The document discusses non-tax financing of government in Islam. It explores how an Islamic economic system may provide alternatives to bridge budget gaps without public borrowing or raising taxes. Section one discusses the Islamic approach to providing public goods. Historically, essential services were funded publicly while other goods relied on philanthropy. Section two outlines Islamic financing principles, noting that while the Prophet borrowed interest-free, later public borrowing sometimes included interest which is prohibited. Alternatives mentioned in the Quran include sales and granting debtors time without charge. Section three discusses using third-party guarantees to incentivize private provision of social goods as a non-debt alternative to budget deficits.
The document discusses principles of financing in Islam and instruments for meeting budget deficits in an Islamic economy. It outlines three main principles - sale, profit and loss sharing, and output sharing. It argues that an Islamic economy must consider budget deficits and alternatives to public provision of social goods, such as voluntary or private provision with third party guarantees. The document then suggests various non-debt financing instruments like ijarah, mudarabah, and output sharing models. It also discusses forms of voluntary and involuntary public debt that could conform to Islamic principles, including sale-based debt instruments, loan-based debt, and demand deposits. The conclusion summarizes that an Islamic economy requires substitutes for public borrowing that are compatible with sharia.
Here are the key advantages and disadvantages of privatization and commercialization in Nigeria:
Advantages:
- Increased efficiency as private companies are profit-driven to cut costs and improve productivity. This leads to better quality and lower prices for consumers.
- Infusion of private capital which helps improve infrastructure and technology. The government does not have to bear the entire financial burden.
- Reduction of government role in business allows it to focus on core functions like regulation.
Disadvantages:
- Potential job losses as private companies aim to reduce excess staff. This increases unemployment.
- Risk of monopoly as key sectors may be dominated by few large private players. This can lead to reduced competition and higher prices.
- Reduction
The document analyzes the historical foundations of voluntary charity and philanthropy as a market response to needs, rather than a "third sector" separate from private enterprise and government. It discusses evidence that voluntary assistance has existed since ancient times in China, Egypt, India, Persia, Judea, Greece and Rome in response to human and market needs. Throughout history, voluntary assistance has primarily been provided through private action rather than government coercion.
This document discusses volunteerism and the nonprofit sector in the Philippines. It provides context on the passage of the Volunteer Act of 2007 which aims to promote volunteerism. It outlines the roles of volunteerism in different sectors including private sector, academe, corporations, and nonprofits. It also discusses the mandates of the Philippine National Volunteer Service Coordinating Agency (PNVSCA) to coordinate the national volunteer program. Some challenges to measuring and promoting volunteerism in the country are presented. Sources of information on Filipino volunteerism are provided from different studies and agencies.
This document discusses instruments and alternatives for public debt in an Islamic economy. It begins by outlining the principles of financing in Islam, including sale, profit and loss sharing, and output sharing. It notes that these principles apply equally to private and public sectors. The document then examines some issues with applying these principles to public borrowing, such as prohibiting interest between the state and individuals. The remainder of the document suggests types of instruments that could be developed based on Islamic principles, including sale-based, lease-based, partnership-based, and output sharing instruments. It concludes by stating that developing Shariah-compliant public debt instruments can help Muslim countries mobilize financial resources in a way that appeals to Islamic values and sentiments.
This document discusses public sector economics from an Islamic perspective. It covers the role of the Islamic state in the economy, its economic objectives and policy tools. It also discusses the Islamic fiscal system including public revenues, expenditures, budgeting, deficits and financing instruments. The key sources of public revenue in the Islamic system are taxes on agricultural land (kharaj) and natural resources like minerals. Public expenditures include defense, administration, welfare and fulfilling religious obligations. The document outlines budgeting practices in early Islamic states and acceptable ways to finance budget deficits, such as debt-free instruments like ijarah (leasing) certificates and profit/loss sharing.
In light of the progression of Islamic finance in non-Muslim countries and the design of innovative financial products, the next frontier for Islamic finance is to attract customers and investors from beliefs other than Islam. This paper examines and discusses the case of a specific Islamic contract, Waqf and highlights its possible use as a (Socially Responsible Investment) SRI offering which is not only attractive to the non-Muslim investor, but also in-line with the actual spirit of Islamic teachings. The methodology is an examination of the Waqf contract through different sources of Islamic law as well as an evaluation of mainstream secondary literature on the link of corporate social responsibility and investor prospection in Non-Muslim countries.
The ultimate result is a proposed viable Waqf product which is in-line with the spirit of Islamic teachings and can be an attractive proposition to the socially conscious investor.
How To Write An Outline Of An Essay With ExamplesLisa Johnson
Dmitri Mendeleev was a Russian chemist who is best known for creating the first version of the periodic table of elements in 1869, arranging the elements in order of atomic mass which revealed periodic trends that allowed properties of undiscovered elements to be predicted. His periodic table was based on the atomic masses of the elements and showed that when they were arranged in order of atomic weight, there was a recurring pattern related to their chemical properties. Mendeleev organized the elements into groups with similar properties and left gaps for elements that were not yet discovered but whose properties he was able to predict accurately based on their position in the periodic table.
The document discusses principles of financing in Islam and instruments for meeting budget deficits in an Islamic economy. It outlines three main principles - sale, profit and loss sharing, and output sharing. It argues that an Islamic economy must consider budget deficits and alternatives to public provision of social goods, such as voluntary or private provision with third party guarantees. The document then suggests various non-debt financing instruments like ijarah, mudarabah, and output sharing models. It also discusses forms of voluntary and involuntary public debt that could conform to Islamic principles, including sale-based debt instruments, loan-based debt, and demand deposits. The conclusion summarizes that an Islamic economy requires substitutes for public borrowing that are compatible with sharia.
Here are the key advantages and disadvantages of privatization and commercialization in Nigeria:
Advantages:
- Increased efficiency as private companies are profit-driven to cut costs and improve productivity. This leads to better quality and lower prices for consumers.
- Infusion of private capital which helps improve infrastructure and technology. The government does not have to bear the entire financial burden.
- Reduction of government role in business allows it to focus on core functions like regulation.
Disadvantages:
- Potential job losses as private companies aim to reduce excess staff. This increases unemployment.
- Risk of monopoly as key sectors may be dominated by few large private players. This can lead to reduced competition and higher prices.
- Reduction
The document analyzes the historical foundations of voluntary charity and philanthropy as a market response to needs, rather than a "third sector" separate from private enterprise and government. It discusses evidence that voluntary assistance has existed since ancient times in China, Egypt, India, Persia, Judea, Greece and Rome in response to human and market needs. Throughout history, voluntary assistance has primarily been provided through private action rather than government coercion.
This document discusses volunteerism and the nonprofit sector in the Philippines. It provides context on the passage of the Volunteer Act of 2007 which aims to promote volunteerism. It outlines the roles of volunteerism in different sectors including private sector, academe, corporations, and nonprofits. It also discusses the mandates of the Philippine National Volunteer Service Coordinating Agency (PNVSCA) to coordinate the national volunteer program. Some challenges to measuring and promoting volunteerism in the country are presented. Sources of information on Filipino volunteerism are provided from different studies and agencies.
This document discusses instruments and alternatives for public debt in an Islamic economy. It begins by outlining the principles of financing in Islam, including sale, profit and loss sharing, and output sharing. It notes that these principles apply equally to private and public sectors. The document then examines some issues with applying these principles to public borrowing, such as prohibiting interest between the state and individuals. The remainder of the document suggests types of instruments that could be developed based on Islamic principles, including sale-based, lease-based, partnership-based, and output sharing instruments. It concludes by stating that developing Shariah-compliant public debt instruments can help Muslim countries mobilize financial resources in a way that appeals to Islamic values and sentiments.
This document discusses public sector economics from an Islamic perspective. It covers the role of the Islamic state in the economy, its economic objectives and policy tools. It also discusses the Islamic fiscal system including public revenues, expenditures, budgeting, deficits and financing instruments. The key sources of public revenue in the Islamic system are taxes on agricultural land (kharaj) and natural resources like minerals. Public expenditures include defense, administration, welfare and fulfilling religious obligations. The document outlines budgeting practices in early Islamic states and acceptable ways to finance budget deficits, such as debt-free instruments like ijarah (leasing) certificates and profit/loss sharing.
In light of the progression of Islamic finance in non-Muslim countries and the design of innovative financial products, the next frontier for Islamic finance is to attract customers and investors from beliefs other than Islam. This paper examines and discusses the case of a specific Islamic contract, Waqf and highlights its possible use as a (Socially Responsible Investment) SRI offering which is not only attractive to the non-Muslim investor, but also in-line with the actual spirit of Islamic teachings. The methodology is an examination of the Waqf contract through different sources of Islamic law as well as an evaluation of mainstream secondary literature on the link of corporate social responsibility and investor prospection in Non-Muslim countries.
The ultimate result is a proposed viable Waqf product which is in-line with the spirit of Islamic teachings and can be an attractive proposition to the socially conscious investor.
How To Write An Outline Of An Essay With ExamplesLisa Johnson
Dmitri Mendeleev was a Russian chemist who is best known for creating the first version of the periodic table of elements in 1869, arranging the elements in order of atomic mass which revealed periodic trends that allowed properties of undiscovered elements to be predicted. His periodic table was based on the atomic masses of the elements and showed that when they were arranged in order of atomic weight, there was a recurring pattern related to their chemical properties. Mendeleev organized the elements into groups with similar properties and left gaps for elements that were not yet discovered but whose properties he was able to predict accurately based on their position in the periodic table.
The document discusses public revenues during the Prophet Muhammad's era in Medina, which is divided into two phases. During the first phase, public needs were financed primarily through voluntary contributions from believers as there was no taxation system. The Prophet relied on donations from companions like Abu Bakr and Khadijah to fund early activities. Community members also provided for needs like supporting new immigrants. The second phase saw the introduction of steady income from state-owned assets but public financing still largely depended on voluntary contributions and loans.
PUB 611Seminar in Public Human Resources Administration Midterm Exa.docxwoodruffeloisa
PUB 611Seminar in Public Human Resources Administration: Midterm Exam
Exam Questions
1. Identify and describe the four public personnel management functions (PADS).
2. What are the four competing values that have traditionally affected the allocation of public jobs? Which three nongovernment values that have emerged recently conflict with them?
3. What are the pros and cons of contracting out? If you have experience with contracting out, what challenges did you face in writing the contract specifications and what challenges did you face in administering the contract?
4. How does the historical development of job analysis relate to the differing objectives of elected and appointed officials, merit system advocates, HR directors and specialists, supervisors and managers, and employees? How are these reflected in the concepts of position management, human resource management, and career development?
5. Describe the contemporary pay and benefits environment.
6. Identify the elements included in a total compensation package.
7. Describe the comparative advantages and disadvantages of competing systems used to determine pay—point-factor job evaluation, rank-in person, and broad-banding.
8. Discuss how conflicts over the fairness of EEO, AA, and diversity management programs have affected the role of the public HR manager in achieving both productivity and fairness.
