This paper compares the transactions costs in two economies, one conventional, the other Islamic. The conventional economy is characterized by borrowing to finance some current purchases, while the Islamic economy disallows interest-based lending and operates on the basis of universal banking that mixes commerce and commercial and investment banking. To finance current purchases, it provides customers with credit purchase agreements, which entail that the bank buy the commodities and assets from suppliers and resell them on credit to customers satisfying conditions of creditworthiness similar to those that conventional banks require for borrowers. The paper uses simple calculations to compare transactions costs in both economies. It argues that under competitive competition, credit purchase arrangements occasion lower transactions costs than borrow-and-purchase arrangements in the conventional economy. The most important implication is that a policy that lifts entry barriers in the Islamic banking market and allows banks to combine commerce with banking activities contributes to social welfare. The paper concludes with suggestions for further points of research.

Venture capital (VC) is a financial institution and a method of investment, which has become enormously popular in the United States particularly since the 1970s. One of the most remarkable characteristics of VC is the fact that it prefers to finance young entrepreneurs or start-ups that are usually rejected by the conventional institutions of finance.

Islam has provided a blueprint of how a society is to be organized, and how the affairs of its members are to be conducted in accordance with its prescriptions. The system itself has not been applied in its entirety, with the exception of a brief period at the inception of Islam. Only in recent decades have Muslims become interested in society-wide implementation of Islamic teachings, with all this implies for development.

This paper aims to apply the doctrine of siyasah shariyyah to a policy proposal in the area of monetary economics, namely, the Grondona system of conditional currency convertibility, which has been proposed as a practical means of resisting the economic instability caused by the present-day fiat money system. The paper uses library research to review the literature relevant to the Grondona system, and examines the extent to which its operations conform to the principle of siyasah shariyyah, thereby encouraging Maslahah, i.e. the public interest. The paper includes important implications for the policymakers in the Organization of Islamic Cooperation countries for the possible implementation of Grondona system.

Theoretically, a monetary policy intervention of a central bank in form of exchange rate devaluation will make exports of such a country cheaper with a resultant increased competitiveness. However, should developing country such as Nigeria that is mostly import-dependent adopt the same approach? Will a greater focus on the structural and developmental changes be a better option? In a long-run, what is the lead-lag relationship between exchange rate and the Balance of Payment (BOP)? These are issues this project paper sets out to empirically investigate through a multivariate vector error correction framework ...

China is currently building a network with more than 80 countries across Asia, Africa, Europe, and Oceania initiating "One Belt and One Road". The main focus of the Belt and Road Initiative (BRI) is in infrastructure transportation, and energy. Countries with majority of Muslim population are involved in BRI and in some ofthese countries Islamic finance is being adopted. The public-private partnership (PPP) model is an important way of infrastructure financing which has potential in reducing government financial pressure by improving operation efficiency, service quality and societal benefits. World Bank report (2018) has discussed flexibility of Islamic financing and the cracking potential of PPP to incorporate with Islamic finance. Existing financial institutions , such as the World Bank and Asian Development Bank have accumulated rich experience in the field of PPP mode of infrastructure financing. However, the newly established Asian Infrastructure Investment Bank (AIlB) dedicated to the development ofinfrastructure for the supporting of BRI has still not established a model in line with Islamic finance principles. China and Islamic countries can seek common cooperation based on PPP models consistent with Islamic financial system. This paper aims to contribute to the literature for a better understanding of the great potential of China link with Islamic countries to help to boost BRI ...

The objective of these institutions is to achieve social justice. Important among their functions is reduction in uncertainty for members of society in order to allow them to overcome the obstacles to decision making caused by paucity of information. Rules specify what kind of conduct is most appropriate to achieving just results when individuals face alternative choices and must take action. They impose restrictions on what society's members can do without upsetting the social order on whose existence all members count in deciding on their own actions and forming their expectations of others' responses and actions.

The topic of poverty and inequality is still a central discussion among the economist. The current efforts in fighting poverty and inequality, which are considered unsuccessful, has motivated the economist and policy makers to find new ideas and strategies in combatting poverty and inequality. At the same time, the area of economic freedom is increasingly being discussed and linked with other major economic areas. This paper aims to examine the relationship between economic freedom and poverty as well as inequality ...

