Shariah Compliant Model of Currency Management: Expanding Landscape from Micro to Macro Level Research
DOI:
https://doi.org/10.13135/2421-2172/3141Keywords:
Shariah Complaint Currency ManagementAbstract
The current interest based economic system is predominantly governed by capitalistic approach. Repetitive crisis in prevalent financial system indicated its structural flaws demanding a more viable financial system. Serendipiciously Islamic Finance (IF) appeared as a viable alternate to capitalistic system. Though IF is one of the fastest growing sectors, however, currently it is focused on microeconomic contracts between IFIs and their clients. To capitalise on the inherent strengths of IF it is needed to encompass the overall economic system in compliance with Shariah principles. Taking this into account, this qualitative and conceptual study – methodologically and substantively analyses the prevalent currency management in general and with particular reference to Pakistan for contriving its Shariah compliant mechanism. In light of Quran, Sunnah, opinions of Shariah experts it applies induction and deduction while analyzing how the prevalent currency management as per M0 is deviant from Shariah principles. Expecting good accrual of IF, it figures out the possible Shariah compliant version of M0. Subsequently our study compares the Shariah compliant version of M0 with the actual Islamic currency management model that was adopted by caliphs in ancient times. It thus contributes how to expand the horizon of Islamic finance from micro to essential macroeconomic function of currency management in an Islamic state.
References
I. S. Agic, “Treasury bills,” In eshaykh, Retrieved October 10, 2015, from http://eshaykh.com/halal_haram/treasury-bills/ as per December 10, 2010.
R. Y. Al-Masri, “Is it permissible to sell by instalments when the price of the product is increased?,” In Fataawa Islamiyyah, 2/331 , 2nd ed., Vol. 331, 2014. Retrieved October 26, 2015, from http://islamqa.info/en/13973.
M. S., Al-Munajjid, Fataawa al-Lajnah al-Daa’imah li’l-Buhooth wa’l-Iftaa, al-Da’wah magazine, issue # 1756, p. 43, 2009, “In Islam Questions and Answers”. Retrieved October 26, 2015, from http://islamqa.info/en/10958.
Al-Quran 2:275-276, 278-279, Chapter 2 Sura-e-Baqara, Verses 275, 276, 278 and 279.
Al-Quran 2:280 and 282, Chapter 2 Sura-e-Baqara, Verses 280 and 282.
Al-Quran 4:161, Chapter 4 Sura-e-Nisa, Verse 161.
Al-Quran 3:130, Chapter 3 Sura-e-Al-e-Imran, Verse 130.
Al-Quran 30:39, Chapter 30 Sura-e-Ar-Rum, Verse 39.
Al-Quran 8:41 and 8:69, Chapter 8 Sura-e-Al-Anfal, Verses 41 and 69.
Al-Quran 9:60, Chapter 9 Sura-e-At-Tawbah, Verse 60.
Al-Quran 4:101, Chapter 4 Sura-e-Nisa, Verse 101.
Al-Quran 62:10, Chapter 62 Sura-e-Al-Jumu’ah Verse 10.
Al-Quran 73:20, Chapter 73 Sura-e-Al-Muzzammil Verse 20.
Al-Quran 28:26-27, Chapter 28 Sura-e-Al-Qasas, Verses 26 and 27.
Al-Quran 2:237, Chapter 2 Sura-e-Baqara, Verse 237.
Al-Quran 18:19 and 18:26, Chapter 18 Sura-e-Kahf, Verses 19 and 26.
A. Al-Tabri, Tareekh e Tabri. Karachi: Nafees Academy, 2004.
M. M. Ashraf, Saving Certificates. “In Sharai Masail,” 2015. Retrieved from http://ya-mujeeb.com/index.php/sharai-masaeel/money-matters/is-it-allowed-to-take-any-profit-on-saving-certificates, on October 16, 2015.
M. Asmatullah, “Money and its usage: An analysis in the light of Shariah,” In E. Sarfaraz (Ed.), 12, August 2012.
I. Azam, and I. Muhammad, I., “Is it religiously permissible to draw interest in Dar-ul-Harb? In Questions on Islam,” 2009, Retrieved from http://www.questionsonislam.com/node/12012 on December 7, 2009.
