the ‘warm glow’ effect. People feel good to help others as they gain personal and private comfort. They might be doing it because of social pressure, to gain fame, to improve social image, to exhibit status or to avoid the guilt of saying no to a cause in public. The paradigm of self-interest is neutral between a person’s decision to help others or to not help others.
The major issue is that the government has not been active in the collection of Ushr. Furthermore, historically, it never achieved its true potential in terms of the amount collected due to the trust deficit between the government and the landowners. It is also a fact that some greedy landlords try to evade it. On the other hand, poor knowledge about Ushr among the landowners results in the meager collection of Ushr at the national level.
In the Islamic framework, there is an emphasis on conservation, preservation and responsible use of resources. There is a discouragement for excessiveness, extravagance, lavishness and wastefulness in the use of resources. These norms are especially needed in the present times to foster a healthy, livable and sustainable ecosystem. In 2019 alone, humans have used up resources for the whole year within 7 months according to World Economic Forum.
Socialists claim that economic problems arise from the extraction of surplus value by the Capitalists in the production process. On the other hand, Capitalists urge that scarcity of resources is the basic economic problem which restricts output growth because wants are innumerable, but the resources for satisfying those wants are limited. Nonetheless, the empirical evidence does not support that resources are scarce for legitimate and compulsory economic needs.
Some of the mainstream asset pricing models can be used for security analysis in Islamic equity investments from the Shari’ah perspective. However, the choice of particular asset pricing models in practical use must depend on their ability to better explain returns on Shari’ah compliant stocks.
Muslim economists have employed the mainstream economics tools to explicate consumption in the Islamic framework. Two of the key limitations of these early works are that they used the Keynesian framework without building micro foundations and they did not model the behaviour in an intertemporal context.
