Islamic Economics

Link to syllabus

R&W Chapters 12, 14

Choudhury “Introducing Islamic Political Economy”Siddiqi “The Growing Popularity of Islamic Banking,”

Ibn Khaldun

Tunis 1332- Cairo 1406Muslim historian and sociologist.Born into an elite family in what is now Tunisia, he was a judge, teacher, and diplomat.In his muqaddama, he wrotethat societies go on threegeneration cycles. Is judged one of the first to have placed economic factors as major causes. Taught at Al-Azhar in Cairo. Left no school ofFollowers.

Analytics of an Islamic Macroeconomic System

Source: Choudhury, Principles of Islamic Political Economy

Link to Choudhury’s web page

Average Cost Pricing in Islamic Economics

Source: Choudhury, Principles of Islamic Political Economy

Timur Kuran: “Why the Middle East is Economically Underdeveloped,” 2004 article in JEP

Kuran, born in Turkey, was for many years a professor at USC, and now isat Duke. His important recent book is The Long Divergence: How IslamicLaw Held Back the Middle East, (Princeton, 2011).

Institutiaonl Delavy

Source: Kuran (2011) The Long Divergence

Institutional Limits

Source: Kuran (2011) The Long Divergence

Summary of article in EJ on IE and riba

Links to newspaper articles on Islamic mortgages in Detroit area

FREEP 1

FREEP 2

FREEP3

Ad for living without interest (riba).

Muslim Observer, June, 2010

Examples of Islamic Financial Agreements

Source: Siddiqi (1999) “The Growing Popularity of Islamic Banking,” Middle East

Global body writes standards for Islamic derivativesSINGAPORE – Bloomberg KATRINA NICHOLAS Tuesday, October 27, 2009Global standards for Islamic derivatives contracts may be published as soon as December, helping companies and investors manage risk more effectively, according to the International Swaps and Derivatives Association.

The New York-based ISDA, which represents more than 830 organizations active in the $592 trillion derivatives market, started working on its Shariah-compliant master agreement with the Bahrain-based International Islamic Financial Market in 2006. The first version of their framework will focus on swaps for profit-rate and currency transactions, Shirvani said.Islamic finance is the fastest-growing segment of the global financial system with $919 billion of assets under management, including $114 billion of Shariah-compliant bonds, known as sukuk, Prudential Financial said on Oct. 7. Assets will grow to as much as $1.1 trillion this year, Kuwait Finance House KSC forecast in July, as the world emerges from recession and a recovery in oil prices boosts Arab wealth.Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.

Estimated size of the Sukuk

market

Source: Int’l IslamicFinancial Market:Sukuk report

Leading examples in the domestic

GCC market

Source: Int’l IslamicFinancial Market:Sukuk report

Sukuk examples from Malaysia

Source: Int’l IslamicFinancial Market:Sukuk report

Islamic Banking Grows, With All Sorts of RulesHugh Pope. Wall Street Journal.  May 3, 2005.

In the past decade, Islamic banking has matured from a tiny, sometimes controversial backwater into an important current of global finance, especially as Western bankers and borrowers compete for the new funds gushing into the Persian Gulf because of higher oil revenue. A Citigroup Inc. unit now operates what is effectively the world's largest Islamic bank in terms of transactions. Some $6 billion of Citibank deals now have been structured and marketed in conformance with Islamic laws since starting out in 1996. HSBC Holdings PLC, Deutsche Bank AG, ABN Amro Holding NV, Societe Generale SA, BNP Paribas and Standard Chartered also have established Islamic banking units in the past few years.

WORLD ISLAMIC BANKING COMPETITIVENESS REPORT 2005' RELEASED

In 2004 Islamic Banks continued to grow much faster than their respective conventional counterparts. However, despite some improvements, the profitability of Islamic banks generally remained below that of their conventional peers. This gap will increasingly be high on the agenda of Islamic Bank CEOs: the current high valuation of Islamic banks indicates strong market expectations for future growth and profits.If Islamic banks are to capture this opportunity, appealing to a broader consumer base will be key. So far Islamic banks have managed to capture customers who have a strong preference for Shari'ah- compliant products. Going forward, they will have to broaden their appeal to customers who are interested in Shari'ah-compliant products but are not ready to sacrifice returns, service or convenience.

Al Bawaba. London: Dec 11, 2005

Islamic Banks’ share of commercial bank deposits, late 1990s

Algeria 1Bahrain 9Egypt 6Iran 100Jordan 7Kuwait 16Lebanon 0.1Qatar 18Saudi A. 14Sudan 28Tunisia 1Turkey 4UAE 8Yemen 4Malaysia 2

These numbers do not include the ‘Islamic window’ in other (conventional) banks.

No Islamic banks in Iraq (under S. Hussein), Libya, Morocco, Oman, and Syria, apparently because the government owned all banks.

No mention of Pakistan, Bangladesh, India, Indonesia, Philippines 

Source: Henry and Wilson (2004) The Politics of Islamic Finance (p. 7) UMD HG 187.4 P6 2004

Islamic Share of Commercial Banks, by GDP/cap

Source: Introduction to Henry and Wilson, eds. (2004) The Politics of Islamic Finance

Conclusion on efficiency of Islamic Banks

Source: Iqbal and Molyneux, Thirty Years of Islamic Banking, p.104.

Efficiency of Islamic Banks Malaysia

Source: Saiful Azhar Rosly and Mohd Afandi Abu Bakar, “Performance of Islamic and Mainstream Banks in Malaysia,” Int’l Journal of Social Economics 2003 #11/12

Efficiency of Islamic Banking Malaysia

Source: Saiful Azhar Rosly and Mohd Afandi Abu Bakar, “Performance of Islamic and Mainstream Banks in Malaysia,” Int’l Journal of Social Economics 2003 #11/12

Faisal Bank, Cairo

Faisal Bank, Cairo

Link to Islamic Development Bank

http://www.isdb.org/irj/portal/anonymous

The Islamic Development Bank (IDB) is a Multilateral Development Bank (MDB), headquartered in Jeddah, Saudi Arabia, established in the early 1970s to foster the economic development and social progress of its 56 member countries and Muslim communities in non-member countries in accordance with the principles of Shari'ah (Islamic Law). In 2010, its authorized capital amounted to 15 billion Islamic Dinars (one ID = one SDR), and it has been involved in project financing of about US$ 1 billion/year. Its menu of activities combine those of the World Bank and the IMF.

Muhammad Yunus

Born in a village in Bangladesh in 1940Studied in Dacca, and in the USTaught in Tennessee, and at ChittagongIn the 1970s he became involved in ruraldevelopment, which led to the Grameen Bank, based on microcredit, lending especially to women.

Awarded the Nobel Peace Prize in 2006In 2011, the government of Bangladesh banned him from the Bank’s directorship – he claims it was politics.

Link to Grameen Bank http://www.grameen-info.org

Web resources

Zakat fund online. Islamic-American Zakat Foundation onlineUSC-MSA compendium of Muslim Texts on Islamic Banking onlineInternational Islamic Financial Market online

Journals accessible through UM-D’s library:

International Journal of Islamic and Middle Eastern Finance and DevelopmentIslamic Banking and FinanceIslamic Business and Finance

Ibn Khaldun in his study

Evolution of Islamic Banks

Source: Introduction to Henry and Wilson, eds. (2004) The Politics of Islamic Finance