Choudhury - Islamic Financial Economy and Islamic Banking

Islamic Financial Economy and Islamic Banking

Islamic Financial Economy and Islamic Bankingis a thorough, deeply conceptual, analytical and applied work in the epistemological foundation of the Islamic world-system.

The book provides an original contribution to the generalized-system model of shariah. The model, derived from the Quran and Sunnah (Prophetic guidance) incorporates wide, analytical coverage of the purpose and objective of the Islamic worldview (maqasid as-shariah) in Islamic economics and finance in particular.

The author covers issues that contrast with the existing understanding of Islamic economics and finance, including some specific goals defining the field and how they compare in todays unstable world of financial volatility. A new heterodox thinking in economic theory is outlined.

Its presentation and analysis, methods and approach, overarch the fields of philosophy of science, rigorous analysis, mathematical and other presentations of the understanding given, and all taken up in the light of the exegesis of the Quran and coverage of the Sunnah. The result is substantive in the field of scholarship and application; and in analytically proving the universality and uniqueness of the epistemic worldview for the academic and practitioner world at large. The totality of the multiverse diversity of issues and problems reviewed comprise the study of the world-system by the Tawhidi methodological approach. Yet this methodology and its empirical configuration are universally applicable to all users without any need for unnecessary religious overtones.

Dr Masudul Alam Choudhury is Professor and International Chair of the Postgraduate Program in Islamic Economics and Finance, Faculty of Economics, Trisakti University, Jakarta, Indonesia. He is a Visiting Professor at the Social Economy Center, Ontario Institute for Studies in Education, University of Toronto.

Professor Choudhury is the pioneer in the field of the epistemological treatment of Islamic Economics and Finance over the past 35 years by way of his original works in this area.

He is the Editor-in-Chief of the SCOPUS-listed and Australian ABDC JEL-catalogued journal HIJSE (Humanomics: International Journal of Systems & Ethics) currently in its 33rd year of publication. His works have been reviewed by the Times Higher Education Supplement, Economic Journal, Southern Economic Journal, Middle East Review and Journal of Economic Literature.

Islamic Business and Finance Series

Series Editor:

M. Ishaq Bhatti, La Trobe University, Australia

There is an increasing need for western politicians, financiers, bankers, and indeed the western business community in general, to have access to high quality and authoritative texts on Islamic financial and business practices. Drawing on expertise from across the Islamic world, this new series will provide carefully chosen and focused monographs and collections, each authored/edited by an expert in their respective field, from all over the world.

The series will be pitched at a level to appeal to middle and senior management in both the western and Islamic business communities. For managers with a western or Islamic background, the series will provide detailed and up-to-date briefings on important topics; for academics, postgraduates and business communities, the series will provide a guide to best practice in business in Islamic communities around the world, including Muslim minorities in the west and majorities in the rest of the world.

1. God-Conscious Organization and the Islamic Social Economy

Masudul Alam Choudhury

Islamic Financial Economy and Islamic Banking

Masudul Alam Choudhury

First published 2016

by Routledge

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and by Routledge

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2016 selection and editorial matter, Masudul Alam Choudhury; individual chapters, the contributors

The right of Masudul Alam Choudhury to be identified as the author of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

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ISBN: 9781472438775 (hbk)

ISBN: 9781315590011 (ebk)

Typeset in Sabon

by Out of House Publishing

Contents

Mustafa Omar Mohamed and Fau ziah Mohamad Taib

Masudul Alam Choudhury and Kabir Hasan

Statistical Appendix: Data on Critical Financial Crisis Indicators

Isharaf Hosain and Masudul Alam Choudhury

My thanks are to those who have contributed to this rare title in the field of scholarly and analytical exposition of Islamic financial economics an area that has not been attended by Islamic economic and finance writers. My thanks to Gower for the early contract that enabled me to start and complete this work on time. My time as visiting professor in the Social Economy Center in the Ontario Institute for Studies in Education, University of Toronto between August and December 2014 has been instrumental in completing this work. The epistemological content and its applications were presented in 23 lectures delivered university-wide at the Institute of Islamic Banking and Finance while I was Professorial Chair in Islamic Banking and Finance, International Islamic University Malaysia between February and August 2014.

The subject of a critique of financial engineering in view of Islamic financial economics was opened up by my paper, Islamic Critique and Alternative to Financial Engineering Issues, King Abdulaziz University Journal Islamic Economics, 22:2, 2009. In the present volume, an approach that is substantially Islamic in its epistemological foundation was carried further into the field of financial economics. Such an approach has not been undertaken by many others, including the so-called gurus of Islamic economics and finance, who wandered in the axioms and theories of rationalism. The result of such meaningless pursuits was a complete misrepresentation of the Tawhidi (oneness of God = unity of knowledge) methodological worldview, specific to the epistemological approach and its application to Islamic financial economics. The result has been a complete misrepresentation of Islamic economics, banking. The starkest outcome is the rampant legitimation of secondary financing instruments and a misunderstanding of primary Islamic financing instruments in terms of shariah-compliance while abandoning the sublime field of maqasid as-shariah (purpose and objective of the shariah). Paradoxically, this situation is true even in respect of a comparative study of Islamic financial economics and banking with contemporaneous theories and applications. Our work here challenges and criticizes this kind of an approach as being without any methodological substance. This work presents the epistemological approach of