Ethical Dimensions of Islamic Finance (eBook)

Zamir Iqbal is VP Finance and CFO of the Islamic Development Bank. Prior to this role, he served as head of the World Bank's Global Islamic Finance Development Center in Turkey. He is a coauthor of Challenges in Economic and Financial Policy Formulation (2014) and a coeditor of the Palgrave Studies in Islamic Banking, Finance, and Economics series. Abbas Mirakhor is the First Holder of Islamic Finance Chair at INCEIF - The Global University of Islamic Finance, Malaysia. He is a coauthor of Challenges in Economic and Financial Policy Formulation (2014), Introduction to Islamic Economics (2015), and Intermediate Islamic Finance

Foreword 6
Contents 9
List of Figures 12
List of Tables 13
Chapter 1: Ethics and Finance 14
1.1 Ethics and Economics and Finance 17
1.1.1 Frequent Financial Crises and Crimes 19
1.1.2 Expropriation of Value and Fair Valuation 21
1.1.3 Corporate Governance 22
1.1.4 Business Leadership 23
1.1.5 Due Care, Honesty, and Transparency 23
1.2 Moral Failure of Capitalism 24
1.3 Financial Repression 28
1.4 Case of Economic Crimes 29
1.5 Summary 33
References 35
Chapter 2: Moral Sense and Ethics in Economics and Finance 38
2.1 Perspectives on Moral Sense 40
2.2 Search for a Universal Moral Principle 44
2.2.1 Golden Rule in Historical Context 46
2.2.2 The Golden Rule as Universal Moral Principle 47
2.3 Applying Golden Rule to Economics and Finance 52
2.4 Theories of Business Ethics 55
2.4.1 What Is Virtue Ethics? 58
2.5 Islamic Perspective on Business Ethics 60
Annex I: Golden Rule Chronology 62
References 66
Chapter 3: Key Virtues of Business Ethics in Islam 73
3.1 Embracing the Unity of Creation 76
3.2 Being Just and Striving for Justice 78
3.3 Preservation of Rights 80
3.4 Sanctity of Contracts 82
3.5 Truthfulness and Integrity 84
3.6 Trustworthiness 85
3.7 Goodness and Excellence (Ihsa?n) 87
3.8 Compassion and Generosity 88
3.9 Prudence and Humility 88
3.10 Honesty in Business Transaction 90
3.11 Cooperation and Solidarity 91
References 91
Chapter 4: Business Ethics in Islam 93
4.1 Market Conduct 94
4.2 Work and Work Ethics 98
4.3 Production, Consumption, and Distribution 101
4.4 Competition and Cooperation 103
4.5 Stakeholders’ Rights 104
4.6 Transparency 105
4.7 Business Leadership 106
4.8 Respecting and Protecting Environment 108
4.9 Avoidance of Vices or Unethical Practices 110
4.10 Conclusion 111
References 113
Chapter 5: Ethical Dimensions of Islamic Economics and Finance 115
5.1 Risk Sharing 116
5.2 Ethics of Risk Sharing 120
5.2.1 Avoidance of Risk Shifting and Exploitation 121
5.2.2 Materiality and Financing of Real Economy Versus Financialization 122
5.2.3 Reduced Information and Agency Problems 123
5.2.4 Stability of the Financial System 125
5.2.5 Overcoming Financial Repression 127
5.2.6 Enhancing Cooperation Among Economic Agents 128
5.2.7 Government as Agent for Risk Sharing 129
5.3 Economic and Social Justice 131
5.4 Redistributive Justice 134
5.5 Role of Regulations 136
5.6 Governance and Prudence 140
References 143
Chapter 6: Sacralizing Finance: Risk-Sharing Islamic Finance 147
6.1 Is the Regime of Risk Transfer Sustainable? Impossible Contract and Inequality 152
6.2 Risk Transfer System: Debt-Economy 158
6.3 Is Risk Sharing a Better Alternative? 166
6.4 How Does Risk Sharing Make a Financial System Antifragile? 168
6.5 Conclusion 169
References 171
Chapter 7: Ethical and Responsible Finance for Development 175
7.1 Need for New Perspective on Economic Development 177
7.2 Development Approaches: Conventional Versus Islamic 181
7.3 Ethics of Islamic Perspective of Development 187
7.3.1 Social and Economic Justice 189
7.3.2 Equitable and Fair Distribution 190
7.3.3 Redistribution (Inclusion) 193
7.4 Conclusion 197
References 198
Index 200