Social Equity and Diversity Management
Dr. James R. Welsh
Barry University
1
1
2
Man is the most composite of all creatures....
“Well, as in the old burning of the Temple at Corinth, by the melting and intermixture of silver and gold and other metals a new compound more precious than any, called Corinthian brass, was formed; so in this continent,--asylum of all nations,--the energy of Irish, Germans, Swedes, Poles, and Cossacks, and all the European tribes,--of the Africans, and of the Polynesians,--will construct a new race, a new religion, a new state, a new literature, which will be as vigorous as the new Europe which came out of the smelting-pot of the Dark Ages, or that which earlier emerged from the Pelagic and Etruscan barbarism.”
Ralph Waldo Emerson, journal entry, 1845,
The Metaphor of the Melting Pot…
Because of a continuous mass immigration that was a feature of the United States economy and society since the first half of the 19th century, ethnic diversity is common in both rural and urban areas.
The absorption of the stream of immigrants became, in itself, a prominent feature of America's national myth.
The idea of the melting pot is a metaphor that implies that all the immigrant cultures are mixed and amalgamated without state intervention.
The melting pot theory implied that each individual immigrant, and each group of immigrants, assimilated into American society at their own pace.
Today the United States can easily be considered one of the most diverse nations in the world.
Recent estimates show that one in three U.S. residents is a member of an ...
Islam and Supply-Side EconomicsSupply-side economics has a long hi.pdfarihanthtoysandgifts
Islam and Supply-Side Economics
Supply-side economics has a long history, dating back to at least the fourteenth century. The
greatest of medieval historians, Abu Zayd Abd-ar-Rahman Ibn Khaldun (1332–1406), included
in his book, The Muqaddimah (1377), an Islamic view of supply-side economics. He pointed out
that “when tax assessments . . . upon the subjects are low, the latter have the energy and desire to
do things. Cultural enterprises grow and increase . . . (Therefore) the number of individual
imposts (taxes) and assessments mounts.” If taxes are increased in both size and rates, “the result
is that the interests of subjects in cultural enterprises disappears, because when they compare
expenditures and taxes with their income and gain and see little profit they make, they lose all
hope.” Ibn Khaldun concluded that “at the beginning of a dynasty, taxation yields large revenue
from small assessments. At the end of a dynasty, taxation yields small revenue from large
assessments.”
(A) How do this Islamic scholar’s theories apply to the modern world?
Solution
Ans:
In the course of the most recent 50 years there has been reestablished enthusiasm for Islamic
nations in looking at the relationship in the middle of Islam and science in the range of its
history. In the wake of picking up autonomy the majority of the Islamic nations have been
attempting to deal with their religious convictions and the Western ideas of science and training.
The instruction frameworks embraced by the greater part of the Islamic nations have been
founded on supposed common Western training. Subsequently a social dichotomy is seen in their
social orders between a conventional Islamic training from one viewpoint confined to religious
gatherings, and a common Western instruction in standard schools, schools and colleges.
Training is seen as a method for securing logical learning and innovation, so as to advance
monetarily in the cutting edge world. On the other hand, training has unsuccessfully attempted to
mix Islamic thinking with this Western instruction framework.
Islamic Nature view :
The Islamic perspective of nature amid the Golden Age was for humankind \'to study nature with
a specific end goal to find God and to utilize nature for the advantage of humanity\'. Nature
could be utilized to give sustenance to humankind and its abundance was to be similarly
circulated among all people groups. All exercises that made damage humanity and thus
devastated nature were illegal. Devastation of the common equalization was disheartened, for
instance, pointless executing of creatures or evacuation of vegetation may thus prompt starvation
because of absence of nourishment. This perspective was an expansion of the thought that
\"man\" had been set on earth as God\'s illustrative.
Supply-side financial aspects is a macroeconomic hypothesis which contends that monetary
development can be most adequately made by putting resources into capital, and by bringing
down boundaries on the .
Law P 539 Exam Final Paper Colonization - Developing Rustam Begaliev
1) The document discusses the role of colonization in developing colonized societies. While colonization had some positive impacts through institutions like education and industry, it also had significant negative consequences.
2) Examples are provided of how British and Spanish colonization positively contributed to social, technological, and governance elements in colonies. However, colonization was also extremely exploitative and involved practices like slavery to extract resources.
3) The modern world still observes complex elements of colonization, so history must be learned from to avoid negative impacts and repeating mistakes regarding weak countries.
Privatisation. Political Economic Digest Series - 14. Akash Shrestha
This document discusses privatization in three parts. It begins with background on state-owned enterprises in Nepal, noting many are inefficient and incurring large losses. It then discusses the history and reasons for privatization, including potential cost savings, improved quality and accountability. Finally, it discusses different methods of privatization and debates around balancing private vs. state control of industries and services.
The document provides an overview of capitalism and Islamic economics. It summarizes the historical emergence of capitalism through Protestantism, the Age of Discovery, and industrialization. It contrasts the anthropocentric individualism of capitalism with the Islamic conception of tawhid (unity of God) and obedience to God's revelation. The document analyzes how capitalism has become totalizing through various means and the social, environmental, and economic consequences that have resulted. Finally, it summarizes the ethics and principles of Islamic economics based on the Quran and hadith, such as generosity, cooperation, and moderation, arguing that capitalism is incompatible with Islamic fundamentals.
Part I Studying nonprofit organizationsThe study of nonprofit.docxdanhaley45372
Part I: Studying nonprofit organizations
The study of nonprofit, third sector, or voluntary organizations is a fairly recent development in the history of the social sciences. What has become one of the most dynamic and interdisciplinary fields of the social sciences today began to gather momentum more than three decades ago. At the same time, the field is rooted in long-standing intellectual and disciplinary approaches that seek to come to terms with the complexity and vast variety of nonprofit organizations and related forms and phenomena. After considering this chapter, the reader should:
■ have an understanding of the wide range of institutions, organizations, and types of activities that come under the label of the nonprofit sector;
■ be able to identify key intellectual traditions of nonprofit sector research;
■ have a sense of the major factors that influenced the field and that contributed to its development; and
■ be able to navigate through the book’s various parts and chapters in terms of specific content and their thematic connections. Some of the key concepts introduced in this chapter are:
THE EMERGENCE OF THE NONPROFIT SECTOR IN THE US While the concept of civil society as such is not common currency in the US, there is nonetheless a deep-seated cultural understanding that civil society finds its clearest expression in this country. Indeed a strong political as well as cultural current running through American history and contemporary society sees the US as an ongoing “experiment” in civility, community, democracy, and self-governance. Not only the country as a whole, but cities, such as New York, Chicago, Miami, and Los Angeles in particular, regard themselves as the “social laboratories” of modern urban life: they are among the most diverse in the world in ethnic, religious, and social terms, with large portions of immigrant populations, small local government, and high levels of community organizing and individualism. A strong expression of this cultural self-understanding is that the US, in all its imperfections and injustices, is nonetheless regarded as the embodiment of human political progress. This ideological current assumes at times mythical dimensions, perhaps because it is so closely linked to, and rests on, major symbols of US political history. In countless political speeches as well as in popular culture frequent references are made to highly symbolic events and documents that provide deep roots of legitimacy to both nonprofit organizations and the notion of self-organization. Among the most prominent of such cultural-political icons:
Charity, i.e. individual benevolence and caring, is a value and practice found in all major world cultures and religions. It is one of the “fi ve pillars” of Islam, and central to Christian and Jewish religious teaching and practice as well. In many countries, including the US, the notion of charity includes relief of poverty, helping the sick, disabled, and elderly, supporting.
This document provides an overview of nonprofit organizations and their role in society. It discusses how nonprofits fulfill needs that are not met by either the government or private sector due to market or government failures. Nonprofits provide services, advocate for issues, and help develop social capital. They exist to serve functions like service provision, being value guardians, advocacy/problem identification, and building social capital. The document also examines specific issues addressed by nonprofits like poverty, medical care, and the environment.
This document discusses alternative delivery methods for public goods. It begins by defining public goods and categorizing them as pure or impure. Pure public goods are non-rival and non-excludable, while impure goods include club goods, common pool goods, and merit/demerit goods. The document then examines various arrangements for providing different types of public goods, including government production, contracting with private firms, franchising, leasing, and user charges. It concludes by presenting a table assessing the suitability of delivery methods for each public good category.
Social Theories can only be understood within their historical context. First Generation Islamic Economics was developed as part of the struggles to achieve liberation from colonization. It stressed the superiority of Islamic Economic System over Western economic systems of capitalism, communism, and socialism. Efforts to launch the political revolution required to control the state and create a macro level Islamic Economic system failed. As a result, 2nd Generation Islamic Economists took an evolutionary approach, and sought to modify capitalism in a step-by-step approach, to move towards and Islamic system. However, this approach failed to bear fruits, and disastrous shortcomings of capitalism became obvious to all in the Global Financial Crisis of 2007. This has led to efforts to build 3rd Generation Islamic Economics on the revolutionary foundations of the 1st Generation, while incorporating many lessons of historical experience, as well as many insights from the 2nd Generation.
Lesson 4 when disaster strikes, what can we doMia Saku
Charitable organizations have a comparative advantage over governments and individuals in providing disaster relief for three reasons: 1) Their decentralized structure allows them to efficiently connect donors who want to help with those in need. 2) They operate in a competitive environment where effective organizations are rewarded with more donations. 3) Centuries of experience providing community-based disaster assistance in the U.S. have strengthened their ability to respond quickly and effectively.
The document discusses the history and evolution of money and monetary systems from ancient times to modern times. It notes that gold and silver coins were widely used as currencies historically. It describes the transition to paper money backed by gold or silver, then the removal of the gold standard and use of fiat currencies not backed by commodities. This led to greater instability, devaluations, and inflation. The Bretton Woods system tied currencies to the US dollar and gold but collapsed in the 1970s, ending the convertibility of dollars to gold and contributing to currency value fluctuations.
This document summarizes key concepts from an article about building human and social capital for economic development. It discusses three main points:
1) Current economic theory fails to adequately consider the role of human capital and social factors like culture that influence economic behavior. Examining successful East Asian economies shows the importance of social cooperation and investing in education.
2) Building human capital through education and skills training is now the dominant factor for economic growth and competitive advantage, rather than physical capital. However, human capital differs in that it cannot be owned.
3) The concept of "social capital" - networks, social trust, and norms that enable coordination - is also important for facilitating wealth creation. Communities with strong social
This document discusses how school leadership may be constrained by neo-liberalism and focused on measurable outcomes like test scores, rather than issues like environmental sustainability. It argues that the neo-liberal emphasis on privatization, free markets, and minimal government intervention has dominated education policy and leadership. As a result, important issues like climate change and environmental protection are largely absent from school curricula and leadership priorities. The author believes school leaders should challenge this neo-liberal paradigm and create an education system focused more on long-term environmental sustainability.