L. Ball, “Treasury Bonds. In on Islam,” Retrieved on October 10, 2015, from http://www.onislam.net/english/ask-about-islam/islam-and-the-world/politics-and-economics/168883-treasury-bonds.html?Economics.
Burhan, “Defence Saving Schemes Interest,” In Islam Helpline. Retrieved from http://www.islamhelpline.net/node/2190 October 16, 2015.
Centre of Research on Religion and Nature Suleymaniye Foundation. Islam and Quran. In. (Ed.). Retrieved October 10, 2015, from http://www.islamandquran.org/fatwas/is-the-interest-from-national-savings-certificates-haraam.html.
S. Chagani, “External deficit financing – an inflationary balloon,” 2008, Unpublished.
B. J. Cohen, “Monetary union: the political dimension in the dollarization debate,” Edited by Dominick Salvatore, James W. Dean, and Thomas D., 2003, Willet. Oxford University Press, New York, 221-337.
Currency Management by State Bank of Pakistan, Retrieved from www.sbp.org.pk/sbp_bsc/apr/Perf-13-14/Chapters/Ch-2.pdf, 2015.
Currency Management by State Bank of Pakistan, Retrieved from http://www.sbp.org.pk/sbp_bsc/apr/Perf-11-12/Ch-01.pdf, 2015.
K. Edge, “Methods of financing the deficit and use of a surplus,” In New HSC Online, 1999, Retrieved October 26, 2015, from http://hsc.csu.edu.au/economics/policies_mgt/2484/Topic4Tutorial3.html.
A. M. Gulde, & C. G. Tsangarides, “The CFA France zone: common currency, uncommon challenges,” p. 31, N.p.: International Monetary Fund, 2008.
R. Hilferding, “Money in the circulation process,” In Marxist, 2015, Retrieved from https://www.marxists.org/archive/hilferding/1910/finkap/ch02.htm.
“How does the Federal Reserve Board determine how much currency to order each year?,” (2015, June 6), In Federal Reserve, Retrieved from Google Search Engine.
“How do changes in national interest rates affect a currency's value and exchange rate?,” In Investopedia, 2015, Retrieved from http://www.investopedia.com/ask/answers/040315/how-do-changes-national-interest-rates-affect-currencys-value-and-exchange-rate.asp.
J. Hussain, Seerat e Ameer ul Momineen (Vol. 2). Lahore: Imam Kutab Khana, 2012.
“Is it important?,”, In Federal Reserve., 2015, Retrieved from http://www.federalreserve.gov/faqs/money_12845.htm.
A. Jan, M. Saleem, A. Ahmad, & A. Riaz, “Disaggregate Analysis of Broad Money and Outlook of Key Monetary Aggregates”, 2013, SBP Working paper series, 58, 4-15.
J. Nizamia, Riba and Darul Harb – Jamia Nizamia’s historic Fatwa. In Aleem Khan Falaki, 2009, Retrieved October 26, 2015, from http://li.aleemkhanfalaki.com/chapters/riba-and-darul-harb-jamia-nizamias-historic-fatwa/.
Jami’at-Tirmidhi (1229 & 1230), Vol. 3, Book 12, Hadith 1229 and 1230.
M. Kababji, “Inflation Management in Islamic Economics,” In Islamic Economics Project, 2012 Retrieved August 19, 2015, from https://islamiceconomicsproject.wordpress.com/2012/04/08/inflation-management-in-an-islamic-economy/.
M. Kahf, “Leasing cars from Islamic perspective,” In onislam, 2014, Retrieved October 26, 2015, from http://www.onislam.net/english/ask-the-scholar/financial-issues/transactions-and-contracts/170114.html?Contracts.
M. Kahf, “How does Islam solve the problem of inflation?,” In on Islam, 2012, Retrieved August 18, 2015, from http://www.onislam.net/english/ask-the-scholar/shariah-based-systems/economic-systems/174973-how-does-islam-solve-the-problem-of-inflation.html.
