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Article
Publication date: 16 March 2021

Haithem Kader

This study argues that in order to address the problems associated with the modern market economy at their core, such as persistent poverty, growing inequality and…

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Abstract

Purpose

This study argues that in order to address the problems associated with the modern market economy at their core, such as persistent poverty, growing inequality and environmental degradation, it is imperative to re-assess the well-being and moral philosophy underpinning economic thinking. The author attempts to offer a preliminary way forward with reference to the Islamic intellectual tradition.

Design/methodology/approach

This study employs content analysis of classical and contemporary Islamic texts on human well-being and economic ethics to derive a conceptual well-being model. The paper is structured in four sections: section one provides an overview of relevant secondary literature on moral economic approaches; section two outlines the main well-being frameworks; section three discusses the concept of human well-being in Islam informed by the Islamic worldview of tawḥīd, the Islamic philosophy of saʿādah, and the higher objectives of Islamic Law (maqās.id al-Sharīʿah); and finally, section four discusses policy implications and next steps forward.

Findings

A conceptual model of human well-being from an Islamic perspective is developed by integrating philosophical insights of happiness (saʿādah) with an objective list of five essential goods: religion (Dīn), self (Nafs), intellect ('Aql), progeny (Nasl) and wealth (Māl) that correspond to spiritual, physical and psychological, intellectual, familial and social, and material well-being, respectively.

Research limitations/implications

Further research is needed to translate this conceptual model into a composite well-being index to inform policy and practice.

Practical implications

This model can be used to review the performance of the Islamic finance sector, not solely in terms of growth and profitability, but in terms of realising human necessities, needs and refinements. It can also provide the basis for the Organisation of Islamic Co-operation (OIC) countries to jointly develop a well-being index to guide national and regional co-operation. More generally, this study highlights the need for research in Islamic economics to be more firmly rooted within Islamic ontology and epistemology, while simultaneously engaging in productive dialogue with other moral schools of economic thought to offer practical solutions to contemporary challenges.

Originality/value

This study offers three aspects of originality. First, by outlining well-being frameworks, it highlights key differences between the utilitarian understanding of well-being underpinning modern economic theory and virtue-based understandings, such as the Aristotelian, Christian and Islamic approaches. Second, it provides a well-being model from an Islamic perspective by integrating the Islamic worldview of tawḥīd, the Islamic philosophy of saʿādah, and the higher objectives of Islamic Law (maqāṣid al-Sharīʿah). Third, it proposes an ethical framework for informing economic policy and practice.

Details

Islamic Economic Studies, vol. 28 no. 2
Type: Research Article
ISSN: 1319-1616

Keywords

Article
Publication date: 6 January 2021

Mehmet Asutay and Isa Yilmaz

This study aims to theoretically explore and examine the possibility of developing an Islamic social welfare function (ISWF) within the Islamic moral economy (IME) frame…

Abstract

Purpose

This study aims to theoretically explore and examine the possibility of developing an Islamic social welfare function (ISWF) within the Islamic moral economy (IME) frame by going beyond the traditional fiqhī approach. It focuses on issues of preference ordering and utility through the normative dimension of Islamic ontology, as expressed and articulated within the IME.

Design/methodology/approach

Being a theoretical paper, a conceptual and critical discursive approach is used in this paper.

Findings

To establish an ISWF, a narrow juristic approach remains inadequate; there is a need to integrate the substantive morality to complement the juristic approach to achieve the ihsani process as the ultimate individual objective, which makes an ISWF possible. As the scattered debate on the topic concentrates mainly on the juristic approach, the main contribution of this study is to present a model in which juristic and moralist positions endogenized and augmented to constitute ISWF.

Originality/value

As there is a limited amount of research available on the subject matter, this paper will be an important theoretical contribution. In addition, this study develops an IME approach rather than fiqh-based approach used in the available research, which makes it novel.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 14 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 9 November 2015

Mohd Mahyudi

– The paper aims to revive the Islamic economic system discourse given the increasing interest in the moral economy agenda.

1916

Abstract

Purpose

The paper aims to revive the Islamic economic system discourse given the increasing interest in the moral economy agenda.

Design/methodology/approach

Proponents of Islamic economics theorise that the Islamic system presents the ideal form of a socio-economic order. However, the reported huge gap between theoretical construct and real activities seems to support the critics’ claim that it is a mere utopian state that directly challenges the viability of the Islamic economy idea.