This document discusses the relationship between capitalism and democracy. It argues that capitalism needs regulation to prevent corporations and the wealthy from oppressing individuals and gaining too much influence over government. While capitalism can drive innovation if balanced with morality and concern for others, unchecked capitalism leads to greed, inequality, and corruption. The government has a role in regulating markets and taxing corporations to fund programs that benefit society, while protecting individuals' rights and welfare. Overall, the document advocates for "moral capitalism" with strong consumer protections and equal opportunities for all.
There is no standard definition of community economic developmenchestnutkaitlyn
There is no standard definition of community economic development (CED). From theoretical and practical perspectives, CED has been commonly described as a quintessentially local project, one in which communities reconstruct dysfunctional markets as a way of reconstituting social relations and building political strength. As social policy, CED emphasizes local participation in the design and implementation of affordable housing, job creation, and financing programs. Regardless of its characterizations, the modern CED movement is making strides to revitalize both urban and rural communities. Significantly, community lawyers and others specializing in CED have worked in partnership with community organizers and other advocates. The Civil Rights era, from the 1950s to the 1970s, is another important juncture in the CED movement. Community organizations and community development corporations act as financial intermediaries, providing technical assistance to local entrepreneurs and developing shopping centers, supermarkets, and other real estate projects. The history of CED is the history of social movements.
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Introduction: What Is CED?
There is no standard definition of community economic development (CED). It has been described as a strategy that includes a wide range of economic activities and programs for developing low-income communities such as affordable housing and small business development
from creation and expansion of neighborhood businesses to larger commercial and retail services - and job creation, some of which has been accomplished by financing and operating shopping centers, industrial parks, retail franchises, and other small businesses. CED also includes many other initiatives and services to fight homelessness, lack of jobs, drug abuse, violence and crime,1 and to provide quality child care and medical care as well as homeownership opportunities.2
As a concept, economic development emerged in response to tenacious poverty and the need for affordable housing, good jobs, affordable health care, and other quality-of-life matters needed for human existence. CED is broader than economic development because it includes community building and the improvement of community life beyond the purely economic.3
From theoretical and practical perspectives, CED "has been commonly described as a quintessentially local project, one in which communities reconstruct dysfunctional markets as a way of reconstituting social relations and building political strength. As social policy, CED emphasizes local participation in the design and implementation of affordable housing, job creation, and financing programs."4
Regardless of its characterizations, the modern CED movement is making strides to revitalize both urban and rural communities. Community development corporations (CDCs) have been reported to be the largest producers of affordable housing in the United States.5 At the same time, "for a field that performs ...
THE DIGNITY OF MAN, An Islamic Perspective.pdfccccccccdddddd
This document provides background information on the author Dr. Mohammad Hashim Kamali and his book "The Dignity of Man: An Islamic Perspective". It discusses the origins and development of the concept of human rights after World War II, including the drafting of the Universal Declaration of Human Rights in 1948. It notes that while the Declaration was an important milestone, there was debate around its philosophical underpinnings and cultural influences being predominantly Western. Some Asian and Muslim-majority countries raised objections or concerns that cultural and religious contexts were not fully considered. The document provides this context and history to frame Kamali's examination of human dignity and rights from an Islamic perspective.
MAQASID AL SHARIAH, IJTIHAD AND CIVILISATIONAL RENEWAL.pdfccccccccdddddd
This document discusses the concept of maqasid (objectives/purposes) of Shariah law and how they relate to ijtihad (independent legal reasoning) and civilizational renewal. Some key points:
1) Maqasid reflect the goals and purposes of Shariah, either generally or for specific topics, and were historically marginalized in Islamic legal theory which focused more on specific legal texts and rules.
2) Recent scholarship is exploring how maqasid can provide a framework for ijtihad and help address modern issues through a focus on universal human values like life, intellect, religion, property and family.
3) The author argues for developing a maqas
ISLAMIC LAW IN MALAYSIA, ISSUES AND DEVELOPMENTS.pdfccccccccdddddd
This chapter provides context about Islamic law in Malaysia. It notes that Malaysia has a multi-racial and multi-religious population, with Malays making up over half and being predominantly Muslim. Islam plays a central role in Malay identity and politics, though Malaysia remains officially secular. Communalism and ethnicity have continued to influence Malaysian politics due to colonial policies that promoted divisions. Reforms to family law have faced debates around increasing Islamization.
FREEDOM, EQUALITY AND JUSTICE IN ISLAM.pdfccccccccdddddd
This document provides an introduction and overview of the first chapter on freedom from Mohammad Hashim Kamali's book "Freedom, Equality and Justice in Islam". It discusses that while freedom is a significant concept, there is little agreement on its precise meaning as it can have different interpretations depending on context. The chapter will analyze conceptualizations of freedom in Islamic theological, social and political contexts based on evidence from the Quran and hadith. It notes that while Muslim jurists have not analyzed the concept of freedom as extensively as Western scholars, contemporary Islamic scholars have contributed more to developing understandings of concepts like freedom and equality in relation to changing modern societies.
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The document discusses public revenues during the Prophet Muhammad's era in Medina, which is divided into two phases. During the first phase, public needs were financed primarily through voluntary contributions from believers as there was no taxation system. The Prophet relied on donations from companions like Abu Bakr and Khadijah to fund early activities. Community members also provided for needs like supporting new immigrants. The second phase saw the introduction of steady income from state-owned assets but public financing still largely depended on voluntary contributions and loans.
PUB 611Seminar in Public Human Resources Administration Midterm Exa.docxwoodruffeloisa
PUB 611Seminar in Public Human Resources Administration: Midterm Exam
Exam Questions
1. Identify and describe the four public personnel management functions (PADS).
2. What are the four competing values that have traditionally affected the allocation of public jobs? Which three nongovernment values that have emerged recently conflict with them?
3. What are the pros and cons of contracting out? If you have experience with contracting out, what challenges did you face in writing the contract specifications and what challenges did you face in administering the contract?
4. How does the historical development of job analysis relate to the differing objectives of elected and appointed officials, merit system advocates, HR directors and specialists, supervisors and managers, and employees? How are these reflected in the concepts of position management, human resource management, and career development?
5. Describe the contemporary pay and benefits environment.
6. Identify the elements included in a total compensation package.
7. Describe the comparative advantages and disadvantages of competing systems used to determine pay—point-factor job evaluation, rank-in person, and broad-banding.
8. Discuss how conflicts over the fairness of EEO, AA, and diversity management programs have affected the role of the public HR manager in achieving both productivity and fairness.
Social Equity and Diversity Management
Dr. James R. Welsh
Barry University
1
1
2
Man is the most composite of all creatures....
“Well, as in the old burning of the Temple at Corinth, by the melting and intermixture of silver and gold and other metals a new compound more precious than any, called Corinthian brass, was formed; so in this continent,--asylum of all nations,--the energy of Irish, Germans, Swedes, Poles, and Cossacks, and all the European tribes,--of the Africans, and of the Polynesians,--will construct a new race, a new religion, a new state, a new literature, which will be as vigorous as the new Europe which came out of the smelting-pot of the Dark Ages, or that which earlier emerged from the Pelagic and Etruscan barbarism.”
Ralph Waldo Emerson, journal entry, 1845,
The Metaphor of the Melting Pot…
Because of a continuous mass immigration that was a feature of the United States economy and society since the first half of the 19th century, ethnic diversity is common in both rural and urban areas.
The absorption of the stream of immigrants became, in itself, a prominent feature of America's national myth.
The idea of the melting pot is a metaphor that implies that all the immigrant cultures are mixed and amalgamated without state intervention.
The melting pot theory implied that each individual immigrant, and each group of immigrants, assimilated into American society at their own pace.
Today the United States can easily be considered one of the most diverse nations in the world.
Recent estimates show that one in three U.S. residents is a member of an ...
Islam and Supply-Side EconomicsSupply-side economics has a long hi.pdfarihanthtoysandgifts
Islam and Supply-Side Economics
Supply-side economics has a long history, dating back to at least the fourteenth century. The
greatest of medieval historians, Abu Zayd Abd-ar-Rahman Ibn Khaldun (1332–1406), included
in his book, The Muqaddimah (1377), an Islamic view of supply-side economics. He pointed out
that “when tax assessments . . . upon the subjects are low, the latter have the energy and desire to
do things. Cultural enterprises grow and increase . . . (Therefore) the number of individual
imposts (taxes) and assessments mounts.” If taxes are increased in both size and rates, “the result
is that the interests of subjects in cultural enterprises disappears, because when they compare
expenditures and taxes with their income and gain and see little profit they make, they lose all
hope.” Ibn Khaldun concluded that “at the beginning of a dynasty, taxation yields large revenue
from small assessments. At the end of a dynasty, taxation yields small revenue from large
assessments.”
(A) How do this Islamic scholar’s theories apply to the modern world?
Solution
Ans:
In the course of the most recent 50 years there has been reestablished enthusiasm for Islamic
nations in looking at the relationship in the middle of Islam and science in the range of its
history. In the wake of picking up autonomy the majority of the Islamic nations have been
attempting to deal with their religious convictions and the Western ideas of science and training.
The instruction frameworks embraced by the greater part of the Islamic nations have been
founded on supposed common Western training. Subsequently a social dichotomy is seen in their
social orders between a conventional Islamic training from one viewpoint confined to religious
gatherings, and a common Western instruction in standard schools, schools and colleges.
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monetarily in the cutting edge world. On the other hand, training has unsuccessfully attempted to
mix Islamic thinking with this Western instruction framework.
Islamic Nature view :
The Islamic perspective of nature amid the Golden Age was for humankind \'to study nature with
a specific end goal to find God and to utilize nature for the advantage of humanity\'. Nature
could be utilized to give sustenance to humankind and its abundance was to be similarly
circulated among all people groups. All exercises that made damage humanity and thus
devastated nature were illegal. Devastation of the common equalization was disheartened, for
instance, pointless executing of creatures or evacuation of vegetation may thus prompt starvation
because of absence of nourishment. This perspective was an expansion of the thought that
\"man\" had been set on earth as God\'s illustrative.
Supply-side financial aspects is a macroeconomic hypothesis which contends that monetary
development can be most adequately made by putting resources into capital, and by bringing
down boundaries on the .
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3) The modern world still observes complex elements of colonization, so history must be learned from to avoid negative impacts and repeating mistakes regarding weak countries.
