International Journal of Islamic Economics and Finance Research

PHILOSOPHICAL FOUNDATIONS OF ECONOMICS – A COMPARATIVE STUDY OF ISLAMIC ECONOMICS, CAPITALISM AND MARXISM

Asad Ullah — 2023-12-18

The philosophy of economics is concerned with the nature of reality, sources of knowledge, and the way knowledge is created. Based on their respective philosophical frameworks; capitalism seeks solution to economic problems through its laissez-faire model, Marxism attempts to resolve the problem through a planned economy model, and Islam on the other hand keeps the balance between the two approaches. The study is based on a comparative qualitative analysis of the philosophical frameworks, making reference to practical world problems. The paper maintains both Capitalism and Marxism have contributed to poverty, economic inequality, unemployment, and financial crises of the world at large. The study provides a model of the righteous economic system based on Islamic teachings for the sound functioning of the economy which can be adopted by the countries intending to switch from the conventional systems to the Islamic economic model.

THE POTENTIAL APPLICATION OF MUZARA’AH IN BRUNEI DARUSSALAM: A FEASIBILITY STUDY AMONG YOUTHS

Amnisuhailah Abarahan — 2023-12-18

Covid-19 without doubt has tested the resilience of many sectors including the food sector. Shortage of food supply during the pandemic due to logistics has heightened measures and awareness of governments across the globe. One of the many mitigation proposed by the government of Brunei Darussalam was to kick start the involvement of more local entrepreneurs in the agricultural sector. Several efforts were made by the government including the pilot programme whereby potential individuals were given plot of lands, up to 7,000 hectares of gazetted land for agricultural development (Wasil, 2019). The allocation of lands was also timely to pick up the rising rate of unemployment in Brunei at the rate of 7.4% in 2022 alone after and during the onset of Covid-19 (CSPS, 2022). However, criteria for the pilot programme available for example having a successful registered business with a steady stream of cashflow and having the expertise in agriculture may hinder both the progress of the sector and youth’s employability prospects, as well as wastage of the allocated lands. This study investigates the potential application of muzara’ah, a traditional Islamic contract used in agriculture to be used in Brunei Darussalam among youths. The study aims at investigating the feasibility through documentation analysis as well as semi-structures interviews with youths as one of the important stakeholders for the improvement of the agricultural sector. The study projects a positive acceptance of muzara’ah among the youths as they see bigger opportunities in using the contract if coupled with the pilot scheme for agriculture development. The research suggests further collaboration between government and institutional agencies involved with local agripreneurs to better understand and open further opportunities using the muzara’ah contract for application.

TA’WIDH: AN ANALYSIS OF ISSUES ARISE IN LIGHT OF RECENT DECIDED CASES IN MALAYSIA

Nurul Syahirah Mohd Zawawi — 2023-12-18

This study investigates the issues that have come into light in regards to the application of Ta’widh and Gharamah by the Islamic financial institutions (IFIs) in Malaysia. The concept of charging penalty on customers who failed to make repayment of Islamic financing as scheduled has been introduced by the Bank Negara Malaysia (BNM) through their guideline in 1998 but the concept of Ta’widh and Gharamah was introduced in 2010 and only in 2012 that the guideline which explains the method of calculation of the Late Payment Charge (LPC) which consists of Ta’widh and Gharamah was introduced. The application of LPC, especially Ta’widh which is allowed by the BNM to be included in profit distributable to the depositors and investors has to be treated by the IFIs with utmost precautions as mistakes in the application may expose the IFIs towards the risk of Shariah Non-compliance (SNC). The study adopts a qualitative method of study where data which is the reported court cases were obtained from online databases such as Lexis Advance Malaysia and CLJ Law and journal articles that helps in the process of analysing the data were acquired from results in search engines such as Google and Google Scholar. This study suggests that the knowledge in Ta’widh and Gharamah is yet to be fully acquired by the contracting parties. In hope to play a part in the development of the Islamic finance industry in Malaysia, the study is significant in ensuring any discrepancy between the issuance of SAC BNM’s regulations and its application by the IFIs is addressed and consequently helps in reducing the risk of SNC.

THE ROLE OF ISLAMIC PHILANTHROPY IN GREEN ECONOMY DEVELOPMENT: CASE IN INDONESIA

Azwar Azwar — 2023-12-18

This study aims to describe the role of Islamic philanthropy in the development of green economy. Through a qualitative descriptive approach with literature study and content analysis methods, the study found that Islamic philanthropy has a large potential to support the green economy development through various projects and programs, such as investment and development of renewable energy, education and research, and community empowerment. The development of Islamic philanthropy to support green economy faces several challenges. However, Islamic philanthropic practices also have potential and opportunities that can be optimized in supporting green economy. Efforts are needed to increase awareness and understanding of green economy in the community and society. Furthermore, it is important to build partnerships and collaborations with non-governmental organizations in an effort to overcome resource constraints and legal complexities. Finally, capacity building within the Islamic philanthropic community through training and mentoring will strengthen capabilities in supporting green economy projects. This research contributes to enriching literacy and insight into the role of Islamic philanthropy in developing the green economy as an important issue in facing the environmental challenges and climate change facing the world today.

