Online from: 1989
Subject Area: Economics
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|Title:||Islamic law and finance|
|Author(s):||Abdul Ghafar b. Ismail, (Research Centre for Islamic Economics and Finance, School of Economics, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, Bangi, Malaysia), Achmad Tohirin, (Centre for Islamic Economics Development and Studies (CIEDS), Faculty of Economics, Universitas Islam Indonesia, Depok, Indonesia)|
|Citation:||Abdul Ghafar b. Ismail, Achmad Tohirin, (2010) "Islamic law and finance", Humanomics, Vol. 26 Iss: 3, pp.178 - 199|
|Keywords:||Company profit sharing schemes, Finance, Islam, Law|
|Article type:||Conceptual paper|
|DOI:||10.1108/08288661011074954 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Acknowledgements:||The authors are grateful for research grant provided by Ministry of Higher Education for this research, under Fundamental Research Grant Scheme No: UKM-EP-04-FRGS0001-2006.|
Purpose – The purpose of this paper is to discuss Islamic laws which are relevant to finance. More specifically, it covers the types of contracts as foundation for the distinctive Islamic financial products. The current institutional framework of financial institutions seems to be incompatible with the nature of these Islamic contracts.
Design/methodology/approach – This is a conceptual paper describing the link between finance and economic growth in the present of Islamic contracts, which have various types from contract of partnership, buy-sale contract, to contract of usufructs. The nature of Islamic contract is to avoid
Findings – The conclusion of the paper is that the distinctive character of Islamic contracts applied by Islamic banking and finance relies mostly on the profit and loss sharing mechanism which contains the cooperative spirit, in the contracts such as
Research limitations/implications – This paper opines that the current framework of financial institutions does not match with the nature of Islamic contracts.
Practical implications – This paper suggests that a new framework for financial institutions is necessary in order to accomplish the
Originality/value – The paper indicates a possible different consequence on the link between finance and growth in the presence of Islamic contracts, i.e. a more positive relation.
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