Islamic Capitalism and Finance

Islamic Capitalism and Finance

Origins, Evolution and the Future

Studies in Islamic Finance, Accounting and Governance series

Murat Çizakça

This illuminating and thought-provoking book questions whether classical Islamic capitalism, which has served Muslims so well for centuries, can provide a viable alternative world economic system. In the current recession – the worst since 1929 – this is surely a provocative question. But if Islamic capitalism is to emerge as a viable alternative, its nature and systems must be well understood.

Chapter 14: Maqasid Al-Shari’ah and Islamic Banking

Murat Çizakça

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation, history of economic thought, islamic economics and finance, money and banking

Extract

Islamic banks viewed from the perspective of maqasid al-Shari’ah What does the future hold for Islamic banks? Will they stagnate and become an unimportant component of Islamic capitalism or will they reform themselves with vigour and become predominant? Whatever direction Islamic finance may take in the future, it must be in conformity with the maqasid al-Shari’ah, which has been defined as the ‘purpose and wisdom behind the enactment of all or most of the Shari’ah rulings’. Laldin has correctly argued that current scholarship is obliged to focus on the way maqasid al-Shari’ah is related to modern financial transactions.1 We will now look at modern Islamic finance from the perspective of maqasid al-Shari’ah and try to envisage how it might evolve in the future. A more comprehensive treatment of the maqasid will be provided in the final chapter. Readers who are not familiar with this concept might wish to read the first subsection of the last chapter first. It is well known that the share of Islamic banks within the financial sectors of Islamic countries is generally very low. Indeed, in 1988, the market share of Islamic banks in Egypt, Kuwait and Sudan was, on average, 20 per cent. In Jordan and Qatar it was 10 per cent. More recently, in 2004, assets mobilized by the Islamic banks constituted 10 per cent of the Malaysian system, while deposits with the Islamic banks constituted 10.4 per cent of the market share. But Islamic bonds, sukuk, have done much better and constituted in...

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