Islamic Banking

Is Islamization of an Economy Possible with Global Non-Islamic Structures

Research Project

By

Group

Fahad Shafiq (1135244)

Sunny Talreja (1135263)

Syed Ali Hassan (1135233)

Supervised by:

Faraz Bandukda

MBA Research Project

Spring 2012

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology (SZABIST)

90 Clifton, Karachi

Contents

1. Introduction 4

1.1. Introduction about an Islamic Economy 4

1.1.1. Islamic Banking 4

1.1.1.1. Musharkah 4

1.1.1.2. Mudarbah 4

1.1.1.3. Murabaha 5

1.1.1.4. Salam 5

1.1.2. Trade 5

1.2. Islamization of an Economy 6

1.2.1. Constitution 6

1.2.2. Zakat and Ushr 7

1.2.3. Prohibition of Interest (Riba) 7

1.3. Governing an Islamic Economy 7

1.3.1. Federal Shariah Court 8

1.3.2. Islamic Research Institute 8

1.4. Types of Global Economic Structure 9

1.4.1. Islamic Economic Jurisprudence 9

1.4.2. Non-Islamic Economic Theories 9

1.4.2.1. Non Property System 9

1.4.2.2. Social Interest Based Credit 9

1.4.3. Mixed Economy 9

1.5. Regional Stories 10

1.5.1. Malaysia 10

1.5.2. Pakistan 10

1.6. Challenges to Islamization of Economy 11

1.6.1. The Regulatory Framework 11

1.6.2. Monitoring and Supervision 12

1.6.3. Institutional framework 12

1.6.4. Products and Instruments 12

1.6.5. Legal framework 13

1.7. Background 13

1.8. The problem statement 13

1.9. Objective of the study 14

1.10. Justifications 14

1.11. Limitations 14

1.12. Scope 15

1.13. Assumptions 15

1.14. Definition of Key Terms 16

2. Literature Review 17

2.1. Key Aspects of Islamic Economic System 17

2.1.1. Economic Science 17

2.1.2. Economic System 17

2.2. Salient Feature of Islamic Economic System 18

2.2.1. Distribution of wealth not just the production 18

2.2.2. Circulation of Wealth 19

2.2.3. Interest free banking 19

2.2.4. The Gold and Silver Standard for Currency 20

2.3. Problems faced by Islamic economies 21

2.4. Regional Case 22

2.4.1. Malaysian economy 22

2.4.1.1. Introduction and Emergence 22...