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Article
Publication date: 1 April 2006

Ahamed Kameel, Mydin Meera and Moussa Larbani

Having argued in the part I paper that the interest‐based fiat monetary system is not compatible with the objectives of the Islamic law or the Shariah, this paper seeks to argue…

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Abstract

Purpose

Having argued in the part I paper that the interest‐based fiat monetary system is not compatible with the objectives of the Islamic law or the Shariah, this paper seeks to argue why commodity moneys, like the gold dinar and silver dirham, are compatible with the maqasid.

Design/methodology/approach

This is a theoretical paper that integrates information from the Qur’an, the traditions of the Prophet, the writings of early Islamic scholars and historical observations vis‐à‐vis the objectives or the maqasid al‐Shariah and makes logical deductions therefrom.

Findings

The theoretical conclusion is that while fiat money is counterproductive to the maqasid al‐Shariah, commodity moneys like the gold dinar and silver dirham, are indeed compatible with the maqasid. The Islamic economic system is, therefore, fundamentally a “barter” system, i.e. an exchange economy where goods and services are exchanged value for value, but avoids the problems associated with barter by taking some of the commodities exchanged in the economy, that have the characteristics of money, as money. Gold is argued to be the best Shari’ah money.

Research limitations/implications

Empirical investigations may shed further light.

Practical implications

If the theoretical deductions and contentions of the paper are correct, then their practical implications cannot simply be understated. For the Islamic economic system to emerge in reality, or for that matter any process of Islamization of knowledge/disciplines to succeed, it is foremost crucial that commodity moneys gradually replace fiat money.

Originality/value

The paper establishes that commodity moneys like gold and silver are Shariah‐compatible moneys, whereas the current fiat money is not.

Details

Humanomics, vol. 22 no. 2
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 22 May 2009

Ahamed Kameel Mydin Meera and Moussa Larbani

The purpose of this paper is to show that fractional reserve banking (FRB) has implications for the ownership structure of assets in the economy that violates the Islamic…

3698

Abstract

Purpose

The purpose of this paper is to show that fractional reserve banking (FRB) has implications for the ownership structure of assets in the economy that violates the Islamic principles of ownership.

Design/methodology/approach

This is a theoretical paper that looks into the works of Islamic scholars on the issue of ownership that are based on Qur'an principles and the traditions of the Prophet, and evaluates the FRB from that perspective.

Findings

The conclusion of the paper is that money creation through FRB is creation of purchasing power out of nothing which brings about unjust ownership transfers of assets, from the economy to the bank effectively paid for by the whole economy through inflation. This transfer of ownership is not based on human effort by taking on legitimate risks and neither with the knowledge nor the consent of the initial owners. This violates the ownership principles in Islam and is tantamount to theft. It also has the elements of riba. Islamic governments should therefore not create fiat money since this is equivalent to taking assets of the people, rich and poor alike, forcefully without compensation.

Research limitations/implications

Empirical investigations into how bank loans along the years have changed the asset ownership structure in economies may shed further light.

Practical implications

It is, therefore, important that Shariah scholars render a fatwa on both the fiat money and the FRB system. Such a fatwa is urgent and pertinent before Islamic banking and finance, that operate under these systems, takes a course that may prove difficult to reverse later. The Islamic economics and finance cannot be founded upon a money system that is fundamentally equivalent to theft and riba.

Originality/value

The paper shows how the operations of Islamic banking and finance within the fiat money, FRB system are invalid from the Islamic perspective.

Details

Humanomics, vol. 25 no. 2
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 1 January 2006

Ahamed Kameel Mydin Meera and Moussa Larbani

To reason whether the interest‐based fiat monetary system is compatible with the objectives of the Islamic law or the Shariah.

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Abstract

Purpose

To reason whether the interest‐based fiat monetary system is compatible with the objectives of the Islamic law or the Shariah.

Design/methodology/approach

This is a theoretical paper that uses the quantity theory of money and the objectives or maqasid al‐Shariah as expounded by scholars as basis for logical deductions therefrom.

Findings

The socio‐economic implications of fiat monetary system imply that the maqasid al‐Shariah cannot be attained. Indeed, the system is likely to cause a move away from the maqasid.

Research limitations/implications

The paper is based primarily on theoretical deductions. Further empirical investigation would shed further light.

Practical implications

Practical implications are numerous. The definition of what is money is then crucial to address the socio‐economic implications caused by the fiat monetary system. For Islamic economics, this would imply that the process of Islamization of knowledge/disciplines is futile without addressing this issue first. Accordingly, the establishment of Islamic economics, banking and finance warrants a serious look into the current definition of money and monetary systems.

