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Global Governance: Is There a Role for Islamic Economics and Finance?

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Global Governance and Muslim Organizations

Part of the book series: International Political Economy Series ((IPES))

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Abstract

In this chapter, Mohseni-Cheraghlou argues that the implementation and growth of genuine Islamic economic and financial (IEF) systems in countries with significant Muslim population, which host more than 1.5 billion people, can help international efforts in increasing financial stability, reducing poverty and inequality, and promoting shared prosperity and environmental sustainability. In doing so, Mohseni-Cheraghlou argues that an IEF system can contribute much toward international institutions’ (such as IMF and World Bank) global governance efforts in these fronts. Finally, the chapter provides the case study of a successful attempt by an organization named Akhuwat, for reducing poverty and promoting shared prosperity in Pakistan through Qard Hassan, an Islamic microfinance scheme.

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Notes

  1. 1.

    According to Reinhart and Rogoff (2008), financial crises are defined as periods of significant distress in currency markets, the banking sector, domestic debt, external debt, and/or inflation.

  2. 2.

    See http://www.worldbank.org/en/topic/poverty/overview

  3. 3.

    For example, see Cihak and Hesse (2010); Hasan and Dridi (2010); Askari et al. (2012a, 2012b); Farooq and Zaheer (2015); Farooq, van Wijnbergen, and Zaheer (2015); and Siraj and Pillai (2012) among many others.

  4. 4.

    Another suggestion in similar line was put forth more recently by King (2016). He suggested the idea of “narrow banking”, where all deposits are backed by safe and liquid assets.

  5. 5.

    For example, Joseph Stiglitz argued that “When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top” and therefore imposed higher than efficient and desired risk on the overall structure of the US banking system. See https://www.vanityfair.com/news/2009/01/stiglitz200901-2 for the whole piece written by Stiglitz.

  6. 6.

    See Askari, Iqbal, and Mirakhor (2009) for more on globalization of an IEF system. Also see Askari et al. (2012a, 2012b) for more on stability of an IEF system in a globalized financial industry.

  7. 7.

    For more, please see http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance

  8. 8.

    For more, please see http://www.imf.org/external/themes/islamicfinance/

  9. 9.

    The authors estimated the resource shortfall to fill the poverty gap in each country and then estimate the potential Zakat amount that can be collected based on data available on average domestic income, remittances, and saving rates.

  10. 10.

    In a 2008 volume titled “Islam and the Environment”, Abdullah Jawadi Amuli, one of Iran’s highest-ranking scholars, has addressed the issue of environmental stewardship in Islamic theology and jurisprudence.

  11. 11.

    Also see Nasr (1992), Kamali (2010), Kula (2003).

  12. 12.

    Authors estimate using data from World Bank’s Povcalnet.

    See http://iresearch.worldbank.org/PovcalNet/povOnDemand.aspx

  13. 13.

    This can be related to Picetty’s “r > g” argument. If the owners of the capital are able to continuously receive returns (r) which are larger than the growth in the economy as a whole (g), it will create a situation where inequality between capital owners and wage earners will be on the rise at rate of r-g per year. An IEF system is equipped from within to prohibit such imbalances.

  14. 14.

    See Mirakhor and Askari (2010) for more detailed and comprehensive discussion on Islam, poverty and inequality reduction, and economic development.

  15. 15.

    See Rauf and Mahmood (2009).

  16. 16.

    See http://www.gifr.net/gifr2012/ch_25.pdf

  17. 17.

    See Rauf and Mahmood (2009).

  18. 18.

    http://www.akhuwat.org.pk/akhuwatcaseStudy.asp.

  19. 19.

    http://www.akhuwat.org.pk/progress_report.asp

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Author information

Authors and Affiliations

  1. American University, Washington, DC, USA

    Amin Mohseni-Cheraghlou

Authors
  1. Amin Mohseni-Cheraghlou
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Correspondence to Amin Mohseni-Cheraghlou .

Editor information

Editors and Affiliations

  1. Carleton University, Ottawa, ON, Canada

    Leslie A. Pal

  2. College of Islamic Studies Hamad Bin Khalifa University, Doha, Qatar

    M. Evren Tok

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Mohseni-Cheraghlou, A. (2019). Global Governance: Is There a Role for Islamic Economics and Finance?. In: Pal, L.A., Tok, M.E. (eds) Global Governance and Muslim Organizations. International Political Economy Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-92561-5_12

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