SYLLABUS FACULTY ECONOMIC AND BUSINESS INTERNATIONAL PROGRAM FOR ISLAMIC ECONOMICS AND FINANCE (IPIEF) 1 Name of Course Fiscal Economics of Islam 2 Course Code EI8460 3 Credit Value 3 Credit hours 4 Objective 1. To provide the students with the introductory knowledge of Islamic Fiscal Policies. 2. To teach students the theories of Islamic Public Finance and Islamic Social Finance. 3. To prepare students for the study of the various Islamic Philanthropy. 4. To explore the issues related to revenues, expenditures, budget deficit, debt and its treatment based on the Islamic perspective. 5. To enhance the students’ skills in relation to the application of Islamic in Islamic economic policy. 5 Learning Outcomes 1. Knowledge and Understanding (Basic Competence) Upon the completion of the course, the students should be able to: • Describe the concept and theory of Islamic Fiscal Policy, Islamic Public Finance, and Islamic Social Finance. • Understand how to explain general theory of knowledge and negative elements in public finance and social finance.

2. Intellectual Skill (Standard Competence) Upon the completion of the course, the students should be able to: • Demonstrate the importance of the knowledge of Fiscal Policy of Islam, Islamic Public Finance and Social Finance • Demonstrate the ability to identify the prohibitive elements in Islamic Philanthropy.

3. Practical Skill Upon the completion of the course, the students should be able to: • Apply various types of Fiscal Policy of Islam and Islamic Public Finance tools to their research activities. • Apply Islamic Social Finance as alternatives to current budget deficit and government debt problems.

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4. Managerial Skill and Attitude Upon the completion of the course, the students should: • Possess ability to analyse the prohibitive elements in fiscal economics activities in Islam. • Possess ability to do a simple analyse the contemporary Islamic Finance. 6 Synopsis The subject Fiscal Economics of Islam is an introductory course which deals with the definition of some basic Shari’ah terms in relation to the role of fiscal policy in controlling inflation, spending levels, and rates (tax deduction and ), by the goals to apply Islamic economic policies. It is assumed that in the context of fiscal, monetary and economic policies, the Islamic framework can be further specified by prohibition of interest and gambling, minimization of hazard and uncertainty and keeping government intervention in the market limited to what is necessary for the understanding of these goals. 7 References 1. Iqbal, Z., & Lewis, M. (2009). An Islamic perspective on governance. Edward Elgar Publishing. 2. 'Abdal'Aziz Duri. (1974). Notes on taxation in Early Islam. Journal of the Economic and Social History of the Orient/Journal de l'histoire economique et sociale de l'Orient, 136-144. 3. Shemesh, A. B. (Ed.). (1967). Taxation in Islam (Vol. 1, 2, 3). Brill Archive. 4. Ariff, M. (Ed.). (1978). Monetary and fiscal economics of Islam. International Centre for Research in Islamic Economics. 5. Siddiqi, S. A. (2007). Public finance in Islam. Adam Publishers. 6. Iqbal, Z., & Amerah, M. S. (1990). Public finance in Islam. Readers Publishers. 8 Lecturer Muhammad Shulthoni, Lc., M.A., MSI 9 Correspondence E-mail: [email protected] WA: +60176432176 10 Consultation time After Class (Friday) 11 Academic Evaluation Test Competency I (30%), and II (30%) Project Paper-Assignment (35%) Attendance (5%) Total 100%

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COURSE OUTLINES Meeting Course Materials 1 – 2nd meeting Introduction • Role of the government in the economy • Role of fiscal policy • Objectives of fiscal policy • Measure of fiscal policy • Economic dues • Mechanism of fiscal policy •Fiscal policy to cure unemployment •Fiscal policy to curb inflation •Fiscal policy to accelerate economic growth

Perception and Practice •Flaws in the theory of interest •Basis of Interest-free banking •structure of banking business •some unresolved practical problems

Islamic Fiscal System •Strict injunctions on interest •Difference between and usury •Prohibition of compound interest •Interest transactions in Pagan Arabia •Types of Riba •Interest transactions in Medina •Fiqh on interest •The analogy •Fundamental principle of jurisprudence •Some other beneficial prohibitions •Islam and credit •Discussion on interest •Goodwill in business transactions •The speculation •Transactions of agricultural commodities •Teachings on forward transactions •Islam and trade •Interest and trade 3-4th meeting Historical Background •Difficulty in elimination of interest •contribution of Jews • Contribution of Christians •Contribution of Muslims •Approach of economist •Obstacles in earlier ages •Problem of Bias •Interest and deposit mobilization • scarcity being self-contrived not justifying interest •Opportunity cost of capital

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•rationing capability of interest •Inflation as argument for retention of interest • Confusion between interest and profit • Socialistic economics • Islamic ideology • Islamic Economics • Current posture • Basic obstacles

Initial period •Elements of fiscal policy • Fiscal system in the first period • Fiscal system in the second period • in Islamic economy • Effect of Zakah on consumption • Zakah and progressive income taxation • Effect of Zakah in investment