Originality/value

It calls for a definition of Shariah‐compatible money. This is beneficial to the researchers, proponents and practitioners of Islamic economics, banking and finance.

Details

Humanomics, vol. 22 no. 1
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 9 February 2015

Nafiu Olaniyi Oladokun, Moussa Larbani and Mustafa Omar Mohammed

– The purpose of this paper is to develop a Muzara’ah–supply chain model for the purpose of enhancing agricultural financing and productivity in Nigeria.

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Abstract

Purpose

The purpose of this paper is to develop a Muzara’ah–supply chain model for the purpose of enhancing agricultural financing and productivity in Nigeria.

Design/methodology/approach

In this paper, an expert survey approach was employed to validate the newly developed model.

Findings

A survey result on the model reveals that majority of the respondents agreed with the Muzara’ah–supply chain model and preferred it to the existing models.

Research limitations/implications

The main limitation of this study is limited number of respondents.

Practical implications

With this newly developed financing model that is based risk sharing principles, the application of this model could help to reduce moral hazard and enhance agricultural productivity.

Originality/value

To the best knowledge of the researchers, such kind of study for financing agriculture does not exists in the case of Nigeria.

Details

Humanomics, vol. 31 no. 1
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 14 August 2017

Syammon Jaffar, Adam Abdullah and Ahamed Kameel Mydin Meera

This paper aims to discuss the opinions of current Shariah scholars on the concept of debt money in the present-day fiat money system.

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Abstract

Purpose

This paper aims to discuss the opinions of current Shariah scholars on the concept of debt money in the present-day fiat money system.

Design/methodology/approach

Research design of this paper is a quantitative investigation of Shariah experts by distributing a questionnaire to them. As majority of Shariah scholars are also Shariah advisory of the current banking system, it is important to find out their level of knowledge on the issue of debt money created by the commercial banking system through the fractional-reserve banking (FRB) system.

Findings

Based on this investigation, most Shariah scholars are unaware of and confused about the mechanics underpinning the creation of money, especially with respect to FRB as it is practiced by the conventional and Islamic banking systems.

Originality/value

Based on this research, it is recommended that these scholars should improve their understanding of the operation of the fiat money system and its consequences. It is recommended that, in future, Shariah scholars should think “outside of the box” by creating Islamic financial instruments that do not resemble those of the conventional system.

Details

Humanomics, vol. 33 no. 3
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 23 February 2010

Hifzur Rab and Syeda Anjum

The purpose of this paper is to study the process of price determination by the market in the existing variable fiat money regime and its consequences.

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Abstract

Purpose

The purpose of this paper is to study the process of price determination by the market in the existing variable fiat money regime and its consequences.

Design/methodology/approach

Scientific knowledge pertaining to units and measurement has been applied to study the issue of wealth measurement and to arrive at the consequences of monetary manipulation. As regards Shariah perspective it may be described as guided application of science to the issue of currency and wealth measurement to analyze and solve economic problems.

Findings

Manipulation of currency that is manipulation of quantity of what determines purchasing power of money does not allow market to determine just prices implying lack of justice in exchange. Profitability of economic activities no longer relates to their utility for the economy implying gross inefficiency in profit driven investment. Market fails to maintain economic balances. These amount to extreme losses. It has led to massive economic uncertainty, instability, disparity, corruption and conflicts. Economic growth, justice and peace become unattainable. It is a serious crime as currency being unit of wealth is the most important unit and it is strictly prohibited in Shariah. Unless corrected for monetary manipulation financial modes recommended by Shariah seem to be unjust and impractical.

Research limitations/implications

Application of scientific approach and scientific knowledge to economic issues especially the issue of wealth measurement needs higher emphasis, efforts and resources.

Practical implications

Governments ought to be persuaded not to manipulate money. Right solution is to link currency with a standard basket of national products with sufficient weight for gold and silver having most stable purchasing power. Unless accounting is corrected for monetary manipulation preferred Islamic modes of finance seem to be unjust and impractical. Where currency is manipulated Shariah/justice requires accounting for dues, capital, profit and loss to be corrected for this manipulation and in present scenario relative change in Consumer Price Index and Whole Sale Price Index may be used as a measure of currency manipulation.

Originality/value

Monetary manipulation has been clearly defined and extreme severity of the problems it creates has been established. It is most important for researchers, academics, government functionaries, social workers and all those who are concerned with economic growth, justice and welfare.

Details

Humanomics, vol. 26 no. 1
Type: Research Article
ISSN: 0828-8666

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