S. N. H. Kararvi, Chuada Sitaray,1959, Imamia Kutab Khana, Lahore, Pakistan, Vol.: None, p. 80 – 120.
A. Khan, “Islam and taxation,” In The Khilafah, 2009, Retrieved November 2, 2015, from http://www.khilafah.com/islam-and-taxation/.
M. A. Khan, & M. Z. Sajjid, “The exchange rates and monetary dynamics in Pakistan: An autoregressive distributed lag (ARDL) approach,” The Lahore Journal of Economics, 10(2), 87-99, 2005.
M. Maurice-Lombard, “The Golden Age of Islam,” Netherlands, p. 110.
S. M. Leghaei, “Can I earn interest from a non-Islamic bank?,” In Askthesheikh, 2012, Retrieved October 10, 2015, from http://www.askthesheikh.com/can-i-earn-interest-from-a-non-islamic-bank/.
M. B. Majlisi, Hayat-ul-Qaloob, Volume 3, 1966, Translated by Molvi Syed Basharat Hussain Sahib Kamil, Imamia Kutub Khana, Lahore, Pakistan, pp. 10 –100.
Mousumi, “Are prize bonds haram?,” In Muslim Academy, 2014, Retrieved August 19, 2015, from http://muslim-academy.com/prize-bonds-haram/.
S. K. Mugewara, “The African economy: policy, institutions and the future,” pp. 86-87. Routledge, 2002.
Muwatta Malik (1293), Book 31, Hadith 1293.
I. H. Naqvi, & M. S. Hashmi, "Analyses of the GNP formula: the Islamic perspective," Journal of Islamic Economics, Banking and Finance, Vol: 9, Issue: 2, 2013, Standard: 2070-4658.
S. M. Naqvi, “Practitioner of Islamic banking and finance”, Skype Interview on December 16, 2017.
I. H. Naqvi, Z. Naveed, & A. A. Khan, “Islamic formula of future value of asset: a scientific derivation”, European Journal of Islamic Finance, 1(3), 2015 doi: http://dx.doi.org/10.13135/2421-2172/1075.
V. Nehal, “How currency is generated and how it is distributed?,” In Quora, 2014, Retrieved June 3, 2015 through Google Search Engine.
S. Nomani, Al – Farooq, 1990, Ilmi Kutab Khana, Lahore, p 100 – 200.
T. Pettinger, “The link between Money Supply and Inflation,” In Economics Help, 2011, Retrieved June 14, 2015, from http://www.economicshelp.org/blog/111/inflation/money-supply-inflation/.
L. Rittenberg, & T. Tregarthen, Macroeconomic Principles, Vol. 1, pp. 463-475, 2012.
S. A. Rosly, “Islamic banking and financial markets,” 2005, Retrieved December 19, 2015, from http://saifulazharrosly.blogspot.com/2005/08/islam-and-gambling-maisir.html.
A. R. S. A. Khamenei, “Istifta on Islamic Jurisprudence & Religious Affairs,” 2019, Retrievable from http://www.leader.ir/en/services/8/Jurisprudence-&-Religious-affairs.
P. C. Rother, “Money demand and regional monetary policy in the West African economic and monetary union,” (p. 5), N.p.: International Monetary Fund, 1998.
“Ruling on Inflation and Change of Currency Value - Islamic Fiqh Academy,” In the Message of Islam, 2015, Retrieved from http://islamicstudies.islammessage.com/Fatwa.aspx?fid=119.
Sahih Al-Bukhari (2174), Vol. 3, Book 34, Hadith 382.
Sahih Al-Bukhari (2312), Vol. 3, Book 38, Hadith 506.
Sahi.h Al-Bukhari (3814), Vol. 5, Book 58, Hadith 159.
Sahih Al-Bukhari (5347), Vo. 7, Book 63, Hadith 259.
Sahih Al-Bukhari (5962), Vol. 7, Book 72, Hadith 845.
Sahih Muslim (1540 c), Book 10, Hadith 3689.