This book provides an introductory, yet comprehensive, treatment of macroeconomic policies and their implementation in an Islamic-designed economic system

Islamic banks play a significant role in social and environmental responsibility. It is known that Islamic finance is not merely profit-oriented but also looking at the prosperity of the society, as an ethical financial system Islamic finance give a massive contribution towards social responsibility. This exploratory study examines the relations between corporate social responsibility (CSR) practices of Indonesian Islamic banks and socio-economic development. The evidence presented is based on the published annual reports of 13 Islamic commercial banks in 2017. The findings of this research suggests that CSR is a priority of Indonesian Islamic banks and has correlation to the socio-economic development. Furthermore, the findings suggest that the robust guiding principles on CSR need to be developed and it has potential of Islamic banks credibility and profitability.

The tragic events in our post 9/11 world disguise the fact that Islam and the West have actually been in a symbiotic relationship over the very long period. Cross-cultural institutional borrowing has constituted a major component of this symbiosis. I intend to focus in this paper on the way these civilizations borrowed important economic institutions from each other. The paper will start with a brief theoretical model explaining the process of cross-cultural institutional borrowing. This will then be followed by an account of the economic institutions actually borrowed.

The East Asian financial crisis indicated that one of the factors that played a critical role in affecting the exchange rate of a country was its current account balance. This paper attempts to investigate this hypothesis. The Singaporean dollar (SD) and the Malaysian ringgit (RM) against the yen are taken as case studies. Our analysis is based on the recent cointegration method and we examine two issues. First, whether the exchange rates are cointegrated with the fundamentals as predicted by economic theory. Our focus was to investigate whether the exchange rate movements are affected by the economic fundamentals, particularly the current account balance. Our findings suggest that the model fits the data well. Secondly, we wanted to test the validity of our model for forecasting future exchange rates. The findings show that the model does produce good in-sample as well as out-of-sample forecasts.

This paper investigates the long run Granger causality between defense spending and economic growth for 20 selected Organization of Islamic Countries (OIC) by employing the Error-Correction Model (ECM) framework using annual data for the period 1960 to 2005. defense spending (milex) is measured using the ratio of defense spending to gross domestic product (GDP); while economic growth (rgdpc) is proxy by the real GDP per capita. The results of our study indicated that one way long run Granger causality was found running from economic growth to defense spending for Burkina Faso, Indonesia, Kuwait, Saudi Arabia, Sudan, Togo and Turkey. On the other hand, one way long run Granger causality was found running from defense spending to economic growth was found for Iran, Mauritania and Nigeria. However for the rest of the OIC countries, the results suggested no relationship between defense spending and economic growth

The statistics shows that of the richest top 20 countries in 2003, 19 were capitalist democracies. This article, thus, attempts to assess the potential association between economic development/ capitalism and democracy. In arguing for a positive nexus between the two, it also aims to locate the historical roots of this relationship. In doing so, the paper argues that Western capitalism historically evolved from market economy and capitalism developed under Islamic civilizations, which preceded the modern nature of Western capitalism by at least six hundreds years. It also argues that fundamental principles of modern democracy can be traced back to political structure of the initial Islamic community. Therefore, it asserts that Islam neither impedes nor objects to democracy and also contains many features of capitalism. In supporting these assertions, the paper introduces the concept of intergenerational Al-Ghazali Optimum and, therefore, argues that the most important values behind the political and economics success of the West can actually be found in a reinterpretation of maqasid al-Shari'ah.

Since small and medium-sized enterprises (SMEs) are drivers of economic growth and job creation in the emerging and developing economies, it is important to develop an evidence-based understanding of factors that drive small and medium-sized enterprises (SMEs) performance to provide an effective supply-side support. Applying the General-to-Specific modeling on World Bank Enterprise Survey data of 266 economies, this paper models five performance indicators based on 80 potential factors derived from firm characteristics, finance, informality, infrastructure, innovation and technology, regulation and taxes, trade and workforce concerning small and medium-sized enterprises (SMEs). We find that the factors vary regarding statistical significance and magnitude between small and medium enterprises.

