Proposal for a New Economic Framework
Based On Islamic Principles
Shaikh, Salman Ahmed
Islamic Economics Project
17 April 2010
PhD in Progress, MS (Szabist), BBA (Bahria University)
Director, Islamic Economics Project
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Preface
This text is a preliminary account of my ongoing research on Islamic Economic System. I took up this project in 2004 when I started my under-graduation at Bahria University, Pakistan. The inspiration for the project came from my personal affiliation with Jamia Dar-ul-Uloom, Hyderabad, Pakistan for 6 years where I completed Hifz-e-Quran with the grace of Allah. I was always interested in Islamic studies, but when I decided to pursue higher education in Business and Finance, I felt that luckily I possess the needed aptitude and dedication to contribute in the field of Islamic economic and financial system. I do not claim to be an expert in Islamic studies nor in Finance and Economics. The recommendations presented in this book have the sole objective of presenting ideas that can cure our socio-economic ills before the general readers, religious scholars, economists and policymakers. The objective is not to infer and endorse, but to seek solutions to our chronic socio-economic ills in the framework of Islamic principles.
I was born in Karachi, but my schooling and college education was completed in Hyderabad that is 160 miles north east of Karachi. I have had a very unique educational background. I have studied in Madrasa, a private school and then in a semi-government university. In Madrasa, I learnt Quran by heart. I came to Karachi to pursue Higher Education in 2004 and graduated Cum Laude in 2008 from Bahria University specializing in Finance. I did my MS in 2010 from Szabist, Karachi. Currently, I am pursuing my PhD in Islamic Economics.
My academic interests include research in Economics and Finance and have published academic books to my credit. I wrote a book on ‘Mathematical Economics’ and ‘Economy of Pakistan’ for Commerce Publications, Karachi. I was awarded a commendation certificate on writing a manuscript for a book “Industries of Pakistan” by National Book Foundation. I have written 12 research papers to date.
The published research work includes a research paper on "A Brief Review of Practiced Islamic Finance" published in Journal of Law & Religion, Hemline, USA. A research paper on “Analysis of Stock Screening Principles in Islamic Mutual Funds Industry”was published in True Banking Magazine in March 2010.
A research paper on “Role & Functions of Central Bank in Islamic Finance” was presented at 14th National Research Conference at Szabist in December 2009.
A research article titled “An Alternate Approach to Practiced Islamic Finance” was published in Accountancy Magazine in February, 2010. A research article titled “A Critical Analysis of Islamic Banking” was published in Accountancy Magazine in July, 2007.
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research project on Islamic Economics and am seeking collaboration with research bodies in this area to promote and further the research work in this field.
My principal issues of interest are ‘poverty’ and ‘inequality’. Both these problems are pertinent to developing countries like Pakistan. In Pakistan, 25% of the people live below the line of poverty according to the government statistics. There is huge income inequality with 20% of the rich, affluent and resourceful class occupying 80% of the country’s wealth.
Income inequality leads to social stratification. Class divide expands into social relations like marriages and professional relations in the form of nepotism. National cohesion and collective work towards national goals is overlooked. Classes exist to consolidate their own existence and vested interests. Only short-term policies are pursued and that too on the direction of International agencies like IMF and World Bank. Policies even though proven effective in one system need modification sometimes to be effective in another system with a different set of characteristics.
Short-term orientation leads to economic growth in patches but without any long-term orientation towards capacity building and infrastructural development, the growth is unsustainable. Therefore, poverty and inequality persist in the society. Poverty and inequality lead to illiteracy, inadequate health conditions and poor standards of living in general. Education, health, sanitation and adequate standards of living can all be provided if the country has enough income and if that income is distributed fairly equally. Conversely, if there is low per capita income and if it is distributed unequally, the basic amenities of life cannot be provided to the masses.
Fundamental problems of developing countries and since developing countries make up most of the world’s population; the fundamental problems of world can generally be categorized under ‘poverty’ and ‘inequality’ in the 21st century. However, it is overshadowed by its consequences in the form of terrorism, poor health and sanitation facilities and illiteracy.
Income inequality stems from wealth inequality. Direct taxation should not only focus upon income but also on wealth using the institution of Zakat. Documentation of the economy is necessary to make facts based effective policies. Unbridled fiscal expansion through desperate deficit financing only increases leverage in the economy and even put its existence at risk. It only delays the inevitable and the central issues remain unresolved. Documentation is necessary to increase the tax base and the size of the formal sector.
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I would like to take this opportunity to thank my parents and grandmother for their support right throughout my life. I would also like to thank my teachers especially Qari Khalil Ur Rehman (Senior Faculty, Jamia Dar-ul-Uloom, Hyderabad) and Qari Sher Ali Khan (Senior Faculty, Jamia Dar-ul-Uloom, Hyderabad), Mr. Mansoor (Senior Faculty, City Foundation High School, Hyderabad), Mr. Shakeel (Senior Faculty, Saifee College, Hyderabad), Mr. Akbar Saeed (Associate Professor, Bahria University), Mr. Naveed M. Khan (Head of Department, Management Sciences, Bahria University), Ehsan Shaikh (Senior Faculty, Bahria University), Mr. Khalid Khawar (Professor, Bahria University), Mr. Salman A. Khan (Associate Professor, Bahria University), Mr. Wajid Hanfi (Senior Faculty, Bahria University), Mr. Ahsan Hussain (Professor, Szabist, Karachi), Dr. Amanat Ali Jalbani (Dean, Szabist, Karachi), Mr. Shan Saeed (Head of External Affairs, Szabist, Karachi) and Mr. Faysal Abdullah (CEO, BMC Pakistan & Senior Faculty, Szabist, Karachi).
I would also like to thank Dr. Khalid Zaheer (Dean, University of Central Punjab), Dr. Muhammad Nadeem Hanif (Additional Director, Research Department, State Bank of Pakistan) and Dr. Muhammad Nejat Ullah Siddiqui - who is one of the pioneer researchers in Islamic Economics - for their valuable comments and suggestions as well as answering some of my queries diligently.
The readers’ comments, guidance and criticism will enrich my knowledge and give me the chance to further sharpen my knowledge base and convert these ideas into practicable models for the development of our people.
Salman Ahmed Shaikh
