IRTI’S Recent Publications
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ISLAMIC ECONOMIC STUDIES Vol. 21 No. 1 Rajab 1434H (June 2013) Advisory Board Articles Khurshid Ahmad Ziauddin Ahmad Redefining Islamic Economics as a New Economic Paradigm Mohamed Ariff M. Umer Chapra Necati Aydin Seif I. Tag el-Din Abbas Mirakhor John R. Presley Why is Growth of Islamic Microfinance Lower than its Mohamed Ali Elgari Conventional Counterparts in Indonesia? M. Nejatullah Siddiqi Rodney Wilson Dian Masyita & Habib Ahmed Abdel-Rahman Yousri M. Anas Zarqa State of Liquidity Management in Islamic Financial Institutions M. Umar Zubair Tariqullah Khan Salman Syed Ali Resolutions of OIC Fiqh Academy Events and Reports In Focus: IRTI’s Recent Publications Abstracts of Articles Published in Dirasat Iqtisadiah Islamiah Cumulative Index of Papers List of IRTI Publications Islamic Research & Training Institute (IRTI) Establishment The Islamic Research and Training Institute (IRTI) was established by the Board of Executive Directors (BED) of the Islamic Development Bank (IDB) in conformity with paragraph (a) of the Resolution No. BG/14-99 of the Board of Governors adopted at its Third Annual Meeting held on 10th Rabi-ul-Thani, 1399H corresponding to 14th March, 1979. The Institute became operational in 1403H corresponding to 1983. The Statute of the IRTI was modified in accordance with the resolutions of the IDB BED No.247 held on 27/08/1428H. Purpose The Institute undertakes research for enabling the economic, financial and banking activities in Muslim countries to conform to Shar ah, and to extend training facilities for personnel engaged in development activities in the Bank’s member countries. Functions The functions of the institute are to: A. Develop dynamic and innovative Islamic Financial Services Industry (IFSI). B. Develop and coordinate basic and applied research for the application of Shar ah in economics, banking and finance. C. Conduct policy dialogue with member countries. D. Provide advisory services in Islamic economics, banking and finance. E. Disseminate IFSI related knowledge through conference, seminars, workshops, apprenticeships, and policy & research papers. F. Provide learning and training opportunities for personnel engaged in socio-economic development activities in member countries. G. Collect and systematize information and disseminate knowledge. H. Collaborate to provide policy advice and advisory services on the development and stability of Islamic Finance and on the role of Islamic institutions in economic development to member government, private sector and the NGO sector. I. Develop partnership with research and academic institutions at OIC and international levels. Organization The President of the IDB is the President and the Legal Representative of the Institute. The Board of Executive Directors of the IDB acts as the supreme body of the institute responsible for determining its policy. The Institute’s management is entrusted to a Director General selected by the IDB President in consultation with the Board of Executive Directors. The Institute has a Board of Trustees that function as an Advisory body to the Board of Executive Directors. The Institute consists of two Departments, each with two Divisions: Research & Advisory Services Department Training & Information Services Department Islamic Economics & Finance Research Division Training Division Advisory Services in Islamic Economics & Finance Division Information & Knowledge Services Division Headquarters The Institute is located at the headquarters of the Islamic Development Bank in Jeddah, Saudi Arabia. P.O. Box 9201, Jeddah 21413 Kingdom of Saudi Arabia Tel: (00966-2) 636 1400 Fax: (00966-2) 637 8927 Home page: http://www.irti.org Email: [email protected] © Islamic Research and Training Institute Member of Islamic Development Bank Group Copyright by Islamic Research & Training Institute, a Member of the Islamic Development Bank Group. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the copyright holder, except reference and citation, but must be properly acknowledged. The view expressed in this publication are those of the authors and do not necessarily reflect the view of the Islamic Research and Training Institute of the Islamic Development Bank. King Fahd National Library Cataloging-in-Publication Data Islamic economic studies – Jeddah, 2012 Vol. 21, No. 1; 17 x 24 cm ISSN: 1319/1616 1-Islamic economics I. Title ISSN: 1319/1616 LDN : 14-0721 Published by The Islamic Research and Training Institute A Member of the Islamic Development Bank Group P.O. Box 9201 – Jeddah 21413 Saudi Arabia Tel: (+9662) 6361400, Fax: (+9662) 6378927 Email : [email protected] Website: http://www.irti.org