EVOLVING MONETARY ECONOMICS IN ISLAMIC PERSPECTIVE

  • Muhammad Ayub Riphah International University, Islamabad
  • M. Fahim Khan Markfield Institute of Higher Education, United Kingdom
Keywords: Islamic Economics, Money and Monetary Economics, Islamic Banking and Finance

Abstract

The challenges facing the Islamic banking and finance industry include, inter alia, resolving the issue of ‘form over substance’, adopting value-based social and ethical finance, and reinforcing public confidence that its business and services conform to the principles of Shari’ah in both letter and spirit. These challenges can be faced only if Islamic finance is based on the money and monetary perspective of Islamic economics. An important aspect for discussion in this context is the issue of money creation. This paper is based on an analysis of the literature on conventional and Islamic economics and Islamic finance. It comprises observational and narrative research mainly because monetary policy from an Islamic perspective has not been implemented in any jurisdiction in the modern world. Its objective is thus to suggest how monetary policy might evolve from the perspective of Islamic law of contracts. It discusses an economic model in which a new theory of monetary economics could become a basis for evolving Islamic finance in its value-based perspective. It also discusses monetary economics and monetary policy from an Islamic perspective in the context of contemporary Muslim economies. The Islamic financial system must be based on the Islamic system of money, monetary economics and exchange principles. Hence, economists and policymakers may first focus on evolving monetary economics and policy from an Islamic perspective, to serve as a basis for structural reforms.

References

Abdullah, A. (2016). An Islamic monetary theory of value and equation of exchange: Evidence from Egypt (696-1517). Humanomics, 32(2), 121-150.

Ayub, M. (2007). Understanding Islamic finance. London, UK: John Wiley and Sons.

Ayub, M. (2015). Financial inclusion: Social inclusion has to be the target. Journal of Islamic Business and Management, 5(1), 05-16.

Ayub, M. (2019). Making Islamic finance a vehicle for social inclusion: A case for revisiting the liquidity management practices by Islamic banks. In Ali, A. E. S., Ali, K. M., & Khaleequzzaman, M. (Eds.), Enhancing financial inclusion through

Islamic finance (Vol. 1). Switzerland: Springer Nature Switzerland. ISBN:978-3-030-39934-4.

Chapra, M. U. (2008). Innovation and authenticity in Islamic finance. Paper presented at the Eighth Harvard University Forum on Islamic Finance on Innovation and Authenticity.

Curott, N. A. (2016). Adam Smith’s theory of money and banking. Studies in Applied Economics, 47, Johns Hopkins Institute for Applied Economics, Global Health, and Study of Business Enterprise.

Gómez, P. (2020). The wealth of nations in the 21st century. Madrid, Spain: Editorial Círculo Rojo.

Hasan, Z. (2008a). Credit creation and control: An unresolved issue in Islamic banking. International Journal of Islamic and Middle Eastern Finance and Management, 1(1), 69-81.

Hasan, Z. (2008b). Ensuring exchange rate stability: Is return to gold (Dinar) possible. Journal of King Abdulaziz University: Islamic Economics, 21(1), 1-21.

Hasan, Z. (2011). Money creation and control from Islamic perspective. Journal of Islamic Business and Management, 1(1), 49-68.

Hassan, M. K., Muneeza, A., Abubakar, M., & Haruna, M. A. (2021). Application of precious metal backed cryptocurrency in Islamic finance. Journal of Islamic Finance Accountancy, 5(1), 17-26.

Hussain, M., Shahmoradi, A., & Turk, R. (2015). An overview of Islamic finance. IMF Working Paper, WP/15/120.

IFA (Islamic Fiqh Academy) (1986). Shari’ah rules governing paper money. Resolution #21, Third Session (11-16 October), Jeddah.

IFA (2000). On inflation and change of currency value. Resolution #115, Twelfth Session (23- 28 September), Islamic Fiqh Academy, Jeddah.

Iqbal, M., & Khan, T. (2005). Financial engineering and Islamic contracts. London, UK: Palgrave Macmillan.

Khan, M., & Mirakhor, A. (1994). Monetary management in an Islamic economy. Journal of King Abdulaziz University: Islamic Economics, 6, 3-21.

Mansuri, M. T. (2021). Maqāṣid al Shari’ah: A valid paradigm for Shari’ah opinions in Islamic finance. Journal of Islamic Finance Accountancy, 5(1), 40-53.

McMillen, M. J. T. (2007). Shari’ah-compliant project finance: An overview, including structures. Journal of Islamic Economics, Banking and Finance, 3(1), 1-45.

Meera, A. K. M., & Larbani, M. (2009). Ownership effects of fractional reserve banking: An Islamic perspective. Humanomics, 25(2), 101-116.

Refinitiv and Islamic Corporation for the Development of the Private Sector (ICD), IDB Jeddah (2020). Islamic finance development report 2020. Retrieved from https://icd-ps.org/uploads/files/ICD-Refinitiv%20IFDI%20Report%2020201607502893_2100.pdf.

Riazuddin, R. (2011). Challenges of transforming riba-based government debt in Pakistan to Sharī´ah-compliant instruments. Journal of Islamic Business and Management, 1(1), 27-48.

Werner, R.A. (2014). Can banks individually create money out of nothing? — The theories and the empirical evidence. International Review of Financial Analysis, 36(December 2014), 1–19.

Zulkhibri, M. (2019). Halal cryptocurrency and financial stability. In Billah, M. M. (Ed.), Halal cryptocurrency management (pp. 35-49). Cham, Switzerland: Palgrave Macmillan.

Published
2021-04-21
How to Cite
Ayub, M., & Khan, M. (2021). EVOLVING MONETARY ECONOMICS IN ISLAMIC PERSPECTIVE. Journal of Islamic Monetary Economics and Finance, 7(2), 317-340. https://doi.org/10.21098/jimf.v7i2.1372
Section
Articles