• Bait al-mal • Diwan of the Army (The military stipend) • various taxes • Zakah-Alms tax • Kharaj-Land Tax • – • Ushur-Trade tax • The expenditures • Zakah • Jizya, Kharaj & Ushur

5-7th meeting Public Revenue: The Alms • Perception of Alms • Zakah, Waqf, Sadaqat, Infaq • The beneficiaries • The distribution • The Exceptions • Nisab (minimum exemption limit) • Question of Re-fixation of nisab • Assessment rate • Visible wealth • Regulation concerning ushr • The animals • Rate for cows and buffaloes • Invisible wealth • The observations • Corner stone • Principles underlying zakah • assessment period • Zakah in the light of modern theories of taxation • Role of zakah in economy

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• The assumptions • The limitations • Fiscal norms of Islamic society • Zakah as the determinant of the nature of fiscal policy • Additional Levies • Income elasticity of zakah • Stability and countercyclical use • Zakah-based fiscal policy • Saving and investments • Decline in expected rate of return on savings • willingness to work • and zakah • investment of zakah for the benefit of the poor • multiplier effect • investment in welfare services • ratio of transfer payments

8th meeting Evaluation I (Test Competency I)

9-12th meeting 1. Waqf Synergy Waqf synergy is defined as the integration of complementary intervention between Waqf solutions to address the challenges of the Muslim economic, social and scientific-technological challenges. It underlines the synergy of both, the Islamic banking and finance sector as well as the Islamic capital market in providing solutions and alternative financing modes in developing Waqf properties all around the world.

2. Waqf Interface Waqf interface is defined as the consolidation of current spiritual economic institutions and good injunction to achieve the higher objectives of faith and virtuous conduct in the daily life of a Muslim for both, this world and the Hereafter. An example is interfacing with the institution of Waqf to address immediate, essential basic needs of the poor in new cities (proposal of the poor share of zakat provision in being utilised to serve perennial economic needs of accommodation in the city).

3. Waqf Co-Creation Waqf co-creation is the collaboration and cooperation between all relevant stakeholders at institutional sectoral, governance and global lower level to address the design, structure, process and outcome of Waqf initiatives across the world and target community to build a clouding platform. It can be realised via technological modes.

4. Waqf Innovation Waqf innovation is defined as the identification of new strategies, programs, processes and systems of enhancing Waqf as the new mainstream alternative at the global, regional, national and community level in changing the destiny of its constituent. It is driven by the sense of strategic visioning, continuous learning, intellect and business acumen

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of individuals and society at large to achieve macro value driven system. Good examples are the issuance of Sukuk Musyarakah to develop the Bencoolen waqf property in Singapore and the issuance of Sukuk Al- Intifa’a for the development of Zamzam Tower, Makkah. 13-14th meeting Public Expenditures 1 Factors affecting the level of public expenditure: - State capability to raise public funds. - The actual performance of economic activities. - Cost-Benefit Analysis: maximum revenue at least cost. - Maintaining relative stability of the value of money (controlling inflationary and deflationary tendencies). - Expenditure rationalization: moderation against overspending and wasteful expenditure. 2 Growth of public expenditure: nominal and real growth. 3 Classification of public expenditure. 4 The economic effects of public expenditure. 15-16th meeting 1. Budgeting in Islam -Deficit Financing -Public debt 2. Public Financial Institutions: Baitulmal -Government Accounting and Auditing 17th meeting The Institution • Al-hisba and the Islamic economy • market failure and Islamic economics • Islamic position on budget deficits • Financing methods for government bodies Accountability and governance •Governance and corruption

18th meeting Evaluation II (Test Competency II)

Rules of class meeting: 1. A class will be managed by class leader, consists of a class leader and its deputy. They are selected democratically according to class members’ aggrement. The class leaders will get additional appreciation in terms of marks for respectively 10% and 7.5% out of normal marking arrangement above. Practically, they are responsible for several tasks: a. Ensuring class attendance and venue b. Ensuring class assignment timely collected c. Intermediating communicating between lecturer and students d. Assisting other related tasks concerning class if deemed necessary 2. Students are allowed to join class for tolerated maximum 15 minutes for late attendance, otherwise are forbidden entering class 3. Students who are absence due to getting sick and organizational activities must inform the lecturer and class leader 2 hours prior the class starts.

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4. Late assignment submission will not be entertained and accepted 5. Students who were absence for three consecutive weeks or accumulately has 3 unclear absence, are not allowed to join class for the entire semester . 6. Test examination and assignment results will be openly announced 7. Students who got D and E on his final marks, must repeat the course on the next academic year 8. Cheating and any dishonest conduct will lead to dismissal 9. Students are required to actively visit BI research corner at least once a week. The visits will imply to additional 5% mark in the end of semester. A visit must get stamp from the library staff. 10. Grading System: Grading and Weight Interval (%) A 80-100 AB 75-80 B 65-75 BC 60-65 C 50-60 D 35-50 E 0-35

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