Islamic Economic Studies (IES) is published biannually, in the months of Muharram and Rajab, according to the Islamic Hijra calendar. Islamic Economic Studies is a refereed journal that maintains high academic standards. It is included in the Abstracting Services CD-ROM indexing of the Journal of Economic Literature published by the American Economic Association. _____________________________ Subscriptions: First class mail is US $35.00 for one year (two issues). The price of a single issue is US $20.00. Subscriptions should be mailed to the following publisher address: The Islamic Research and Training Institute A Member of the Islamic Development Bank Group P. O. Box 9201, Jeddah 21413 Saudi Arabia Tel: (+9662) 6361400, Fax: (+9662) 6378927 E-mail: [email protected] ISLAMIC ECONOMIC STUDIES Vol. 21 No. 1 Rajab 1434H (June 2013) Editor CONTENTS Salman Syed Ali Co-Editor Articles Hylmun Izhar Mohammed Obaidullah Editorial Board Mohamed Azmi Omar Redefining Islamic Economics as a New Economic 1 Sami Al-Suwailem Paradigm Tariqullah Khan Osman Babiker Necati Aydin Mohammed Obaidullah Why is Growth of Islamic Microfinance Lower than 35 Salman Syed Ali its Conventional Counterparts in Indonesia? Dian Masyita & Habib Ahmed State of Liquidity Management in Islamic Financial 63 Institutions Salman Syed Ali Resolutions of OIC Fiqh Academy - Resolution No. 186 (1/20): Rules of Insolvency and 101 Bankruptcy in Islamic Shar ah and Contemporary Systems - Resolution No. 187 (2/ 20): Cooperative Insurance: Shar ah Rules and Regulations Events and Reports - Risk Management Meeting on Islamic Banking 109 - Expert Group Meeting on Financial Sector Assessment Program for Islamic Finance - Lecture on UK Financial Reform by Prof. Maximilian Hall In Focus: IRTI’s Recent Publications - Credit Risk Transfer by Abd Elrahman Elzahi 117 Abstracts of Articles Published in Dirasat 121 Iqtisadiah Islamiah Cumulative Index of Papers 127 List of IRTI Publications 137 ARTICLES Islamic Economic Studies Vol. 21, No. 1, June 2013 (1-34) Redefining Islamic Economics as a New Economic Paradigm NECATI AYDIN Abstract1 The more recent literature on Islamic economics is largely about Islamic financial instruments and institutions. It might give an impression as if the main difference between conventional and Islamic economics is in the instruments, rather than foundational aspect. Islamic economics is not about the prohibition of certain goods and services. It is a vastly different economic system whose answers to the core economic questions vary significantly. It is important to start from the foundation Islamic economics by redefining assumptions, developing new theories of microeconomics and macroeconomics, and offering testable models from the Islamic paradigm. This paper is an attempt to redefine Islamic economics as a new economic paradigm based on the distinctive axiomatic feature of Islamic worldview. In order to do that, the paper first presents evidences of the crises of capitalism and search for alternative paradigm. Second, it outlines the origin of capitalism within the Western secular worldview. Third, it presents the Islamic worldview from anthropological, epistemological, and teleological perspectives. Fourth, it redefines Islamic economics as alternative economic paradigm to capitalism. 1. Introduction The more recent literature on Islamic economics is largely about Islamic financial instruments and institutions. It might give an impression as if the main difference between conventional and Islamic economics is in the instruments, rather than foundational aspect. Islamic economics is not about the prohibition of 1 This research paper was supported by King Saud University, Deanship of Scientific Research, College of Business Administration Research Center. 1 2 Islamic Econoic Studies Vol. 21, No.1 certain goods and services. It is a vastly different economic system whose answers to the core economic questions vary significantly. As currently done, mimicking conventional economics and finance is only creating Islamic economics and finance by name. The secular essence and soul of capitalist system is largely untouched. It is important to start from the foundation Islamic economics by redefining assumptions, developing new theories of microeconomics and macroeconomics, and offering testable models from the Islamic paradigm. As Nasr indicates the theoretical works in Islamic economics has “failed to escape the centripetal pull of western economic thought, and has in many regards been caught in the intellectual web of the very system it set out to replace” (Nasr 1991, p.388). Indeed, the differences between Islamic and capitalist financial institutions are getting blurry every day. As Asutay