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Fiat money: from the current Islamic finance scholars’ perspective

Syammon Jaffar (IIBF, International Islamic University Malaysia, Kuala Lumpur, Malaysia)
Adam Abdullah (IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia, Kuala Lumpur, Malaysia)
Ahamed Kameel Mydin Meera (Department of Economics and Management Sciences, International Islamic University Malaysia, Kuala Lumpur, Malaysia)

Humanomics

ISSN: 0828-8666

Article publication date: 14 August 2017

Abstract

Purpose

This paper aims to discuss the opinions of current Shariah scholars on the concept of debt money in the present-day fiat money system.

Design/methodology/approach

Research design of this paper is a quantitative investigation of Shariah experts by distributing a questionnaire to them. As majority of Shariah scholars are also Shariah advisory of the current banking system, it is important to find out their level of knowledge on the issue of debt money created by the commercial banking system through the fractional-reserve banking (FRB) system.

Findings

Based on this investigation, most Shariah scholars are unaware of and confused about the mechanics underpinning the creation of money, especially with respect to FRB as it is practiced by the conventional and Islamic banking systems.

Originality/value

Based on this research, it is recommended that these scholars should improve their understanding of the operation of the fiat money system and its consequences. It is recommended that, in future, Shariah scholars should think “outside of the box” by creating Islamic financial instruments that do not resemble those of the conventional system.

Keywords

Citation

Jaffar, S., Abdullah, A. and Meera, A.K.M. (2017), "Fiat money: from the current Islamic finance scholars’ perspective", Humanomics, Vol. 33 No. 3, pp. 274-299. https://doi.org/10.1108/H-01-2017-0013

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited