Topic 3: History of Islamic Economic Thought

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MFK ISB544 Topic 3
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i.
ii.
iii.
iv.
Quranic and Sunnatic perspectives on economics.
Contribution of eminent jurists, philosophers,
Sufis etc.
Contemporary Islamic Economic Thought.
Historical Development and Islamic economic
reform in Malaysia.
MFK ISB544 Topic 3
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MFK ISB544 Topic 3
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
At the end of the lessons, students should be
able:
To highlight the contribution of eminent jurist
towards Islamic economics.
MFK ISB544 Topic 3
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Foundations
(450H/1058 CE)
•Discussion focus on ‘what
is’
( i.e. description of the
economic phenomena)
•Working on just behavior
and sound policy and
defining the limits of
permissibility in the conduct
of worldly affairs
Second Phase
(450-850H/1058-1446 CE)
•Started with a rich
intellectual heritage
•Faced with political reality
characterised by the
disintegration of the central
Abbasid
•Corruption at high places
and moral decline at the
community level
Third Phase
(850-1350H/1446-1932 CE)
•The decline in independent
thinking has already yielded
to stagnation
•But there is a fresh stirring
during the last two hundred
years in which a number of
thinkers and reformers
called for a return to the
Quran and Sunnah for
inspiration and guidance
•An age of prosperity
•The realm of Islam
extended from Morocco and
Spain in the west to India in
the east, each region having
numerous centres of
intellectual activity
MFK ISB544 Topic 3
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Contribution of eminent jurists, philosophers, Sufis etc
Foundations
(450H/1058CE)
Second Phases
Third Phase
(450H -850H/1058-1446 CE)
(850-1350H/1446-1932 CE)
Abu Yusuf
Al-Ghazalli
Shah Waliullah
Muhamad Bin al-Hassan
Ibn Taymiyyah
Mohd Iqbal
Abu Ubaid
Ibn Khaldun
Harith bin Asad al
Muhasibi
Junaid Baghdadi
Mawardi
Ibn Miskawaih
MFK ISB544 Topic 3
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MFK ISB544 Topic 3
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
At the end of the lessons, students should be
able:
To describe the contemporary Islamic
economic thought.
MFK ISB544 Topic 3
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


Need to be emphasis that Islamic economic has its own
identity.
IE is not something new, it has emerge since the reveal
of wahyu to Prophet Muhammad (PBUH).
Hence, the principle of IE has been in existence earlier
than the western economic paradigm.
MFK ISB544 Topic 3
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

Islam, as a deen, outlines principles and doctrines to
guide relationship among human being and the Allah
Almighty.
Unlike Judaism and Christianity which regard as a
specific religion, Islam through Shari’ah has provide
human being a comprehensive guideline in dealing with
material and spiritual matters.
MFK ISB544 Topic 3
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


Islamic resurgence which began in 1930s motivate
Muslim economists worldwide to re-develop
economics disciplines that in line with Islamic teaching.
The momentum of Islamic resurgence is at its height in
70s,80s and continue until today.
Islamic resurgence also contributed to the end of the
colonial era in 1960s.
As the original native of the land has full control on the
management of economy, greater attention on was
given to the Islamic injunctions relevant to economics.
MFK ISB544 Topic 3
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

As such, review on the modern institutions such as
banking, insurance, joint stock companies, stock
exchange and taxation has been conducted.
Those institutions that could not be legitimize on
Shari’ah grounds, necessitated a search for alternatives
which lead to a number of works to attend to the
broader issues involved.
As a result, subject such as the nature of economic
enterprise, ownership, organization of production and
economic development were discussed in some detail.
MFK ISB544 Topic 3
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


In addition, greater details attention was dedicated on
public finance, social security, industrial relations and
banking without interest.
Subsequently, the resurgence of Islam lead to the First
International Conference on Islamic Economics held at
Makkah Mukarramah in February 1976 – which
regarded as a starting point for the establishment of
Islamic economic thought.
Simultaneously it provided a great “political will” in
establishing Islamic financial institutions i.e. Islamic
Development Bank in Jeddah and the Dubai Islamic
Bank.
MFK ISB544 Topic 3
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


Currently, we have more than ____ Islamic financial
institutions as well as three countries, Pakistan, Sudan
and Iran, have switched to interest-free banking at the
national level.
The emergence and continuation of the Islamic
financial movement has produced a lot of economic
and juridicial research relating to its operational
details.
More important, however, are the recent attempts to
capture a vision of the Islamic economic system as a
whole within the framework of conventional macro –
economic analysis.
MFK ISB544 Topic 3
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
Nonetheless, literature on IE thought, according
to Anas Zarqa, can be classified into three
areas:i. General comparison of Islamic economic with
other world economic system i.e. Capitalism
and Socialism.
ii. Critiques on other world economic system.
iii. Discussion on specific economic issues such
as riba, zakat, Islamic financial system and
etc.
MFK ISB544 Topic 3
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

In the early days of Islamic economics
resurgence, most of the literature focus on issues
of riba, roles of zakat institutions and Islamic
financial system.
In fact, until recently these areas remain as a
focal point in discussing Islamic economic –
perhaps it lies on the fact that Islamic banking
and finance is a stepping stone to re-emulate
Islamic economics system.
MFK ISB544 Topic 3
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

As a result, not much emphasis was given to other
aspects of economics especially in the area that
required comprehensive critical analysis on
conventional economics concepts.
However, M.A Mannan (1970) and Monzer Kahf (1978)
were among the Muslim economists that has
significantly wrote on Islamic perspective on
conventional economics concepts.
MFK ISB544 Topic 3
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

In fact in Islamic economics thought, they were regards
as a pioneer in the area of microeconomics.
Apart from that, a number of works on the
microeconomics has been edited by:i. Khurshid Ahmad(1980),
ii. Rafiqul Islam Molla (1988),
iii. Ausaf Ahmad and Kazim Raza Awan (1992) and
iv. Sayyid Tahir (1992)
MFK ISB544 Topic 3
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

As a result, not much emphasis was given to other
aspects of economics especially in the area that
required
comprehensive
critical
analysis
on
conventional economics concepts.
However, M.A Mannan (1970) and Monzer Kahf (1978)
were among the Muslim economists that has
significantly wrote on Islamic perspective on
conventional economics concepts.
MFK ISB544 Topic 3
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MFK ISB544 Topic 3
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
At the end of the lessons, students should be
able:
To explain historical development and Islamic
economic reforms that has been taken place in
Malaysia.
MFK ISB544 Topic 3
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
In Malaysia, efforts to re-emulate Islamic economics
has been pioneered by university’s lecturer in the
related field through:-
i. Seminars.
ii. Colloquium.
iii. conferences and etc.
MFK ISB544 Topic 3
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
Among the courses organised are as follows:-
Date
Course
Organised by
July-December, 1986
Short Course on Islamic
Economics
Kulliyah of Economics
and Management
Sciences of IIUM
14-18 July 1987
Course on Islamic
Economics
The then School of
Business Management of
ITM
16-18 November 1989
Course on Islamic
Economics: Philosophy
and Application
School of Economy and
Public Administration of
UUM
MFK ISB544 Topic 3
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

Subsequently, Islamic Economics course has been
taught to undergraduates as well as post-graduate
students in Malaysia’s public universities.
Apart from that, some of Islamic economics aspects has
been incorporated in syllabus of economics that taught
to form 4 and form 5 students in secondary school.
MFK ISB544 Topic 3
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

Islamic economic reforms in Malaysia began in 1981
when Tun Dr. Mahathir Mohamad came to power.
Among the initiative taken by him were:-
Initiative
Description
Setting up of Islamic
Consultative Body (ICB)
•To ensure that no development plans and policies
ran against ‘Islamic values’
•Made up of Islamic experts in administration, law,
economic, medicine, engineering, agriculture,
sociology, Islamic philosophy and politics
•It looks as if the Mahathir Administration was
attempting to sift development policies using some
kind of Islamic filter and to “Islamize’ policies or
aspects of policies not in line with Islam
Inculcation of Islamic
values (IIV) Policy
To instill ‘universal Islamic values’ to enable the
country to have an effective, strong, just, and
progressive administration that would help create ‘a
dynamic work ethic which would increase
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productivity’
Initiative
Year
Description
Establishment
of Islamic
institutions
1983
•Bank Islam Malaysia Berhad (BIMB)
•Established International Islamic University Malaysia
and started taking in students to read for degrees in
economic and law
1984
•YAPEIM
1985
Syarikat Takaful Malaysia Berhad
80’s
•Restructuring of the institution of bayt al-mal and
collection of zakat
•Islamic finance companies being set up
90’s
•International Offshore Financial Centre was planned
for Labuan- had an aim of creating an ‘Islamic niche’
and becoming a financial centre for the region
•Commercial banks set ‘Islamic window”
2000
•Commercial banks set up Islamic subsidiary
•Issued license to foreign Islamic bank
•Introduction of ‘Islam Hadhari’
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
Other than that, many legal reform were also
presented and passed in parliament to enable the
Islamic institutions to exist and conduct their business
according to Islamic requirements such as:-
i. Islamic Banking Act 1983
ii. Takaful Act 1984
MFK ISB544 Topic 3
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i.
Islamic economic thought: Foundations,
evaluation and needed direction,
Muhammad Nejatullah Siddiqi.
MFK ISB544 Topic 3
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i.
ii.
iii.
iv.
Quranic and Sunnatic perspectives on economics.
Contribution of eminent jurists, philosophers,
Sufis etc.
Contemporary Islamic Economic Thought.
Historical Development and Islamic economic
reforms in Malaysia.
MFK ISB544 Topic 3
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
Read methodology and significance of
Islamic economics.
MFK ISB544 Topic 3
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THANK
YOU…
MFK ISB544 Topic 3
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