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Part I Studying nonprofit organizationsThe study of nonprofit.docxdanhaley45372
Part I: Studying nonprofit organizations
The study of nonprofit, third sector, or voluntary organizations is a fairly recent development in the history of the social sciences. What has become one of the most dynamic and interdisciplinary fields of the social sciences today began to gather momentum more than three decades ago. At the same time, the field is rooted in long-standing intellectual and disciplinary approaches that seek to come to terms with the complexity and vast variety of nonprofit organizations and related forms and phenomena. After considering this chapter, the reader should:
■ have an understanding of the wide range of institutions, organizations, and types of activities that come under the label of the nonprofit sector;
■ be able to identify key intellectual traditions of nonprofit sector research;
■ have a sense of the major factors that influenced the field and that contributed to its development; and
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THE EMERGENCE OF THE NONPROFIT SECTOR IN THE US While the concept of civil society as such is not common currency in the US, there is nonetheless a deep-seated cultural understanding that civil society finds its clearest expression in this country. Indeed a strong political as well as cultural current running through American history and contemporary society sees the US as an ongoing “experiment” in civility, community, democracy, and self-governance. Not only the country as a whole, but cities, such as New York, Chicago, Miami, and Los Angeles in particular, regard themselves as the “social laboratories” of modern urban life: they are among the most diverse in the world in ethnic, religious, and social terms, with large portions of immigrant populations, small local government, and high levels of community organizing and individualism. A strong expression of this cultural self-understanding is that the US, in all its imperfections and injustices, is nonetheless regarded as the embodiment of human political progress. This ideological current assumes at times mythical dimensions, perhaps because it is so closely linked to, and rests on, major symbols of US political history. In countless political speeches as well as in popular culture frequent references are made to highly symbolic events and documents that provide deep roots of legitimacy to both nonprofit organizations and the notion of self-organization. Among the most prominent of such cultural-political icons:
Charity, i.e. individual benevolence and caring, is a value and practice found in all major world cultures and religions. It is one of the “fi ve pillars” of Islam, and central to Christian and Jewish religious teaching and practice as well. In many countries, including the US, the notion of charity includes relief of poverty, helping the sick, disabled, and elderly, supporting.
This document provides an overview of nonprofit organizations and their role in society. It discusses how nonprofits fulfill needs that are not met by either the government or private sector due to market or government failures. Nonprofits provide services, advocate for issues, and help develop social capital. They exist to serve functions like service provision, being value guardians, advocacy/problem identification, and building social capital. The document also examines specific issues addressed by nonprofits like poverty, medical care, and the environment.
This document discusses alternative delivery methods for public goods. It begins by defining public goods and categorizing them as pure or impure. Pure public goods are non-rival and non-excludable, while impure goods include club goods, common pool goods, and merit/demerit goods. The document then examines various arrangements for providing different types of public goods, including government production, contracting with private firms, franchising, leasing, and user charges. It concludes by presenting a table assessing the suitability of delivery methods for each public good category.
Social Theories can only be understood within their historical context. First Generation Islamic Economics was developed as part of the struggles to achieve liberation from colonization. It stressed the superiority of Islamic Economic System over Western economic systems of capitalism, communism, and socialism. Efforts to launch the political revolution required to control the state and create a macro level Islamic Economic system failed. As a result, 2nd Generation Islamic Economists took an evolutionary approach, and sought to modify capitalism in a step-by-step approach, to move towards and Islamic system. However, this approach failed to bear fruits, and disastrous shortcomings of capitalism became obvious to all in the Global Financial Crisis of 2007. This has led to efforts to build 3rd Generation Islamic Economics on the revolutionary foundations of the 1st Generation, while incorporating many lessons of historical experience, as well as many insights from the 2nd Generation.
Lesson 4 when disaster strikes, what can we doMia Saku
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The document discusses the history and evolution of money and monetary systems from ancient times to modern times. It notes that gold and silver coins were widely used as currencies historically. It describes the transition to paper money backed by gold or silver, then the removal of the gold standard and use of fiat currencies not backed by commodities. This led to greater instability, devaluations, and inflation. The Bretton Woods system tied currencies to the US dollar and gold but collapsed in the 1970s, ending the convertibility of dollars to gold and contributing to currency value fluctuations.
This document summarizes key concepts from an article about building human and social capital for economic development. It discusses three main points:
1) Current economic theory fails to adequately consider the role of human capital and social factors like culture that influence economic behavior. Examining successful East Asian economies shows the importance of social cooperation and investing in education.
2) Building human capital through education and skills training is now the dominant factor for economic growth and competitive advantage, rather than physical capital. However, human capital differs in that it cannot be owned.
3) The concept of "social capital" - networks, social trust, and norms that enable coordination - is also important for facilitating wealth creation. Communities with strong social
This document discusses how school leadership may be constrained by neo-liberalism and focused on measurable outcomes like test scores, rather than issues like environmental sustainability. It argues that the neo-liberal emphasis on privatization, free markets, and minimal government intervention has dominated education policy and leadership. As a result, important issues like climate change and environmental protection are largely absent from school curricula and leadership priorities. The author believes school leaders should challenge this neo-liberal paradigm and create an education system focused more on long-term environmental sustainability.
This document discusses the relationship between capitalism and democracy. It argues that capitalism needs regulation to prevent corporations and the wealthy from oppressing individuals and gaining too much influence over government. While capitalism can drive innovation if balanced with morality and concern for others, unchecked capitalism leads to greed, inequality, and corruption. The government has a role in regulating markets and taxing corporations to fund programs that benefit society, while protecting individuals' rights and welfare. Overall, the document advocates for "moral capitalism" with strong consumer protections and equal opportunities for all.
There is no standard definition of community economic developmenchestnutkaitlyn
There is no standard definition of community economic development (CED). From theoretical and practical perspectives, CED has been commonly described as a quintessentially local project, one in which communities reconstruct dysfunctional markets as a way of reconstituting social relations and building political strength. As social policy, CED emphasizes local participation in the design and implementation of affordable housing, job creation, and financing programs. Regardless of its characterizations, the modern CED movement is making strides to revitalize both urban and rural communities. Significantly, community lawyers and others specializing in CED have worked in partnership with community organizers and other advocates. The Civil Rights era, from the 1950s to the 1970s, is another important juncture in the CED movement. Community organizations and community development corporations act as financial intermediaries, providing technical assistance to local entrepreneurs and developing shopping centers, supermarkets, and other real estate projects. The history of CED is the history of social movements.
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Introduction: What Is CED?
There is no standard definition of community economic development (CED). It has been described as a strategy that includes a wide range of economic activities and programs for developing low-income communities such as affordable housing and small business development
from creation and expansion of neighborhood businesses to larger commercial and retail services - and job creation, some of which has been accomplished by financing and operating shopping centers, industrial parks, retail franchises, and other small businesses. CED also includes many other initiatives and services to fight homelessness, lack of jobs, drug abuse, violence and crime,1 and to provide quality child care and medical care as well as homeownership opportunities.2
As a concept, economic development emerged in response to tenacious poverty and the need for affordable housing, good jobs, affordable health care, and other quality-of-life matters needed for human existence. CED is broader than economic development because it includes community building and the improvement of community life beyond the purely economic.3
From theoretical and practical perspectives, CED "has been commonly described as a quintessentially local project, one in which communities reconstruct dysfunctional markets as a way of reconstituting social relations and building political strength. As social policy, CED emphasizes local participation in the design and implementation of affordable housing, job creation, and financing programs."4
Regardless of its characterizations, the modern CED movement is making strides to revitalize both urban and rural communities. Community development corporations (CDCs) have been reported to be the largest producers of affordable housing in the United States.5 At the same time, "for a field that performs ...
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1. 1
NON-TAX PRIVATE SECTOR
FINANCING OF GOVERNMENT
IN ISLAM
INTRODUCTION
Government borrowing is as ancient practice. There are many circumstances
that create a gap in the public finance of any state and requires quick borrowing.
Besides public borrowing may be an easy solution which is more popular than
raising taxes or cutting down on government programs.
The present paper looks at public borrowing from a special angle. Accepting
for a moment, the postulate many Muslim writers make that the religion of Islam is
a total way of life, and that it has its own economic system, the paper investigates
the methods and means the Islamic system provides for bridging the budget gap.
In Section One, I will study the Islamic approach to the provision of public
goods. Section Two will give a brief description of the Islamic principles of
financing. Section Three will discuss the Instrument of financing the Government'
budget from the private sector without resorting to taxes. Finally, Section Four
summarizes the results of the paper.
2. 2
I - PROVISION OF PUBLIC GOODS IN THE
ISLAMIC ECONOMIC SYSTEM
Government borrowing have several reasons. In the past, Governments used
to borrow for meeting certain necessitates such as mars of natural catastrophes. The
contemporary phenomenon of public borrowing in many Muslim countries is not
always caused by conditions of necessity. M.U. Chapra cites four major areas of
excessive public spending that are behind resorting to borrowing in most Muslim
countries: high defense expenditures, price subsidies, inefficient and large public
sector and corruption and wasteful spending.1
One may even argue that if these
malaises are cured, there may still be needs for public borrowing in an Islamic or
non-Islamic economy.
Social Goods -- Islamic Perspective.
The inability of market system to provide efficient mechanism for
production and distribution of certain goods raises the issue of social or public
goods. This failure is caused by the characteristics of non-rivalry and non-
excludability certain goods have although both are subject to technological and
social influences. A non-rival good may become rival under certain circumstances.
For instance the wild-life protection regulations make hunting a rival good where
each prospective hunter competes with others for a seasonal hunting license.
Similarly, installation of a gate and a toll booth transforms a non-excludable good
(driving on the highway) into an excludable one and a price for using the highway
can be auctioned.
Additionally, political elements interfere in deciding whether goods are
going to be provided by the public sector. Certain rival and excludable goods may
be provided by the public sector by virtue of political choice. The most obvious
example is public concerts and education2
. A close look into the public finance of
.1
Chapra, M. Umer ,Islam and the Economic Challenge ,Islamic Foundation, Leicester,
UK 1992, pp. 290-294.
2
Education may be considered a mixed good because the benefit of adding one educated
3. 3
the early Islamic state, especially during the life of the Prophet Mohammad when
revenues were tight, may indicate that the main services provided by his
government were: defense, judiciary and running the administrative affairs of the
state. Therefore, public borrowing made by the Prophet in cash or in kind may be
assumed to be for payment of these kinds of services. On the other hand
drinking water, Mosque construction, feeding the poor, freeing slaves and some
defense and foreign guests expenses were provided by philanthropic action in
response to calls by the head of state. When public revenues became abundant
during the reign of the Prophet's Second Successor, Umar, the government not only
ceased asking for voluntary contributions, but provided rival goods, such as, food
stuff to private consumers.
Furthermore, the historical experience of Muslim society indicates that the
role of philanthropy in providing public goods might have been instrumental. For
instance, until the introduction of Western system of education in the Muslim
countries, education had always been provided free to its users by the Islamic
Awqaf. In fact, whenever certain rulers wanted to support education, the help itself
would be channelled through Awqaf. Good examples are the Ayyubites and
Mamluks Awqaf on schools in Palestine3
.
Alternatives to Public Provision of Social Goods:
It can be argued that for each feasible level of public revenue, there is a level
of provision of public goods which does not cause any budget deficit. Accordingly,
stretching the provision of social goods beyond government available resources
creates a budget deficit. Consequently, providing social goods by agents which do
not require the use of public funds lessens the financial burden of the budget and
may therefore be considered alternative of public borrowing4
. Non-government
person to one's colleagues may be impossible to internalize. One may also argue that a
conversation with an educated person may be made a rival good and all its cost may be
internalized through a 900 charge call number.
