An Ideal Islamic Economic System: A Gone Case

Salman Ahmed Shaikh ()

MPRA Paper from University Library of Munich, Germany

Abstract: Islamic finance industry mostly uses LIBOR linked financial contracts which are akin to debt financing than the more preferable participatory modes of Mudarabah and Musharakah. As per the current orthodox understanding and practice of Islamic finance, the often cited preferable modes like Mudarabah and Musharakah are incapable even in a simple model economy with them as the only mode of financing. Hence, they are rarely used. The prevalent Islamic products which are linked with LIBOR are and will predominantly be used and practiced Islamic finance may remain incapable of providing egalitarian benefits it once promised. Ironically, Islamic values like justice, equality, truth, trust, kindness, honesty and responsibility are often discussed in literature and seminars on Islamic Economics; whereas, in reality, the lack of these values in practice is the major reason why preferable participatory modes remain unusable! As discussed, the current orthodox understanding of Islamic fiscal redistribution mechanisms like Zakat and Inheritance also make them incapable of contributing towards the establishment of an egalitarian economic framework. This paper proposes an alternate approach to practiced Islamic finance and orthodox understanding of Zakat and inheritance laws and shows that the alternate approach could still be sufficient to contribute towards egalitarian objectives effectively.

Keywords: Islamic Finance; Islamic Economics; Welfare Economics; Experimental Economics; Heterodox Economics; Zakat; Fiscal Redistribution (search for similar items in EconPapers)
JEL-codes: A1 B5 G0 H2 (search for similar items in EconPapers)
Date: 2010-11-01
New Economics Papers: this item is included in nep-ara, nep-cwa and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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