CHAPTER


DOI :10.26650/B/SS10.2020.017.08   IUP :10.26650/B/SS10.2020.017.08    Full Text (PDF)

Bringing Islamic Finance Home Through the Circular Economysocial Finance (Cesf) Discourse

Mohamed Aslam Haneef

This paper argues that the current Circular Economy and Social Finance (CESF) discourse allows Islamic economists to re-align Islamic Banking (IB) and Islamic Finance (IF) with its roots, i.e. Islamic economics. Notwithstanding the impressive growth figures of Islamic Banking/Finance over the last three decades, reservations are voiced especially on the role and impact of IF in Muslim communities. This paper begins by critically discussing, albeit briefly, selected tensions that have evolved in Islamic Banking literature over the decades that show the departure of IB from IE. The criticism of IB has moved away from merely focussing on contracts/instruments or the debt/equity debate of the 1980s and early 1990s to a substantive systemic focus on the role of IF in developing the real economy to enhance the welfare of society as a whole. Genuine Islamization of Knowledge approach can be a methodological framework that allows IB/IF to be re-connected to IE and to the epistemological bases of Islam. The paper then briefly presents the basic ideas in the CESF discourse and argues that its central features provide an opportunity to re-align the current direction taken by Islamic Banking/Finance. The goals of IB/IF must help achieve the overall socio-economic goals of society and not merely serve outdated neoclassical economics objectives of maximizing individual shareholder welfare, with no consideration for overall equity considerations in society. The paper then argues that the CESF discourse provides a golden opportunity to re-visit the theory of decision-making in economics. Utilizing selected literature written on interdependent utility functions, it is proposed that economic decision-making in Islamic economics must include a concern for others, including its environmental and human impact, something that is at the base of the CESF agenda. The paper generally adopts selected discourse/content analysis involving literature on the various component parts of the paper. 



References

  • Al-Attas, S. M. N. (1995). Prolegomena to the Metaphysics of Islam, International Institute of Islamic Thought and Civilization [ISTAC], Kuala Lumpur. google scholar
  • Amin, R. (2018). The Malaysian Islamic Banking Sector Viewed Through Systems Theory (Doctoral Dissertation). Retrieved from http://studentrepo.iium.edu.my/handle/123456789/3599 google scholar
  • Asutay, M. (2012). Conceptualising and locating the social failure of Islamic finance: Aspirations of Islamic moral economy vs the realities of Islamic finance. Asian and African Area Studies, 11(2), 93-113. google scholar
  • Bergstrom, T. C. (1999). Systems of benevolent utility functions. Journal of Public Economic Theory, 1(1), 71- 100. google scholar
  • Drakopoulos, S. (2012). The history of attitudes towards interdependent preferences. Journal of the History of Economic Thought, 34(4), 541-557. http:// dx.doi.org/10.1017/S105383721200051X google scholar
  • Faruqi, I. R. (1982), Islamization of Knowledge: Problem, Principles and the Workplan. International Institute of Islamic Thought, Herndon. google scholar
  • Haneef, M. A., & Furqani, H. (2007). Usul Al-Iqtisad: The Missing Dimensions in Contemporary Islamic Economics and Finance. Readings in Islamic Economics and Finance (pp. 1-16), Sintok: UUM Publications google scholar
  • Haneef, M. A. (2009). Islamic banking and finance in the 21st century- selected issues in human capital development. Islam and Civilizational Renewal,1(2). google scholar
  • Haneef, M. A. (2009). A critical survey of Islamization of knowledge (2nd ed.). Kuala Lumpur, International Islamic University Press. google scholar
  • Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic banks via communication in annual reports. Journal of Business Ethics, 76(1), 97-116. google scholar
  • Hassan, A., & Syafri Harahap, S. (2010). Exploring corporate social responsibility disclosure: the case of Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 3(3), 203-227. google scholar
  • Hassan, M. K., & Aliyu, S. (2018). A contemporary survey of Islamic banking literature. Journal of Financial Stability, 34, 12-43. google scholar
  • Islamic Financial Services Board. (2019). Islamic Financial Services Industry Stability Report. Kuala Lumpur:Author. google scholar
  • Ismail, A. G. (2019) Innovation, Islamic Finance and Economic Development. IESTC Working Paper Series, Working Paper No. 16. Bangi: Organization of Islamic Economic Studies and Thoughts google scholar
  • Khan, T. (2019). Venture Waqf and the Circular Economy. ISRA International Journal of Islamic Finance, 11(2). google scholar
  • Malaysia Islamic Finance Education Report (2016). International Council of Islamic Finance Educators(ICIFE), Kuala Lumpur, Malaysia. google scholar
  • Mirakhor, A. (2010). Whither Islamic finance? Risk sharing in an age of crises. MPRA Paper 56341, University Library of Munich, Germany. google scholar
  • Sardar, Z. (1986). Islamic Futures. Mansell Publishing, London. google scholar
  • Siddiqi, M.N. (2007). ‘Shari’ah, Economics and the Progress of Islamic Finance: The Role of Shari’ah Experts’. IIUM Journal of Economics and Management, Vol. 15 No. 1. google scholar
  • Sillanpaa, M., & Chaker N. (2019). Circular economy and sustainable development, The Circular Economy: Case Studies About the Transition from the Linear Economy. Academic Press, pp. 281-311. google scholar
  • Standard and Poor (2020), Islamic Finance Outlook 2020. google scholar
  • Thomson, Frances and Sahil Dutta (2015). A Primer on Financialization. Transnational Institute, Amsterdam. google scholar
  • World Economic Forum (2014). Towards a Circular Economy, Geneva. google scholar
  • Zaman, A. (2005). Towards a New Paradigm for Economics. Journal of King AbdulAziz University: Islamic Economics, Vol. 18, No. 2, pp. 49-59. google scholar


SHARE




Istanbul University Press aims to contribute to the dissemination of ever growing scientific knowledge through publication of high quality scientific journals and books in accordance with the international publishing standards and ethics. Istanbul University Press follows an open access, non-commercial, scholarly publishing.