MANAGING LIQUIDITY AND PROFITABILITY: A STUDY OF THE IMPACT OF BASEL III REGULATIONS ON ISLAMIC BANKS IN PAKISTAN

Rafia Ayub — 2023-12-18

Basel III imposed restrictive measures on liquidity, targeting both Islamic and conventional banks equally, to strengthen the resilience of the banking industry in the aftermath of the 2008 financial crisis. This study examines the impact of Basel III liquidity regulatory variables, net stable funding ratio (NSFR), and liquidity coverage ratio (LCR) on the profitability of all four full-fledged Islamic banks in Pakistan from 2007 to 2021. Results reveal no short-term impact and a significant long-term impact of liquidity regulations on the profitability of banks by using the panel autoregressive distributed lag model. Specifically, the LCR is found to have a significant positive impact, and NSFR has a significant negative impact on the profitability of Islamic banks in Pakistan. The significance of sustained profitability planning is highlighted by the long-term effects of NSFR and LCR on profitability. Managers of banks should concentrate on tactics that strike a balance between liquidity requirements and the objective of maintaining or enhancing long-term profitability.

SUSTAINABLE DEVELOPMENT AND ISLAMIC ECONOMICS PARADIGMS COMPARED

Ezzedine Ghlamallah — 2023-12-18

The article, in three parts, compares the divergences and convergences between the paradigms of sustainable development and Islamic economics. The first part of this article deals with the sustainable development paradigm. This paradigm is analysed through its three-dimensional definition and the United Nations' Sustainable Development Goals. The second part characterizes the Islamic economics paradigm: Islamic economics is defined through a multidimensional approach and its objectives are outlined. The third section compares the two paradigms, revealing their divergence and convergence. The comparison shows that there is considerable conceptual convergence between these two paradigms and that their definitions and objectives converge insofar as they share the same universal ambition of achieving human well-being. These convergences can be observed in their theoretical models, dimensions, and values. They also share certain limitations, results, failures, and paradoxes.

THE WAY FORWARD WITH SOCIAL JUSTICE IN ISLAMIC ECONOMICS

Shafinah Rahim — 2023-12-18

In this conceptual paper, the authors attempt to revive a critical yet fortuitously overlooked idea of justice (al-adl) in the Islamic academic debates. Given its direct and far-reaching effect on the realization of the Maqasid Shariah, the present work begins with evidences of specific emphasis on social justice in the Holy Quran as well as the tradition of Prophet Muhammad (S.A.W) highlighting the relationships between al-adl, al-haqq (truth) and al-qist (equity). Followed by, key literary works by both the past and contemporary Muslim scholars passionate about the subject matter of justice in general. Ultimately, the paper involves a 3R; recollect, refine and restore approach to bridging the theoretical views of social justice to its rightful implementation in forms of economic policies in Malaysia. The underlying short run goal of this research is to motivate others with similar interests to continue seeking solutions within the Turath. The longshot being the added knowledge and better appreciation of the understanding of justice as central to a moral economy, progressing to improved decision making and effective action plans.

ANALYSING THE ROOTS OF INFLATION IN THE GAMBIA: AN ISLAMIC APPROACH TO RESOLVING THE ISSUE

Adama Sowe — 2023-12-18

Inflation is a persistent problem in many countries, including The Gambia. This study aims to analyse the roots of inflation in The Gambia and propose an Islamic approach to resolving the issue. The study uses a secondary data analysis approach to identify the root causes of inflation, analyse its effects on the economy and the population, and propose an Islamic path to resolving the issue. Principles of justice, fairness, and social welfare guide the study. The study finds that various factors, including government policies, supply shocks, and external factors, cause inflation in the Gambia. Inflation has negatively affected the economy and the population, increasing poverty and hardship. The study proposes an Islamic approach to resolving inflation in Gambia, which involves adopting Islamic economic models and principles. The study concludes by summarising the findings and providing recommendations for policymakers and stakeholders in Gambia.

INTERNAL CONTROL SYSTEM AND EFFECTIVE INTERNAL SHARIAH AUDIT FUNCTION: A CONCEPTUAL FRAMEWORK

NUR LAILI AB GHANI — 2023-12-18

This study proposes a conceptual framework for the internal control system, as a necessary pre-requisite for an effective internal Shariah audit function in Islamic Financial Institutions (IFIs). To improve a strong management of risks that do not comply with the Shariah, it is imperative that the internal Shariah audit function is effectively operated. This study reviews existing literature on the internal Shariah audit function. By adopting contingency theory, this study then develops a conceptual framework for an effective internal Shariah audit function. The main argument presented in this article is that a strong internal control system leads to a more effective the internal Shariah audit function at managing risks associated with non-compliant events in IFIs. This study contributes to provide a clear direction to the IFIs in reshaping the prevailing Shariah audit function and Shariah governance arrangements.