3
Islamic Research Center for History, Culture and Arts (IRCICA (
, The Muslim Pious
Foundations (Awqaf) and Real Estates in Palestine, Istanbul 1982.
4
Islam does not allow the provision of certain social goods by private or voluntary agents.
Law enforcement is an example. Additionally, certain social goods cannot be made subject to
market conditions on moral grounds, such as, giving religious opinions or visiting a mosque.
4. 4
providers of social goods may be either voluntary organizations and individuals or
profit-motivated private sector.
Voluntary provision of public goods:
Provision of public goods by voluntary agents is as old as human societies.
In the Muslim society, this goes back to the time of the Prophet Muhammad. Upon
his arrival in Madinah, a mosque was built by voluntary labor and material.
Defense activities started on a voluntary basis. The faithful used to volunteer both
labor and weapons. Lights in the mosque and food to the poor were also provided
on voluntary basis. Drinking water used to be sold by owner of a well and the
Prophet called on Muslims to buy the well and give water free. The Institution of
Philanthropic waqf (non-profit trust) was established. The early properties of
philanthropic waqf consist of agricultural land, wells, etc. These were used to
provide support for the poor and free drinking water for inhabitants of Madinah5
.
As time went by, waqf Institution became the main provider of education, health
care and mosques construction and maintenance and a major contributor to building
and maintaining border defense posts and providing financial aid to the poor.
Voluntary organizations have achievement incentives because of the
bondage that links their workers to the organization's objectives. At the same time,
they have accessibility to free (voluntary) labor while they avoid the bureaucratic
structure of government6
. The provision of public goods by non-profit
organizations has now-a-days a wide spread application, especially in the area of
education, health care and water supply7
. Nevertheless, non-profit organization
may become victims of corruption and exploitative management.
5
Hasan Abdallah al Amin, ed .
, Idarat wa Tathmir Mumtalakat al Awqaf,(Management and
Development of Waqf Properties), IRTI, Jeddah 1989.
6
Lance Liebman, "Political and Economic Markets: the Public, Private and Not-for-Profit
Sectors" in Public-Private Partnership, H. Brooks, L. Liebman and C.S., Selling, eds., Ballinger
Publishing Co, Cambridge, Mass, USA 1984, p 354.
7
Gabriel Roth ,The Private Provision of Public Services, EDI of World Bank, Oxford
University Press, 1987, pp. 11-12.
5. 5
Profit-Motivated Provision of Public Goods
On the other hand, whenever market mechanism can be activated, efficiency
usually increases. Therefore, if the concept of smaller government leads to inducing
the private sector to provide goods that should otherwise, be provided by debt -
financed public sector, efficiency and consequently social welfare may increase.
Education, health care, water supply, communication, electricity, garbage
collection, etc. are examples of goods where almost all cost of production can be
internalized8
. These traditional public goods can now be produced and provided by
the private sector.
From Islamic point of view, the following two important points deserve
attention: First, the scope of private provision of public goods is flexible and it
depends on two factors: (1) Islam prevents a small number of goods from being
produced on market basis. These include spaces in a place of worship, exercise of
political rights and implementation of law and order. Beyond these, most goods and
services may be privatized. For instance, you may go to Court to have a judgement
on a dispute or you may agree with the other party to buy the services of a private
judge9
. (2) Sources of public revenues affect their uses. This means that if the
government has revenues characterized with flexible usage such as return from
public property, it can allocate them to any public goods. On the other hand, if the
government does not have such use-flexible revenues and it has to tax citizens for
revenues, then necessary public goods, such as public administration, law
enforcement and defense must be provided. Second, like other religions, Islam
provides individuals with moral and spiritual incentives to undertake social work
and produce public goods on voluntary basis. In Islam, this is further supported by
8
Technological and organizational changes reduce externalities, allow providers to charge
users for all cost of provision and eliminate non-excludability conditions. However, there remain
situations in which the size of the market is small and economies of scale or characteristics of
natural monopoly (e.g. one source of some factors of production) prevail. These situations are
dealt with through tax/subsidy, pricing and other regulatory means while the provision of social
goods is kept in the private sector. Additionally, cases of market failure because it is either
impossible or very difficult to avoid the free-rider problem remains a concern of public sector.
So is the case of political/social preferences for public sector's provision of certain goods. For
detailed discussion on this issue refer to Gabriel Roth, op. cit.
9
The Qur'an refers to private judges in family disputes (4:35). These judges may be paid for
their services.
6. 6
the concept of individual responsibility of social duties (fard al kifayah).
Additionally, Islam permits the government to provide government guarantee as a
third party for encouraging investors in socially desired sectors.
Third-party guarantee as an incentive for
private sector's provision of public goods.
The Islamic Shari'ah does not allow the partner/entrepreneur to guarantee the
principal or any profit to the partner/ financier in all forms of partnership. However,
it has been argued that if such a guarantee is granted by a third party, it may become
permissible. Third-party guarantee is therefore a pledge given by a person, who is
not part of the partnership, to the financier assuring him/her that if the investment
fails in returning the principal and/or producing certain profit, the guarantor will
step in and compensate the financier for loss in capital and/or anticipated profit.10
The government may offer this guarantee to private investors in order to encourage
them to offer funds for projects that would otherwise be financed from public
sources. Consequently, this guarantee saves on the use of public funds and may be
treated as an alternative to budget deficit. The use of tax-payers' money to provide
this guarantee has its pros and cons the discussion of which is outside the limits of
this paper. However, the reality remains that governments have done it and will
continue doing it for one reason or another.
10
Islam's permissibility of third-party guarantee is beyond doubt. It was approved by the
Religious Committee of the Ministry of Religious Affairs in Jordan, 1977. A published opinion
of the Islamic Fiqh Academy of the Organization of Islamic Conference states :
"There is nothing in Shari'ah, which prevents the inclusion of a statement in the prospectus of
the Mudarabah certificates about a promise made by a third party, totally unrelated to the
two parties of the contract, in terms of legal personality or financial status, to donate a
specific sum, without any counter benefit, to meet losses in a given project, provided that
such commitment is independent of the partnership contract". (The OIC Islamic Fiqh
Academy, Resolutions and Recommendations, for the years 1406H-1409H/1985-1989,
Resolution No.5 of its fourth session held in Jeddah, Saudi Arabia, 18-23/5/1408H
equivalent to 06-11/2/1988, p. 62.)
7. 7
II - PRINCIPLES OF FINANCING IN ISLAM
Public Borrowing
During the time of the Prophet Muhammad in Madinah, incidents of public
borrowing happened a few times!11
. There are also known cases of borrowing by
Muslim governments during the Abbasites12
and the Ottomans, and obviously by
modern Muslim states since the middle of the nineteenth century. Ottoman's and
Egypt's borrowing in the nineteenth century were mainly external, from foreign
governments and bankers. Early borrowing, i.e. the Prophet's and the Abbasites' did
not result in issuing any debt instruments. Although it may be understandable that
Abbasite Ministers of Treasury who made the borrowing must have issued some
"IOU's" to lenders. Historical sources mention that transactions of the government
treasury (bait al mal), at that time, were recorded and documented. However, there
are no reports available on negotiability of such "IOUs" if they ever existed.
Additionally public borrowing was known to the classical writers of Islamic
Jurisprudence (fiqh). For instance, Al Mawardi (Circa 1058 CE, P 215) talked
about resorting to borrowing for payments of dues on the treasury and argued that
successive rulers are bound to pay such loans back.
The Prophet' borrowing was all interest-free. Later on, interest may have
been the basis for at least some of the Abbasites' public loans.13
The Qur'an, Islamic holy book, prohibits interest (riba) in terms stronger
than any terms used in any other prohibition. The alternative mentioned in the
Qur'an for riba-based financing is sale (Verse II: 275),14
. The traditions of the
11
Τηε Προπηετ Μυηαµµαδ διεδ ιν 632 Χ.Ε. Ηε µιγρατεδ το Μαδιναη ιν Ωεστερν Αραβιαν Πενι
νσυλα ανδ εσταβλισηεδ τηε φιρστ Ισλαµιχ στατε ιν 622 Χ.Ε. Μ.Ν. Σιδδιθι χιτεσ σεϖεν χασεσ οφ β
ορροωινγ βψ τηε Προπηετ. Ιν τωο χασεσ, τηε συµσ οφ λοανσ ωερε ρελατιϖελψ λαργε. Ονε λοαν
ωασ ιν κινδ ανδ ονε ιν χαση. Ηε βορροωεδ φορ δεφενχε πυρποσεσ ασ ωελλ ασ φορ περσοναλ νεεδ
σ φυλφιλλµεντ φορ χερταιν χιτιζενσ. Μ.Ν. Σιδδιθι, ∀Πυβλιχ βορροωινγ ιν εαρλψ Ισλαµιχ ηιστορ
ψ.∀ παπερ πρεσεντεδ ατ τηε τηιρδ Ιντερνατιοναλ Χονφερενχε ον ισλαµιχ Εχονοµιχσ, Κυαλα Λυµ
πυρ, ϑαν 29−31 1991 φορτηχοµινγ ιν τηε χονφερενχε προχεεδινγσ, ππ. 4−14.
12
Ιβιδ., ππ. 19−23
13
Ιβιδ.
14
ςερσεσ ΙΙ: 276 ανδ 280 αλσο µεντιον χηαριτψ ανδ γραντινγ τιµε το τηε δεβτορ φρεε οφ χηαργε
, βυτ σινχε βοτη οφ τηεσε αλτερνατιϖεσ αρε χηαριταβλε ιν νατυρε τηεψ δο νοτ µακε αλτερνατιϖ
8. 8
Prophet Mohammad confirm this and add the principles of Profit and loss sharing
and output sharing as additional alternatives.
Sale -base Financing
Financing is done when payment is deferred. The sale principle of financing
lies in the provision of physical factors of production, intermediate inputs or
consumption goods and services against deferred payment. The object of financing
may be goods or services, which may be used for production or consumption. This
mode of financing can be used by financial intermediaries (such as Islamic banks),
owners of factors of production and other economic agents and intermediaries.15
Financing may take the form of sale or lease with few differences in their respective
legal conditions. Sale, as a financing mode, includes deferred payment sale, order
purchase with deferred payment (istisna`) and deferred delivery sale (salam).
Deferred payment sale is usually practiced as sale at mark up to the purchase orderer
(murabahah). Leasing financing is practiced in the form of leasing to the purchase
ordered too.
Unlike interest-based financing, murabahah and leasing do not create a
situation in which the return to financier is known in advance,16
because the seller-
cum financier (or lessor-cum-financier) carries certain risks involved in purchasing,
owning and selling or leasing the object of sale or lease.17
Moreover, in the case of
lease the object of the contract remains in the financier's ownership for the duration
of the contract. Like interest-based financing sale financing creates debtor/ creditor
ε το ιντερεστ−βασεδ φινανχινγ ον τηε γρουνδ τηατ τηε φινανχιερ δοεσ νοτ εξπεχτ µατεριαλ ρετυρ
ν ουτ οφ τηεµ.