FDI is the central topic of contemporary economics. Its role in propping up the economy has long been demonstrated, and the FDI inflow is thus competed fiercely by OIC member countries for the sake of economic development. To succeed in bringing in FDI, however, requires governments to identify and analyze the determinant factors of FDI. For this purpose, we use multilinear regression to process the data of FDI and its possible determinants variables within the OIC members from 1992 to 2010 ...

Understanding the determinants of portfolio investment inflows is imperative in a region highly susceptible to large amount of capital inflows like ASEAN. And to formulate the right policy, intervention and upgrade, ASEAN needs to have a good grasp on these determinants before it can manage volatile capital flows and the accompanying disruptive potential. Although a number of studies focusing on the drivers of gross capital inflows into EMEs has been established, one on ASEAN's has been largerly left out. The need for studying gross inflows is simple, as its movement has direct implication on financial stability and the vulnerability of the overall financial system ...

During the year 1997, the Asian financial crisis disclosed the inherent weaknesses of the financial market in Asia. Organisations had an over-dependence to the banks as the primary sources of fund is one of the reasons why companies faced difficulty during the financial crisis. One of the factors that contributed to the financial crisis was that organizations failed to diversify their financing structure. It is to be noted that when organisations want to source for funds, they can either issue stocks, bonds or finance from banks locally or globally. Source capital from equity and borrowing through debt is considered difficult, expensive and will distort the financial leverage of the company. The development of securitization allows the organization to smooth up their cash flow by converting the illiquid assets into a liquid asset through a special purpose vehicle (SPV). SPV is a legally separated entity from the company or the holder of the assets. SPV can take the forms of either a trust, corporation or partnership set up just for the purchasing of the originator's assets. There are many literature pieces of research that regard the factors that contribute to the pricing of corporate bonds but there are few empirical studies on the determinants on securitization in Malaysia.

The purpose of this paper is to empirically investigate the determinants and the impact of financial development on shadow economy in OIC countries and then compared with non-OIC countries. The study applies advanced panel GMM technique. The study finds that macro-variables (unemployment, economic growth, money supply and foreign trade) and institutional variables reduce shadow economy both in OIC and non-OIC countries. The study also explores that financial development mitigates shadow economy; however, its impact is significantly less in case of OIC economies compared to the non-OIC countries. Since the focus of this study is OIC countries vs non-OIC countries, the research only includes discussion about shadow economy in 42 OIC member states and 99 non-OIC economies. The decision to restrict the study to 42 OIC economies and 99 non-OIC nations is due to the availability of data. The study suggests that free market and good business environment in the formal economy are the keys to have less shadow economy. Good institutional setup and ease in regulations can attract firms and businesses from informal sector to the official economy, while political instability is one of the main factors for having large size of shadow economy. The OIC member countries should implement policies which improve accessibility to finance of every citizen of the country.

GDP, often the proxy to measure progress in policy implementations, does not fully reflect the wellbeing of a nation, although it may be one of the contributing factors. Applying an estimation model based on panel data of 22 sample countries, we illustrate that wellbeing in general can be improved with intrinsic growth, influenced by economic stability, demand composition and sectoral composition. Additionally, key economic and quality of life factors - such as, broader income distribution, lower housing prices, lower infant mortality, effective health expenditure, higher education attainment and broadband access - are significant to households ...

Cost efficiency plays a significant role in bank risk taking behaviour. This paper examines the effect of cost efficiency on the liquidity risk of Islamic banks and conventional banks in 16 OIC countries from 1999 to 2013. The findings suggest that cost efficiency has a positive effect on liquidity risk. Other significant factors of liquidity risk include capital, bank specialization, credit risk, profitability, size, GDP and inflation whereas market concentration is not significant contributor to banking liquidity risk. There is weak evidence to support the notion that Islamic banks have higher level of liquidity risk than conventional banks. The findings imply the need to provide liquidity, probably through a well-functioning money market to lower liquidity risk in banking.