Findings

The fact of the matter is that homo economicus is overpowering homo Islamicus despite the presupposed position of homo Islamicus as the mainstay of Islamic economics.

Research limitations/implications

To manifest the Islamic economic system notion further, it is argued that a shariah-based values infusion policy (VIP) needs to be formulated to actualise the predominance of homo Islamicus.

Practical implications

Owing to the overarching and holistic nature of the proposed public policy, the operations of individuals, firms and state agencies should have the tendency to reflect the expected behaviour of homo Islamicus better than the present state of affairs.

Social implications

The success of the VIP would include the enhancement of social integration and cohesion.

Originality/value

The link between moral economy, homo Islamicus and public policy is clearly established. Thus, this research guides policy makers in promoting the Islamic economic system as a universally-aspired moral economy project.

Abstract

Details

Monetary Policy, Islamic Finance, and Islamic Corporate Governance: An International Overview
Type: Book
ISBN: 978-1-80043-786-9

Article
Publication date: 10 February 2022

Erhan Akkas and Mehmet Asutay

This paper aims to evaluate the impact of intellectual capital in terms of human capital, structural capital and capital employed on the financial performance of Islamic

Abstract

Purpose

This paper aims to evaluate the impact of intellectual capital in terms of human capital, structural capital and capital employed on the financial performance of Islamic and conventional banks in the Gulf Cooperation Council (GCC) countries.

Design/methodology/approach

Along with the measurement discussion, the empirical analysis examines the relationship between intellectual capital measured through value-added intellectual coefficient (VAIC) and the financial performance of banks in the GCC states by conducting a panel of six GCC countries, including 24 Islamic banks and 32 conventional banks covering 2012–2020 period.

Findings

This paper shows that while Islamic banks have similar VAIC, human capital efficiency and capital employed efficiency results to conventional banks, Islamic banks have lagged behind conventional banks regarding the impact of structural capital on financial performance. It is argued that this is in contradiction with Islamic ontology and epistemology, which essentialises intellectual capital formation.

Practical implications

Islamic banks should promote research and development for their intellectual capital at the product, operational and institutional levels, as Islamic banking is considered an alternative financing method, incorporating a new form of knowledge-based institutions inspired by capitalist institutions.

Originality/value

This study conducts a comparative examination of the intellectual capital performance and its impact on financial performance by using interaction variables to capture any differences between Islamic banks and conventional banks in the GCC countries. The paper also considers the knowledge economy impact as a novelty, which is prominent for the GCC countries. In addition, Islamic ontology’s essentialisation of knowledge and its articulation in the form of intellectual capital within modern understanding is widely discussed, as part of originality. Finally, the findings are located within Islamic ontology and epistemology.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 16 November 2015

Necati Aydin

The purpose of this paper is to report that the social business model has emerged to mitigate the failure of free-market capitalism driven by self-interest in creating…

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Abstract

Purpose

The purpose of this paper is to report that the social business model has emerged to mitigate the failure of free-market capitalism driven by self-interest in creating social value. It shows how social business contradicts with free-market capitalism while being compatible with Islamic moral economy due to the axiomatic differences between the two economic systems.

Design/methodology/approach

The paper follows conceptual, axiomatic and theoretical approach to show how the social business model contradicts with free-market capitalism, but is compatible with Islamic moral economy. The paper provides a theoretical framework for Islamic social business based on an Islamic human and social development perspective. The paper first discusses the failure of free-market capitalism and the emergence of social business in the capitalist system. It then defines Islamic social business and lays out its axiomatic foundation based on the Islamic worldview. It also presents Islamic financial instruments and funds for social business. Finally, it makes a case for sustainable socioeconomic development and subjective well-being within the Islamic development paradigm.

Findings

The paper shows that a cosmetic change to capitalism is not sufficient for enabling the social business model to take the main stage in the free-market system. There is a need for a new paradigm of reality, truth, telos and human nature to support social business. Tawhidi paradigm can be such alternative. The paper makes a strong case for social business from an Islamic worldview. Particularly, certain economic axioms within the Tawhidi anthropology, teleology and axiology provide intrinsic causes for pursuing such business model. The multi-dimensional nature of humans from the Tawhidi anthropology sets the intrinsic foundation for social business. Indeed, although the social business model is new to the West, it has been practiced in certain forms in the Muslim world throughout history. Zakat, sadaqah, and qard hasan can be used to support social business in addition to some Islamic banking instruments. The paper suggests that Muslim countries should embrace the social business model for sustainable development and greater subjective well-being.

