Spiritual and Natural Roots of Economic Reflection

prepared by Frank Kaufmann

for the

Conference on Islamic Finance & Investment

Irish Business Executives Forum (IBEF) 5th and 6th June 2012.

Section 1: Islamic Finance and Investment

Basis of law:
Islamic religious law drives from the following sources:
The Quran: Sunnah: Ijmah: Qiyas:

History
Naiem Siddiqi and Ahmad in the 40s Hamidullah and Uzair in the 50s The emergence of Muslim economists such as Abdullah al-Araby (1967), Nejatullah Siddiqi (1961, 1969), al-Najjar (1971) and Baqir al-Sadr (1961, 1974) in the 60s and 70s

History
Then institutions: The Conference of the Finance Ministers of the Islamic Countries held in Karachi in 1970, the Egyptian study in 1972,

the First International Conference on Islamic Economics in Mecca in 1976, and the International Economic Conference in London in 1977

Basic Tenets
Two main tenets:

no interest (riba) can be earned on loans and socially responsible investing. risk related no haram industry

Present situation and attractiveness

Several hundred Islamic banks,
Assets estimated near half a trillion

Projected growth of 15% per annum.

Criticism
It is interest-based in the end, just wellhidden Zakat can be given to anyone and does not need to be accounted for in the books

Issues and difficulties

LEGAL FRAMEWORK Appropriate for the enforcement of Islamic banking and financial contracts do not exist in many countries. EXCESS LIQUIDITY

Islamic banks have over 60 % excess liquid funds which cannot be properly utilized due to non-availability of Sharia'h Compliant products and instruments. The competitiveness and soundness of financial institutions depend on the availability of efficient financial products. Islamic banks urgently need Sharia'h compliant products to meet a number of pressing needs.

Contents of social relations: Systems, cultures, and civilizations

Religion

Politics
Commerce

Finance, manufacturing, commodities, and trade

Education

Media
Culture

Arts, sports, leisure, entertainment

Jurisprudence and morals

Religious life:

Approach to God Approach to fellow people and social life

Jurisprudence and morals

Jewish and Muslim Revealed and developed laws for personal and social transformation Practices for self training and purification Practices for worship Inner Transformation by God through Jesus in the life of the believer

East Asian

Christian

Inner integration of the law

Revelation, nature, human relations, and morals Evolution of law (even sacred law) Differences of circumstances and interpretation Applies to all sectors of civilization Universal, intercultural, global

Nature Family

Finance: Issues and responsibilities

Growth
Inequality

Growth

Nature
Animals
Plants

Ourselves

3 orderly stages

contraction Parameters of rates

Expansion

Economic Inequality
Family
4

great and eternal realms of heart

Way Forward

Obedience to the divine order of growth Spiral growth with expansion and contraction Credit, middle class,

Harmonized ideals of commerce Expansion of family into social dynamics