15
Μονζερ Καηφ ανδ Ταριθυλλαη Κηαν, Πρινχιπλεσ οφ Ισλαµιχ Φινανχινγ: Α Συρϖεψ, Ισλ
αµιχ Ρεσεαρχη ανδ Τραινινγ Ινστιτυτε (ΙΡΤΙ) οφ τηε Ισλαµιχ ∆εϖελοπµεντ Βανκ, ϑεδδαη, 1993.
16
Μ. Φαηιµ Κηαν, Χοµπαρατιϖε Εχονοµιχσ οφ σοµε Ισλαµιχ Φινανχινγ Τεχηνιθυεσ, ΙΡΤΙ,
1992, ππ. 6−7.
17
Τηεσε ρισκσ αρε υσυαλλψ µεντιονεδ ιν Ισλαµιχ ϕυρισπρυδενχε ρεφερενχεσ. Τηεψ ινχλυ
δε τηε ρισκ οφ τηε χοντραχτ δισχοϖερεδ το ηαϖε βεεν ϖοιδ, τηε ρισκ οφ δισχοϖερινγ αν υνδετεχτ
εδ δεφεχτ, ετχ.
9. 9
relationship between the two parties. On the other hand, unlike interest-based
financing, sale- based financing is committed to a complete or perfect
correspondence with the physical or real market and it involves the financier in
commodity-based relationships in strictest sense of the term rather than pure
financing.
Profit-and-Loss sharing principle
Profit-and-loss sharing may take the form of partnership (sharikah) or
commendam partnership (mudarabah). The Islamic principle of profit-and-loss
sharing implies that profit may be distributed between partners as per agreement
which may differ from their shares in capital, but losses have always to be
distributed in accordance with capital shares. Mudarabah is a special case of
sharikah in which the capital share of the managing partner is zero, therefore he/she
does not share in the loss.18
Partnership requires the financier to share both capital
and management i.e., to contribute to the decision making process. Mudarabah
requires financier to provide capital and remain away from managerial decisions.
Mudarabah's inability to allow the banker to participate in the decisions of the
management and to exercise effective control on truthfulness of its financial reports
is probably the main reason behind the failure of most Islamic banks to
courageously use this mode of financing on the investment side of their activities.
Output sharing principle
This principle of financing is derived from crop sharing which is an ancient
practice in agriculture approved in Islam and re-organized in accordance with the
Islamic law. In this arrangement, output (rather than profit) is shared. One party
provides land and trees while the other party provides labor. Seeds, fertilizers,
pesticides and machinery may be provided by either partner. Output-sharing
financing requires the financier to own durable productive assets which are given to
the manager who takes charge of managerial decisions against certain percentage of
gross output. The issue of expenses on other inputs seem to be of lesser importance
according to Islamic law since, as in corp sharing, either party may pay for them
provided this is considered in determination of shares of output distribution.
18
Μ. Φαηιµ Κηαν, ιβιδ., ππ. 2−9.
10. 10
In Practice, output sharing did not make a serious headway among the modes
used by Islamic banks today as it requires the financier to own land and equipment
for a long period.
III - INSTRUMENTS PUBLIC BORROWING IN
ISLAMIC SYSTEM
This section will discuss instruments of public borrowing in the Islamic state
which are based on the Islamic principles of financing. From the discussion of
Section Two, it is noticed that as the financier in profit-and-loss-sharing and output-
sharing agreements is a partner not a creditor to the working partner, and as a lessor
in leasing agreements is an owner of leased assets not a creditor to the lessee, the
application of these principles of financing does not create public debt. Modes of
financing derived from these principles are - in fact - alternatives to public debt.
Government guarantee of private investors in public goods production is also
another alternative. On the other hand, sale-based financing creates debt and
instruments derived from sale-based financing are instruments of public debt.
Moreover, since Islamic Shari'ah does not prohibit interest-free borrowing by the
public sector, instruments and modes of public borrowing which fulfil the Islamic
law's conditions should also be included in the category of public-debt creating
instruments.
3.1 Ownership-based Financing instruments
Ownership-based financing instruments are certificates which allow the
financier certain return and are at the same time negotiable, i.e., can be traded at a
secondary market. From Islamic point of view, a certificate must represent (i.e., be
a title of ownership of) physical commodities or property in order to be sold at a
price other than its face (purchase) price. Consequently, from the point of view of
the financier, all instruments discussed in this sub-section represent real or physical
income-generating properties.
Lease instruments
This is the only form of negotiable instruments of financing based on sale
principle: ijarah [leasing] instrument. The way a leasing instrument works within an
Islamic system is as follows: Certificates are issued to the public as titles of
11. 11
ownership of real estates, machinery and equipment, airplanes, ships, or any other
long living assets. These fixed assets are leased to the government. Certificate
holders receive their share of the return in proportion of their holdings to total
certificates. As owners, certificate holders bear full responsibility of what happen
to their property and they are required to keep it in shape suitable for deriving its
usufruct by the lessee. Arrangement to take charge of these responsibilities may be
made by means of insurance and power of attorney to the lessee or anybody else.
The negotiability of these instruments is unquestionable provided that the issuing
body accepts, in the prospectus, that holders may sell the property without any
effect on the lease relationship between lessee and lessor. Moreover, lease
instruments are sold at market prices which obviously reflects the market valuation
of the stream of income involved with each instrument.
A variety of condition may be included in lease instruments. Lease
instruments may be perpetual or renewable, whereby capital consumption
(amortization) or replacement allowance is introduced to preserve the value of the
asset and replenish it when needed. They may be temporary in which no
amortization allowance is made and the instrument gradually looses its value at
regular intervals. This kind of instruments may fit for investments where fast
changes in technology are expected such as computer equipment, etc. They may
also be declining leasing instruments, where the lessee desires to own the property
after a period of time and assigns installments of the value of the property to be paid
to the lessor along with the rent.
Lease instruments may be used to finance income producing projects such as
an electricity plant as well as for projects which do not produce income such as
mute infrastructure. Fixed assets and installation of either a commercial or military
airport may be financed by leasing certificates. These certificates may also be used
to bridge the gap in current budget such as leasing public office furniture instead of
buying it. They can also be used in developmental financing such as school
buildings, laboratory equipment or machinery for a government economic
enterprise. They can be used for infrastructure construction, productive equipment
or for defense (except consumable material), as long as the assets involved have
long live and can be identified for a rental relationship. Certificate may be issued to
represent one long living asset or a group of assets put together in one project or in
several projects (diversification) as long as they are covered by one leasing contract.
Assets of different life spans may be combined together, thus providing this
instrument with the ability of having fixed or declining return.
Leasing certificates may be issued by the central government or any other
12. 12
governmental body of autonomous budget and identity such as local governments,
municipalities, government owned economic enterprises, government supervised
awqaf organizations, etc. They may be issued for assets that have a relatively short,
medium or long use life span as long as they are not themselves consumable.
Lastly, the nature of leasing financing does not change the provider of public
goods. When resorting to this form of financing, the government keeps the decision
making on the provision of goods it supplies in its own hand. Therefore, leasing
financing can be applied irrespective of the public choice regarding who provides
public goods. The issue of privatization, or size of government does not arise.
Sharikah-and-Mudarabah-based instruments
These instruments are similar to common stocks in almost all aspects
provided they do not have any prohibited conditions such as preferential or
guaranteed return.19
Sharikah mode of financing does not offer much of freedom
for the public sector as it gives shareholders equal shares of management right. By
selecting sharikah instruments for financing projects the government surrenders
management rights to shareholders. In this respect, sharikah financing is in fact a
form of privatization of public projects which may be applied to new projects as
well as to existing projects. Sharikah may suit mixed corporations in which the
public sector desires to benefit from the skills of private businessmen in decision
making. In such a case private shareholders will provide managerial skills along
with finance. The benefit to the government is that it gets its project established and
entrusted to skillful management while keeping certain control over it. Sharikah
instruments are negotiable and the government may increase (decrease) its stake in
the corporation through the secondary market. The government may preserve a
majority right by holding a large chunk of the stocks. On the other hand,
mudarabah makes a good mode of finance for income earning public sector projects
as it limits the role of the financier to providing money and receiving (+ or -) return,
while the management of the project is retained in the hands of the government.
The practical experience of Islamic banks in the last fifteen years indicates
that the success of mudarabah in mobilizing deposits is very satisfactory. This
success, along with the limited ability of most Islamic banks to exercise this mode
19
Σεε τηε Ρεσολυτιονσ οφ τηε 7τη αννυαλ µεετινγ οφ τηε ΟΙΧ Ισλαµιχ Φιθη Αχαδεµψ, ϑεδδαη,
Μαψ 1992.
13. 13
of financing on their assets side, may partially be attributed to the corporate form of
the managing partner (bank) which reduces the moral hazards in addition to other
factors related to trust in management and religious zeal which may be higher
among depositors than businessmen who are usually more pragmatic, etc.20
Consequently, mudarabah has a good chance to succeed in mobilizing resources for
public sector income earning projects provided the government takes practical steps
to offer managerial skills which nourish confidence among prospective financiers.
Mudarabah instruments are also equity shares. They entitle shareholders, who are
exposed to losses not to exceed the entire value of their shares, to receive shares of
profit as stipulated in the prospectus. They may be offered for a specific investment
or project (or a group of projects) under the management of one managing partner
provided that this project (group of projects) may be identified accounting-wise in
such a way that a profit and loss account may be made for it (them) distinct from
other projects the managing partner might be running.
These kinds of instruments may be issued for short, medium or long term
investment. They may be issued by the government itself, local executive branches,
municipalities, government economic enterprises, etc. They can be sold at market
prices because they are fully negotiable. They may be issued by the users of funds
themselves so you have mudarabah instruments of railway, airlines or
communication corporations etc. They may be issued by an intermediary managing
agency which supplies funds to other users on the basis of mudarabah or other
modes of financing. This characteristic confers high degree of flexibility on this
kind of instruments which makes it possible to establish private or government
institutions specialized in issuing mudarabah and/or sharikah instruments to
financiers and allocating mobilized funds to government income generating
enterprises. Moreover, specialized institutions may be established to raise funds on
murabahah basis and use them to supply goods for deferred payment to the
government; or to combine goods and services together and provide financing to the
government on the basis of contracting works against deferred payment (istisna`).21
Mudarabah and sharikah instruments may be perpetual or for a definite period.
They may also be decreasing if the prospectus allocates certain proportion of the
managing partner's share of profit to buy up the shares of financier. They may also
20
Ιν ∀ΠΛΣ, Φιρµ Βεηαϖιορ ανδ Ταξατιον∀, ΙΡΤΙ, 1992, Μ. Φαηιµ Κηαν, χιτεσ εξαµπλεσ οφ Πα
κιστανι ανδ Σαυδι βυσινεσσ αττιτυδε τοωαρδσ Μυδαραβαη.