Research limitations/implications

The paper is purely theoretical. Future studies might shed light on the issue through empirical evidence.

Practical implications

The paper is likely to enhance the interest in social business in the Muslim world.

Social implications

The paper has potential to lead the creation of social value through dissemination of the social business model.

Originality/value

The paper contributes the Islamic moral economy doctrine by making a strong case for Islamic social business.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 8 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 14 December 2020

Harun Sencal and Mehmet Asutay

As an essential component of Islamic governance for ensuring religious compliance, Shari’ah annual reports (SARs) play an important role in providing communication between…

Abstract

Purpose

As an essential component of Islamic governance for ensuring religious compliance, Shari’ah annual reports (SARs) play an important role in providing communication between Shari’ah board (SB) members and stakeholders. This paper aims to determine the ethical disclosure in SARs to identify how close the Shari’ah disclosure to the standards set by AAOIFI and also substantive morality of Islam. The research also aims to examine the factors determining disclosure performance.

Design/methodology/approach

Two disclosure indices are developed to generate data from the SARs: the AAOIFI standards for Shari’ah governance index for form related approach, an Islamic ethicality augmented index reflecting on substantive morality approach. The sample consists of 41 Islamic banks from 15 different countries for the period of 2007–2014. Sampled 305 SARs were examined through disclosure analysis in line with the two indices developed for this study. The econometric analysis was run to identify the factors determining disclosure performance.

Findings

The findings suggest that AAOIFI guidelines have an influence on the level of disclosure, even if Islamic banks have not adopted them. However, the level of disclosure for the ethically augmented index is found to be very limited with reliance on general statements in most of the cases. As part of determining factors, the popularity of Shari’ah scholars is significant for both indices, while the existence of an internal Shari’ah auditing department holds some explanatory power. The adoption of AAOIFI standards at the country level, the regulatory quality and the duration of Sharīʿah-compliance are particularly deterministic factors in terms of complying with AAOIFI standards for SARs.

Originality/value

Although SB is the most crucial division of corporate governance in Islamic banks in terms of securing the “Islamic” identity of these institutions, their most important communication instrument, namely, SAR, has not been explored sufficiently, alongside an insufficient attempt to constitute Islamic corporate governance. Initially, this study attempted to constitute an Islamic corporate governance framework as a theoretical construct, which provides context for the empirical part of the research and this should be considered a novel approach. Second, the empirical part of the research aims to fill the gap observed in the literature such as small sample size and index construction-related matters. This research is conducted with a larger sample size as compared to the available studies in the literature and it has developed two indices for disclosure analysis along with developing an Islamic morality-based index beside an index based on AAOIFI standards.

Details

Corporate Governance: The International Journal of Business in Society, vol. 21 no. 1
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 24 January 2022

Erhan Akkas and Mehmet Asutay

This paper aims to comparatively examine the impact of the intellectual capital performance on the financial performance of Islamic and conventional banks in the Gulf…

Abstract

Purpose

This paper aims to comparatively examine the impact of the intellectual capital performance on the financial performance of Islamic and conventional banks in the Gulf Cooperation Council (GCC) countries by classifying intellectual capital as human capital, knowledge creation and innovation processes.

Design/methodology/approach

Along with the theoretical discussion in essentialising the rationale for intellectual capital formation through Islamic norms, the empirical analysis is formulated through the data generated by disclosure analysis using a panel of five GCC countries examining 408 annual reports from 19 Islamic and 23 conventional banks covering 2010–2019 period. In the analysis of the generated data, both fixed and random effects regression models are used.

Findings

The findings of this paper suggest that Islamic banks perform better than conventional banks in creating intellectual capital through knowledge creation, human capital and intellectual contribution. While the intellectual capital disclosure index and its pillars are significant for Islamic banks, these variables are not significant for the conventional banks in the GCC countries.

Research limitations/implications

Considering that disclosed information may not reflect actual experience and performance, factual data could also be used to overcome potential shortcomings of disclosure generated data.