S. A. Saqr, “Dealing in Riba with non Muslims,” In onislam, 2014, Retrieved October 10, 2015, from http://www.onislam.net/english/ask-the-scholar/financial-issues/usury/174688-dealing-in-riba-with-non-muslims.html.
S. Sadooq, Mun La Yahzar Faqih, 1996, Translated by Syed Hassan Imdad Sahib Mumtaz Alfazil, Qureshi Art Press, Nazimabad, Karachi, pp. 58–200.
S. Schadler, & H. Brendenkamp, “Economic adjustment and reform in low-income countries,” pp. 117-121, N.p.: International Monetary Fund, 1999.
A. S. Seestani, “A code of practice for Muslims in the west,” 2015, Retrieved from http://www.sistani.org/english/book/46/2054/.
Sunan Abi Dawud (3685), Book 26, Hadith 3677.
Sunan Ibn Majah (2195), Vol. 3, Book 12, Hadith 2195.
Suranovic, S. M., International Finance Theory and Policy, Chapter 40, 2005.
Suyuti, J., Tarikh-ul-Khulafa. Islamabad: Millat Publications, 1997.
A. Vasudevan, “Money and banking: select research papers by the economists of reserve bank of India,” pp. 93-94, N.p.: Academic Foundation, 2003.
U. I. Vadillo, “Fatwa on banking and the use of interest received on bank deposits (Master's thesis),” 2003, Retrieved October 10, 2015, from www.kantakji.com/media/2128/b024.pdf.
A. J. Schwartz, “What is the money supply?,” In Library of Economics and Liberty, 2015 Retrieved from http://www.econlib.org/library/Enc/MoneySupply.html.
R. E. Wright, & V. Quadrini, Finance, Banking and Money, Vol. 1, pp. 303-316, 2012.
D. Yaqub, “When printing notes is robbery,” In The News, (2013, December 16), Retrieved June 3, 2015, from http://www.thenews.com.pk/Todays-News-9-220031-When-printing-notes-is-robbery.
Q. Zaman, “Saving certificate,” In Muftisays, 2012, Retrieved October 10, 2015, from http://www.muftisays.com/qa/question/2478/saving-certificate.html.
Al-Quran 5:90, Chapter 5 Sura-e-Maida, Verse 90.
I. H. Naqvi, “Islamic banking in Pakistan: fiqa-e-jaferia offers optimization,” African Journal of Business Management, Vol. 6(5), Page 2071 – 2085, 8 February, 2012.
N. Desai, Nishith Desai Associate for Legal and Tax Counselling Worldwide, 2018 Retrieved from http://www.nishithdesai.com/information/research-and-articles/research-articles.
M. T. Qadri, “Interest-Free Banking and Islamic Economy,” 1994, Lahore, Minhaj ul Quran. Retrieved from https://www.minhajbooks.com.
P. P. Biancone & M. Radwan, “Social finance and financing social enterprises: an Islamic finance prospective”, European Journal of Islamic Finance, 2019.
P. P. Biancone & M. Radwan, “Social finance and unconventional financing alternatives: an overview”. European Journal of Islamic Finance, (10), 2018.
P. P. Biancone & M. Radwan, “European companies: evaluation for Sharia compliance opportunities and challenges”, European Journal of Islamic Finance, (5), 2016.
P. P. Biancone & M. Radwan, Sharia Compliant, “Possibility for Italian SMEs”, European Journal of Islamic Finance, (1), 2015.
P. P. Biancone & S. Secinaro, “The equity crowd funding Italy: a model Sharia compliant”, European Journal of Islamic Finance, 5, 1-10, 2016.
Downloads
Published
How to Cite
Issue
Section
License
EJIF content is licensed under a Creative Commons Attribution 4.0 International License.
Authors keep the copyrights for their work and give the journal the work's first publication copyright, which is at the same time licensed under a Creative Commons License – Attribution, which in turn allows other parties to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
EJIF has been approved for inclusion in 
EJIF has been approved for inclusion in 
EJIF is a member of 
EJIF is indexed by 
EJIF is listed in the ANVUR (Italian National Agency for the Evaluation of Universities and Research Institutes) as a scientific journal in both 
