Book contents
- Frontmatter
- Contents
- Acknowledgements
- A Note on Transliteration and Dates
- Abbreviations
- Introduction: Islamic Finance in the Global Economy
- 1 Islamic Finance in Theory and Practice
- 2 Islam, Economics and Finance
- 3 Riba, Gharar, and the Moral Economy of Islam in Historical and Comparative Perspective
- 4 The Evolution of Modern Islamic Finance
- 5 Islamic Finance and the Global Political Economy
- 6 Country Differences
- 7 Financial Products and Instruments
- 8 Strategic, Managerial, and Cultural Issues
- 9 Economic Issues: Islamic Finance and Development
- 10 Regulatory Issues and Challenges: Global Norms and Religious Constraints
- 11 Islamic Finance and Politics: Guilt by Association
- 12 Religious Issues and Challenges: Defining Islam and Interpreting the Shariah
- Conclusion: Islamic Finance and the Global Financial Meltdown
- Glossary
- Index
9 - Economic Issues: Islamic Finance and Development
Published online by Cambridge University Press: 12 September 2012
- Frontmatter
- Contents
- Acknowledgements
- A Note on Transliteration and Dates
- Abbreviations
- Introduction: Islamic Finance in the Global Economy
- 1 Islamic Finance in Theory and Practice
- 2 Islam, Economics and Finance
- 3 Riba, Gharar, and the Moral Economy of Islam in Historical and Comparative Perspective
- 4 The Evolution of Modern Islamic Finance
- 5 Islamic Finance and the Global Political Economy
- 6 Country Differences
- 7 Financial Products and Instruments
- 8 Strategic, Managerial, and Cultural Issues
- 9 Economic Issues: Islamic Finance and Development
- 10 Regulatory Issues and Challenges: Global Norms and Religious Constraints
- 11 Islamic Finance and Politics: Guilt by Association
- 12 Religious Issues and Challenges: Defining Islam and Interpreting the Shariah
- Conclusion: Islamic Finance and the Global Financial Meltdown
- Glossary
- Index
Summary
Insofar as “money is the only good that trades against all other goods,” the financial sector “is unique in the degree to which its markets, prices, institutions, and policies impinge upon all others.” More specifically, in any modern economy, financial systems are central to long-term economic development in that:
they facilitate trade: at the most rudimentary level, money minimizes the need for barter and thereby encourages commerce and specialization;
they facilitate risk management, by pricing risk and providing mechanisms for pooling, ameliorating, and trading risk;
financial intermediaries mobilize resources from disparate savers to investment in worthwhile investment projects;
financial systems obtain information and evaluate firms, projects, and managers; and
financial systems provide corporate governance. It is difficult if not impossible for individual investors to evaluate and monitor the performance of firm managers. Consequently, financial intermediaries are often charged with compelling managers to act in the best interests of firm claim holders (stockholders or creditors).
Promoters of Islamic finance have argued that Islamic finance is not only con sistent with capitalism (that is, with a market-driven allocation of resources), but that it is in many ways better suited to a dynamic economy. More specifically, Islamic finance could bring about more efficient mobilization of savings, more equitable and just distribution of resources, more responsible and profitable lending, as well as less volatile business cycles and more stable banking systems.
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- Information
- Islamic Finance in the Global Economy , pp. 177 - 191Publisher: Edinburgh University PressPrint publication year: 2010