21
Ιστισνα∋ µανυφαχτυρινγ ορ χονστρυχτιον ον ορδερ, ιν ωηιχη τηε συππλιερ οφ µανυφαχτυριν
γ ορ χονστρυχτιον µαψ αλσο προϖιδε φινανχινγ, ι.ε., παψµεντ ωιλλ βε µαδε ατ, ορ σοµε τιµε αφτε
ρ, δελιϖερψ. Τηε νατυρε οφ τηε χοντραχτ, ηοωεϖερ, γιϖεσ ροοµ φορ φινανχινγ το βε γιϖεν βψ τηε
ορδερερ το τηε προδυχερ, ι.ε., ιν τηε οπποσιτε διρεχτιον, τοο.
14. 14
have decreasing value if assets exploited have no end-of-productive-life value such
as an oil well or a fixed term franchise. Besides, the pool of funds raised through
mudarabah and/or sharikah instruments may make a closed pool as in common
stock companies with fixed principal, or they may make an open pool similar to that
of open capital companies and to the pools of investment deposits in Islamic
banks.22
Transfer of ownership of these instruments may be made easy by records in
the issuing institutions, endorsement on the certificates, or even by change of hands
of certificates if they were to bearers.23
Lastly, these instruments may be backed by
a guarantee from the government if they are issued by corporations and/or
institutions having legal and financial independence from the government. Such a
guarantee may cover certain kinds of risks especially non-commercial risks but it
may also cover commercial risks as we have seen earlier in this paper.
Output-sharing instruments
This principle permits sharing the output provided no valuation of capital is
needed, because valuation is subject to value judgement. Hence, this principle
requires that income generating property is handed over to a manager on the basis of
sharing the output. Output-sharing certificates take the following form: follows:
The government sells an existing income earning fixed asset such as a toll bridge or
highway to certificate holders. The proceeds of sale are needed for another
governmental project whatever it may be and the purchasers have nothing to do
with this matter. Certificate holders may assign a governmental bridge authority (or
any other body they may choose) to run the property on the basis of output sharing
while all running expenses are born by the Managing authority. Of course,
expenses are taken into consideration in determining the rate of output sharing.
Alternatively, a private contractor may issue shares and invite investors to construct
a toll bridge which will be managed by the governmental bridge authority on the
22
Βαηραιν ιντροδυχεδ αν αχτ περµιττινγ τηε εσταβλισηµεντ οφ οπεν−ενδ−χαπιταλ χοµπανιεσ ι
ν ωηιχη παρτ οφ τηε χαπιταλ µαψ τακε τηε φορµ οφ νον−ϖοτινγ σηαρεσ βασεδ ον µυδαραβαη πρι
νχιπλε. Σεε Σαµι Ηαµουδ, ∀αλ Αδαωατ αλ Μαλιψψαη αλ Ισλαµιψψαη∀ [Ισλαµιχ φινανχιαλ ινστ
ρυµεντσ], παπερ πρεσεντεδ ατ τηε σεµιναρ ον τηε φινανχιαλ µαρκετσ φροµ Ισλαµιχ ποιντ οφ ϖιεω
οργανιζεδ ϕοιντλψ βψ τηε ΟΙΧ Φιθη Αχαδεµψ ανδ ΙΡΤΙ, Ραβατ Νοϖ. 1989.
23
Α ωορκσηοπ οργανιζεδ ιν Βαηραιν, Νοϖ. 25−28, 1991, βψ Τηε ΟΙΧ Ισλαµιχ Φιθη Αχαδεµψ, ΙΡ
ΤΙ ανδ Ισλαµιχ Βανκ οφ Βαηραιν ρεχοµµενδεδ τηατ ιτ ισ περµισσιβλε ιν Σηαρι∋αη το ισσυε βεαρ
ερ σηαρεσ. Τηισ ωασ αππροϖεδ βψ τηε πλεναρψ 7τη αννυαλ µεετινγ οφ ΙΦΑ, ϑεδδαη, Μαψ 1992.
15. 15
basis of output sharing between the Government and the contractor. The bridge
authority may also assume the role of the construction contractor as deputed by
shareholders.
Certificates may be offered for an existing or a new project with or without a
gestation period. But in new projects, there will be two forms of relationships, at
two consecutive stages, between the bridge authority and certificate holders. In
stage one, the authority shall be an agent of certificate holders in constructing the
bridge. It may be paid certain fees for services provided or it may act voluntarily
until the construction is complete. In stage two, i.e., once the property is ready for
income generation, the authority becomes a managing partner as in corp sharing.
Since output-sharing certificates represent property actually owned and
legally possessed, they can be sold at market prices. For new projects, there may be
certain waiting period until cash funds are substituted for physical property and/or
construction material since the Fiqh Academy of the OIC ruled that sale of such
instruments at a price other than the purchase price is only permissible after at least
majority of property becomes physical commodities and assets instead of cash.24
Output sharing certificates, like common stocks, do not necessarily have any
embodied process of redemption or amortization as they represent full ownership of
fixed assets. They also expose holders to risks resulting from natural calamities as
well as commercial risk such as diversion of traffic away from the bridge. A vast
variety of output sharing certificates may be issued to accommodate a multiplicity
of output yielding public projects which need financing especially in infrastructure
and transportation sectors. Like mudarabah and sharikah instruments, output
sharing certificates may represent projects in which allowance for amortization of
capital may or may not be made. In the latter case, periodically distributed share of
output represents both a portion of the principal and a return. This approach may be
suitable for projects based on exploiting a franchise or when there is a condition of
transfer of ownership of the project or its assets to the public sector after certain
period.
Characteristics of Ownership-based public financing instruments
24
ΟΙΧ Ισλαµιχ Φιθη Αχαδεµψ,Ρυλινγσ ανδ Ρεχοµµενδατιονσ, Ρυλινγ Νο. 5 οφ αννυαλ µεετινγ Ν
ο. 4, ϑεδδαη 1988, ππ. 66−67.
16. 16
1. The most important implications of ownership-based instruments are the
following: a) These instruments are fully negotiable at market prices because
their sale means the sale of the property they represent. They can be issued to
a specific name or to holder. b) In principle, there is no need for repayment
(by government) of the principal of these instruments, unless this is so
specified in the conditions of financing agreement (as in diminishing leasing,
sharikah or mudarabah). Therefore, the whole issue of inter-generational
equity does not arise. c) Ownership by the public of government projects is
in a way a form of privatization. But we noticed that except in sharikah, the
government retains the management of projects financed by these
instruments. This means that the provision of the output of these projects is
kept public, not private. Therefore, this is only a special form of
privatization, not similar to what is usually meant by the term. In a different
research,25
I called this form a "democratization" of public projects. d)
Except in diminishing leasing, the government has to pay the market price if
it wants to regain ownership of projects financed by these instruments. In
diminishing leasing the paid price is contractually determined.
2. These financing instruments are neutral as far as the size of government is
concerned. In other words, these instruments can be used by a government
which opts to provide larger variety of goods, or by a government which
chooses to contain its role to the provision of goods on which the principle of
exclusiveness does not operate through the play of the market forces.
3. The need for future taxes and/or fresh borrowing to pay for public financing
through these instruments can be tackled from two angles: first, whether a
financed project produces a surplus sufficient to pay for its finance services
(principal plus return). Efficient income generating projects may be able to
pay for these services. Therefore, in this case, future taxes may not be
inevitable. On the other hand, projects that do not produce income may call
for future taxation to pay for their financing services. Second, what forms of
financing is applied in the project. In interest- based public debt, future
taxation-cum-borrowing is required to pay for the debt services. In all
financing instruments discussed in this sub-section, the financing agreement
may be formulated in a way that does not require future taxation because
there would be no need to pay back the principal financed. In other words,
even with leasing instruments used to finance non-income generating assets,
25
Μονζερ Καηφ, Φινανχιαλ Ρεϖενυεσ οφ τηε Εαρλψ Ισλαµιχ Στατε, ΙΡΤΙ, 1992.
17. 17
the government is not necessarily required to pay back the principal since it
may keep renting the leased assets for ever.
4. Ownership instruments financing are always related to specific projects and
usages. In case of leasing, this implies that the government can only use the
rented fixed assets and in the case of other instruments the government is
bound to undertake specified revenue generating projects. This is in contrast
with interest based public borrowing which does not necessarily involve
such one to one correspondence with acquisition of physical assets or
construction of income producing projects. On the one hand, this linkage
with physical assets and the profit incentive in such projects reduce the moral
hazards on the part of public officers because of added (private) control
element, and on the other hand, they increase efficiency because public
projects would have to compete with private sector's projects for financing.
5. Sharikah, mudarabah and output sharing instruments only apply to income
generating projects. On the other hand, leasing may be utilized for any kind
of public projects regardless of being mute or income generating. Therefore,
of the above mentioned instruments leasing financing is the most flexible.
6. These instruments can be used for external and internal resource
mobilization.
3.2 Debt Based Public Financing
Governments may prefer resorting to public borrowing under certain
circumstances. For instance, seasonal needs to bridge the timing gap between
revenue collection and expenditure disbursement, inability to formulate certain
financing needs under any of the ownership instruments because of certain legalities
or failure of these instruments to attract investors. Thus, debt-based financing
remains an alternative and supplement to ownership-based financing especially that
debt-based modes are basically tuned to serve short-term needs although they may
be used for long-term financing. However, it the Islamic system, whenever we
move from the idea of ownership to the idea of debt, we loose on the side of
liquidity because of two Islamic Shari'ah conditions: (1) debts may only be
exchanged at face value regardless of date of maturity, and (2) debts may not be
exchanged for debts, i. e., in a permissible or lawful exchange either price or
commodity must be present if the other is deferred.
18. 18
Consequently, none of the debt-based modes of financing can be negotiable.
This eliminates the possibility of a secondary market with all negative effects on the
first market itself, and makes it necessary that an alternative approach for liquidation
must be sought. The alternative which is permissible in Islamic law is redemption.
Redemption, in this context, means buying back the debt before its maturity by the
debtor. It may be done either at the debt's face value or at a discount. The Islamic
law requires certain conditions for redemption, the most important among them is
that it should not be part of the original contract which created the debt.26
Lastly, debt may be acquired from the public voluntarily or by use of legal
authority of the government or coercion. With regard to sources of the loans, they
may be internal or external. The focus of this paper is on the voluntary public debt
in Islam.
If voluntary public debt is to succeed, it must have certain built-in attractions
in order to appeal for the self interest drive of individuals. Islamic Shari'ah prohibits
attaching any fringe benefits to loans and considers any such benefits as a form of
interest. Prohibited fringe benefits may include tax reduction, relaxation of deadline
conditions of tax payment, providing facilities in sale of certain public goods, etc.
