DOHA: A genuine Islamic financial system would require creation of new Islamic knowledge that can build appropriate institutions, organisations and transactions, says an Islamic finance expert.
Giving a lecture on ‘knowledge, economy, and Islamic finance: A new institutional economics perspective’ at Hamad bin Khalifa University recently, Dr Habib Ahmed, Professor of Islamic Law and Finance at Durham University and Visiting Professor at Qatar Faculty of Islamic Studies (QFIS) said the failure of Islamisation of economies can be explained by the lack of Islamic knowledge needed to produce the appropriate institutions and organisations in an economy.
The lecture was organised by the Center for Islamic Economics and Finance (CIEF) at QFIS. Dr Habib spoke about the role of knowledge in the economy, the status of knowledge in the Muslim world, the implications of this for Islamic finance, and a way forward.
The speaker adopted a New Institutional Economics (NIE) framework. NIE takes a multi-disciplinary approach to explain how economic structures evolve and change over time.
Economic structure is studied at four levels: culture, institutions, organisations and transactions. While culture embodies the body of knowledge of different societies, the nature and growth of knowledge determine the type and evolution of institutions, organisations and transactions in an economy.
After examining the status of knowledge in the Muslim world using data from Unesco and other sources, the example of the status of Islamic finance was presented to illustrate how dormant Islamic scholarship led to problems of implementing financial structures entailing Islamic ethos.
Dr Habib presented data from the academic literature to show that attitudes of Muslims towards Islamic banking are still uncertain. For example, many Muslims are still unsure how Islamic banking differs from conventional banking.
Dr Habib argued that the push for Islamising economies without the necessary knowledge base and appropriate economic structure led to adopting a “marginal adaptation approach”.
He claimed that establishing an Islamic economic structure in general, and a genuine Islamic financial system would require reorientation of culture towards creation of new Islamic knowledge that can build appropriate institutions, organisations and transactions.
The example of Malaysia was cited as a model for development policy. Fifty course providers and 18 universities exist in Malaysia that teach Islamic finance. Their contribution to creating Islamic knowledge is evident by their research activities in the Islamic economics discipline. Furthermore, the institutional environment and regulatory framework for Islamic finance in Malaysia is also well-established.
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