nep-isf New Economics Papers
on Islamic Finance
Issue of 2019‒03‒25
four papers chosen by

  1. The Welfare Cost of Ináation with Banking Time By Max Gillman
  2. Is any benefit prohibited in Islam? By Abozaid, Abdulazeem
  3. Comités de savants islamiques By mehagni, soheir
  4. Analysis of Business Development on Organic Products at Muslim SMEs (MSMEs) in Malang, Indonesia By Sri Muljaningsih

  1. By: Max Gillman (Department of Economics, University of Missouri-St. Louis)
    Abstract: The paper presents the welfare cost of inflation in a banking time economy that models exchange credit through a bank production approach. The estimate of welfare cost uses fundamental parameters of utility and production technologies. It is compared to a cash-only economy, and a Lucas (2000) shopping economy without leisure, as special cases. The paper estimates the welfare cost of a 10% inflation rate instead of zero, for comparison to other estimates, as well as the cost of a 2% inflation rate instead of a zero inflation rate. The zero rate is specified as the US inflation rate target in the 1978 Employment Act amendments. The paper provides a conservative welfare cost estimate of 2% inflation instead of zero at $33 billion a year. Estimates of the percent of government expenditure that can be financed through a 2% vs. zero inflation rate are also provided.
    Keywords: Euler equation, interest rates, inflation, banking, money demand, velocity, price-theoretic, marginal cost, productivity shocks, great recession.
    JEL: E13 E31 E43 E52
    Date: 2018–07
  2. By: Abozaid, Abdulazeem
    Abstract: It is a well-established rule in the Shariah (Islamic law) that a loan contract is of a charitable nature and as such the lender may not stipulate any excess or benefit from the borrower. However, it is also known in the Shariah that if the benefit from a loan comes to the lender voluntarily and it is not stipulated in the loan contract then it is permissible. This exception derives from some reports that the Prophet used to repay his debt with some increment, and to this effect he said: "The best amongst you are those who benevolently repay their debts”. Moreover, within Islamic law there exist some juristic opinions allowing the lenders to derive some indirect benefits from the loan contract, such as stipulating that the repayment of the debt is to be made in a place different from the one where the loan was first initiated, as this may save transfer costs and effort, or in utilizing, with conditions, the assets mortgaged against the loan. These exceptions may in principle nullify the general understanding that “any loan which results in a benefit is considered a form of usury” in Islam. The paper comes to define the prohibited benefits on a loan in Islam, thereby building the basis for addressing important questions, such as: i) are reciprocal loans prohibited in Islam? ii) is repaying the loan with excess to cater for inflation lawful? iii) is the benefit that pertains to the lender and does not harm or burden the borrower lawful? Answering these questions shall help set out the parameters for what constitutes unlawful benefits obtainable from a loan contract.
    Keywords: Loan, Interest, Islam, Benefit, Reciprocal Loans.
    JEL: A1 A19 G0 K1 Z1
    Date: 2018
  3. By: mehagni, soheir
    Abstract: This article aims to examine the composition of Islamic boards in the context of the finance Islamic industry. More precisely, it discusses their characteristics such as their networks and their educational backgrounds.
    Keywords: Islamic Boards; Islamic finance.
    JEL: G0 M1 P4
    Date: 2019–03–19
  4. By: Sri Muljaningsih (Faculty of Economics and Business, Brawijaya University, Indonesia Author-2-Name: Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This study aims to determine the constraints on business development of organic products run by Muslim SMEs (MSMEs) in Malang city. Businesses concerned with organic generally adopt the principles of health, ecology, justice and protection. Organic products are very popular in today's global market. This is because organic products provide great opportunity for development. However, the requirements of organic products can be quite stringent, as is the experience of developers of organic products in Muslim SMEs (MSMEs) in Malang, Indonesia. Methodology/Technique - This research analyses the root problem using a fishbone method. To determine the main problem, an AHP (Analytical Hierarchy Process) method is used. The data is obtained using FGD (Focus Group Discussion) attended by informants with an understanding of organic products produced by: Lily Group, Organic Vigur, Representatives of AOI (Organic Alliance of Indonesia) and Representatives of Pamor (Association of Organic Society) in East Java. Finding and Novelty - The research results identifies the problems faced by Muslim SMEs including: raw material, market condition, organic certification, and financial and social capital. Furthermore, the main policy issue faced by these businesses is organic certification. The implications of these policies impact market accessibility and expansion of market reach. The novelty of this research is the identification of the effect of business development policies on Muslim SMEs producing organic products.
    Keywords: Organic Products; Muslim SMEs; Organic Certification; Business Development.
    JEL: L20 L23 L29
    Date: 2019–02–22

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