Shariah-compliant central banking practices: lessons from Muslim countrie’s experience
Source
ISRA International Journal of Islamic Finance
Issue
Vol. 12, Issue 1 (30 Apr. 2020), pp.7-26, 20 p.
Publisher
International Shari'ah Research Academy for Islamic Finance
Publication Date
2020-04-30
Country of Publication
Malaysia
No. of Pages
20
Main Subjects
Financial and Accounting Sciences
Islamic Studies
Abstract EN
Purpose – The purpose of this study is to document how a central bank can perform its primary and secondary functions in a Sharīʿah-compliant manner.
It also seeks to investigate the outcomes of the experiments of Muslim-majority countries in this regard.
Design/methodology/approach – As a first step, a detailed review of existing literature is conducted, which discusses the views of scholars and practitioners on the central banking mechanism in a fully Sharīʿah- compliant financial system.
Moving further, the case studies of Iran, Sudan and Pakistan are presented to highlight experiences of regulators from three Muslim-majority countries, which aimed to achieve full compliance with Sharīʿah (Islamic law) principles related to Islamic finance.
To evaluate their models, an assessment of their practices is performed in the light of Sharīʿah rules and principles based on existing literature.
Finally, the issues involved in establishing a Sharīʿah-compliant central bank (SCCB) are discussed and improvements are suggested.
Findings – It is found that Iran played an effective role in pursuing broader objectives of monetary policy by setting priorities for credit allocation and assisting the government in reducing expenses; however, with respect to instruments, its experience is limited to the rebranding of conventional products.
Sudan has not only used monetary policy to effectively curb inflation but also it has introduced various indirect instruments to perform monetary operations.
Pakistan succeeded in formulating a theoretical roadmap to establish a SCCB but the desired objectives could not be achieved because of multiple factors.
Practical implications – This study has important policy implications for regulators and policymakers from Muslim countries, who can use the findings in shaping effective Sharīʿah-compliant central banking practices in their respective countries.
Originality/value – This study discusses the salient features of an important Islamic financial institution, the central bank and evaluates the experiments of three Muslim-majority countries in implementing Sharīʿah- compliant central banking practices.
To the best of the knowledge, this evaluation has not been performed in the existing literature and the present study fills in this gap.
American Psychological Association (APA)
Anwir, Zahir& Khan, Shabeer& Abu Bakr, Muhammad. 2020. Shariah-compliant central banking practices: lessons from Muslim countrie’s experience. ISRA International Journal of Islamic Finance،Vol. 12, no. 1, pp.7-26.
https://search.emarefa.net/detail/BIM-1429311
Modern Language Association (MLA)
Abu Bakr, Muhammad…[et al.]. Shariah-compliant central banking practices: lessons from Muslim countrie’s experience. ISRA International Journal of Islamic Finance Vol. 12, no. 1 (2020), pp.7-26.
https://search.emarefa.net/detail/BIM-1429311
American Medical Association (AMA)
Anwir, Zahir& Khan, Shabeer& Abu Bakr, Muhammad. Shariah-compliant central banking practices: lessons from Muslim countrie’s experience. ISRA International Journal of Islamic Finance. 2020. Vol. 12, no. 1, pp.7-26.
https://search.emarefa.net/detail/BIM-1429311
Data Type
Journal Articles
Language
English
Notes
Includes margin notes.
Record ID
BIM-1429311