Practical implications

This paper demonstrates that Islamic banks in the GCC have been successful in their intellectual capital performance, whereby they seem to be performing in line with the Islamic ontology. In addition, the disclosure items used in this paper may guide the Islamic and conventional banks in the process of preparing their annual reports. Importantly, they may use these items as benchmarks in further developing their intellectual capital performance for better financial performance.

Originality/value

This paper essentialises knowledge development and innovation for Islamic banks through the Islamic cognitive system rather than as a requirement of the market mechanism. Secondly, a comparative analysis between Islamic and conventional banks is presented by acknowledging the peculiarities of Islamic banks in the methodology and disclosure index.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 15 no. 5
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 10 November 2014

Necati Aydin

This paper aims to compare Pareto optimality for altruistic and individualistic societies to show whether it is possible to have Pareto improvement through altruistic acts…

Abstract

Purpose

This paper aims to compare Pareto optimality for altruistic and individualistic societies to show whether it is possible to have Pareto improvement through altruistic acts even after free market equilibrium.

Design/methodology/approach

The paper follows conceptual, axiomatic and theoretical approaches to show Pareto efficiency in altruistic versus individualistic societies. The paper first outlines the welfare axioms of Islamic economics compared to those of capitalism. Second, it defines Pareto efficiency within capitalist and Islamic economic systems. Third, it compares and contrasts the concept in the two systems based on their epistemological and anthropological worldviews. Fourth, it shows how – even under the efficient allocation of material goods – room for Pareto improvement still exists through the redistribution of resources. Finally, it demonstrates optimum income transfer for social welfare maximization.

Findings

The paper shows that Islamic economics relying on certain welfare axioms aim for an altruistic society. It then theoretically proves that social well-being would be greater in such an altruistic society in comparison to an individualistic society promoted by capitalism, holding everything else constant. The paper clearly shows that free market equilibrium does not maximize social utility. It theoretically demonstrates that even under efficient allocation of material goods, there is still room for Pareto improvement through redistribution of resources. It reveals that optimum income transfer might not be possible through voluntary altruistic behaviors unless people transcend self-interest and begin to value social interest as important as their own interest. Therefore, the paper suggests a role for the government to reach optimum-level income transfer for social welfare maximization.

Research limitations/implications

The paper is purely theoretical. Its main limitation is not to be empirically tested. Future studies might shed light on the issue through empirical evidence

Practical implications

Pareto improvement provides important guidance or at least moral justification for welfare programs. The paper might directly affect welfare policy of Muslim countries.

Social implications

The paper suggests income transfer through altruistic acts would provide higher social welfare. Therefore, it is in the best interest of nations to promote altruistic behaviors and support voluntary welfare programs for higher social utility.

Originality/value

The paper contributes to the Islamic moral economy doctrine by proving that altruistic behaviors encouraged by Islamic teaching could provide higher social welfare.

Details

Humanomics, vol. 30 no. 4
Type: Research Article
ISSN: 0828-8666

Keywords

Article
Publication date: 10 May 2021

Muhammad Nouman, Muhammad Fahad Siddiqi, Karim Ullah and Shafiullah Jan

This paper aims to conceptualize the nexus between the participatory finance and the higher ethical objectives within the Islamic moral economy, also termed as Maqasid al Shari’ah.

Abstract

Purpose

This paper aims to conceptualize the nexus between the participatory finance and the higher ethical objectives within the Islamic moral economy, also termed as Maqasid al Shari’ah.

Design/methodology/approach

Insights from the extant Islamic economics and finance literature are integrated through an interpretative systematic review using the principles from critical interpretative synthesis (CIS).

Findings

A coherent framework is synthesized comprising the typology of the Maqasid al Shari’ah, the axioms of participatory finance and their nexus which is formulated by theorizing the common thread of meaning through the axioms of participatory finance and Maqasid al Shari’ah at the interpretative level. This framework postulates that the participatory finance fits well in the ethos and the value system of Islam. Moreover, “social well-being” invariably provides the nexus between the Maqasid al Shari’ah and participatory finance.

Originality/value

This study contributes to the Islamic economics and finance literature by integrating the dissenting views from the divergent literature related to the basic philosophy of Shari’ah and participatory finance and provides grounds for policy implications, particularly, for designing the financial products. Moreover, it demonstrates an application of interpretative systematic review in Islamic banking and finance research.

Details

Qualitative Research in Financial Markets, vol. 13 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

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