Consequently, attractions for public debt must be carefully designed in order to
fulfil the conditions of Islamic law. Attractive features of public debt may be in the
form of appealing to the sense of patriotism and religious piety or in the form of
profit incentive incorporated in exchange relationships. This profit incentive may
take the form of mark up on goods sold to the government for deferred payment,
mark down on future goods and services sold by the government for immediate
payment, or protection against inflation.
A- SALE-BASED PUBLIC DEBT
Mark up may be applied through murabahah or through 'istisna'. Mark
down may be applied by means of salam, 'istisna' or leasing. Hence, we have four
kinds of sale-based financing modes which can be used by the public sector:
26
Ιτ µυστ βε νοτεδ τηατ τηισ δισχουντ ισ αππροϖεδ βψ σοµε Μυσλιµ σχηολαρσ ωηιλε οτηερσ
οπποσε ιτ ον τηε γρουνδ τηατ ιτ ισ α φορµ οφ ιντερεστ. Φορ α δισχυσσιον ον τηε ισσυε ρεφερ το Ρ
αφιθ αλ Μισρι, Αλ Ηασµ αλ Ζαµανι [τιµε∋σ δισχουντ],Χεντερ φορ Ρεσεαρχη ιν Ισλαµιχ εχονοµιχ
σ, ϑεδδαη. Ηοωεϖερ, τηε ΟΙΧ Ισλαµιχ Φιθη Αχαδεµψ χονσιδερσ τηισ δισχουντ περµισσιβλε υνδε
ρ χερταιν χονδιτιονσ. Σεε Ρεσολυτιονσ οφ 7τη Αννυαλ Μεετινγ, ϑεδδαη, Μαψ 1992.
19. 19
murabahah, 'istisna', salam and leasing.
Mark-up-based public debt : murabahah and 'istisna'
The concept of mark up comes from raising the price of goods if payment is
made at a subsequent date in recognition of a financing compensation. Public-debt
creation may take the form of simple deferred payment sale in which the
government gives IOU's for future payment to suppliers of goods. By the same
token 'istisna' form of sale may be used for construction with payment taking the
form of IOU's due at a point of time subsequent to the date of delivery of completed
construction. Since these IOU's are transferable at the face price, they do not attract
secondary market transactions. A provision may be made that they can be used for
tax payment, etc. Debt certificates, which may be of different denominations and
maturities, may be redeemed by the government before their due date and at the
time of redemption the government may seek a discount for early payment.
Public debt may also copy the murabahah for the purchase orderer. It works
as follows: The government assigns one of its bodies to work as agent of the public
in acquiring goods on order for the government. These goods shall be paid for in
cash from funds obtained from the public to finance the operation. Upon completion
of sale of goods purchased on order and receipt of small denomination murabahah
bonds from the government for the amount of the contract, the agent will distribute
these bonds to contributors of funds in proportion of their principal.
Mark-down and fixed-price-in-kind public debt : salam, 'istisna' and
leasing
Salam offers a mode of financing the public sector if government is able to
provide future goods for which funds are obtained presently. For example,
government owned enterprises or farms, which produce consumer goods, may sell
part or all of their output on salam basis. Salam coupons of indebtedness of small
denominations of quantities of goods may thus be issued to purchasers. These
coupons are not negotiable because according to Islamic law one may not sell
purchased goods before physical delivery. But they can be redeemed before
maturity by canceling the contract if the parties agree and the purchaser may get
his/her money back without any increment.
20. 20
'Istisna'-based public debt is similar to salam with only one difference
related to the nature of goods. In 'istisna', the object of sale is not necessarily
identical or standardized commodities. Rather, it includes construction or
manufacturing works with certain specification. These works may cover both
material and labor such as houses, cars, etc. In 'istisna'-based financing of the public
sector, the government sells future housing units with specifications and delivery
date, put clearly forward in the prospectus at the price of say $100 for each one
thousandth of a unit. Whoever buys one thousand coupons will get a house. These
housing coupons are also not negotiable but they can be redeemed before maturity
by canceling the 'istisna' contract.
The use of proceeds of this form of financing is not tied or restricted to
specific goods or projects. Consequently, proceeds of salam and 'istisna' may be
used to finance another project, current budget deficit, balance of payment deficit
and what not. Moreover, salam and 'istisna' coupons may be issued by federal,
regional or local branches of government as long as the delivery of object (contrac-
ted goods or construction) is feasible for the issuing body. The incentive to hold
these debts may be a mark down on current prices or alternatively, if prices are
expected to increase because of expected or persistent inflation, pricing at the
present level provides an incentive in the form of protection against inflation.
Public utility warrants
This is a special kind of debt-based financing which applies to public
utilities. This arrangement is a version of salam. A utility public sector corporation
may contract its consumers on sale of certain quantity of say electricity they draw in
the future at a marked-down price against advance payment. Obviously, the nature
of this commodity is that delivery is combined with consumption, so the consumer
is the party who determines the quantity delivered at each period of time.
Lease instruments
Lease debt may take the form of securities representing a commitment by the
government to provide certain service to the holder or his family at a future date. It
is a contract to sell a service for advance payment. Services object of this contract
may be provided after a number of years such as university education for children or
housing usufruct, or they may be provided only after a short span of time such as
21. 21
garbage collection during 4th month of the current year. Like salam and 'istisna'
public debt, leasing securities are not negotiable. They may be priced at a mark
down or at present a price lower than expected price at time of delivery. They can
be issued by central government, a university or a local branch of government as
long as issuing agency can provide contracted service in the future. They may be
redeemed before maturity for the paid price. Their proceeds need not be tied to any
specific use, i.e., seller of services may use proceeds at own wish and discretion,
e.g., to finance current budget deficit.
B - Loan-based financing
There is one kind of public loan which may embody certain permissible
fringe benefit. This is foreign currency loan. It invokes the incentive of protection
of one's wealth against devaluation and to a certain extent inflation abroad).
Foreign currency bonds may be issued against foreign currency debt on the
government. They may be used when local currency is expected to loose value in
terms of foreign exchange. The incentive they provide is the guarantee of payment
in the foreign currency in which bonds are issued. They are issued when foreign
currency is more stable than domestic currency. Thus, these bonds award protection
against devaluation of domestic currency and against domestic inflation, but the
prohibition of yield and negotiability makes them unattractive. However, they may
be demanded by individuals who have no investment opportunities of their foreign
liquid assets which may happen in case of restrictions on holding foreign assets.
On the other hand, it may be possible sometimes to find a reasonable
response to the appeal for lending the government by invoking the sentiments of
loving one's country and protecting and promoting the religious values and
principles it stands for. After all, the Islamic system has a strong built-in
mechanism to promote voluntary contributions by tying them to good deed and to
appeasing to God and saving for one's hereafter. If the Qur'an calls on people to
sacrifice their lives for supporting just causes, why not also sacrificing one's wealth
especially if it is sought only on lending basis.
Characteristics of public debt modes
1. While mark-up modes, voluntary and involuntary public borrowing
create indebtedness in money terms, mark-down modes create in-kind
22. 22
indebtedness.
2. Mark-up and mark down-modes are tightly related to the
exchange/production of goods and services. In mark-up modes,
(murabahah and 'istisna') public borrowing occurs only in order to
supply the government with goods and services it wants to use for its
current and/or developmental activities, regardless of whether
financed projects generate income or not. In mark-down modes,
government prepares to produce goods and services as payment of its
in-kind debt. Islamic law requires that those forms of financing
cannot be concluded if the debtor is not able to supply contracted
goods and services.
The link with commodities supplied and produced puts a tab on
public debt which prevents the government from expanding it. Thus
mark-up and mark-down public debts avoid one of the major
drawbacks of interest-based debt.27
3. In mark-down modes as well as in voluntary and involuntary
borrowing, the public sector has a free hand over the proceeds of
financing. It can use them to meet budget deficit regardless of its
sources. This is unlike the case of financing instruments examined in
sub-section 3.1. In other words, these modes of public debt provides
the government with the flexibility of using the proceeds as desired
by budget planners. They bear resemblance to most interest-based
public debt.
4. Debts, whether in-cash or in-kind, have to be paid when due.
Therefore, all modes of Islamically acceptable forms of public debt
pose the challenge of repayment of debts in the future, especially if
the goods and supplies obtained in mark-up modes and/or proceeds of
other modes are not used for income generating projects. This means
that future generations have to be either taxed or asked for fresh flow
of loans to repay outstanding debits. Obviously, this calls for a
thorough examination of the impact of such modes on inter-
generational equity.
27
Αλ−Θαρι, Μοηαµµαδ Αλι, ∀Πετρολευµ βονδσ ασ αν αλτερνατιϖε το τρεασυρψ βονδσ∀, υνπ
υβλισηεδ παπερ, ΧΡΙΕ, Κινγ Αβδυλαζιζ Υνιϖερσιτψ, ϑεδδαη, 1412Η.
23. 23
5. Since all modes of public debt discussed in this sub-section provide
the government with either cash or goods and services, there is no
issue of privatization arising from the application of these modes.
6. The government may provide any form of guarantee or collateral.
Such a guarantee may be given by the same body which uses the
financing or by another governmental body which may be legally and
financially independent from the debtor.
7. Modes of public debt can be applied to external as well as internal
financing. Consequently government may obtain foreign institutional
financing on the basis of murabahah, salam, 'istisna' and benevolent
foreign borrowing. It can also mobilize foreign financing from
individual, citizens and others, on the basis of mark-down modes and
foreign currency bonds.
IV - CONCLUSIONS AND SUMMARY
The Islamic system foresees, public goods to be provided by government,
voluntary sector, and/or private sector. The Islamic system encourages the provision
of public goods by non-profit organization and by the private sector and offers
moral enhancement as well as material incentives for that. Whenever it is possible
Islam, in general, prefers small government over big government as it assigns as
fewer goods as possible for provision by the government. Nevertheless, under all
circumstances there will remain certain public goods that are to be provided by the
public sector. This may be either because of the nature of these goods, Islamic law's
requirement, or political choice of the nation.
Since interest is prohibited, the Islamic economic system provides two kinds
of instruments that mobilize non tax resources from the private sector. Funds may
be raised on the basis of financier's ownership of assets made available to the
government or on the basis of debt creation. Without going in the details mentioned
in the text about the characteristics of each public financing instrument and mode of
public debt, three important points are worth to conclude with:
1- A future liability arises always from public debts. Hence, unless the
government generates sufficient future resources to pay back the debt, taxes
and/or expansion of borrowing become inevitable. From the point of view
of financing instruments this requires certain details: while
24. 24
ownership-based instruments do not call for redemption as they do not
create liability on the public sector, in-kind public debt calls for future
production of contracted goods and services. This requires financing.
Therefore, unless the production capacity of the public sector is expanded
sufficiently, fulfillment of contractual obligations becomes difficult.
Default of government in this regard may result in compensatory damages,
etc.
2- Public debt cannot be rescheduled because interest is prohibited.
3- There are non-tax public revenue sources which should be explored.
4- Sale of public property is, for instance an important source of public
revenue that may be tapped to meet budget deficit and pay back public debt.
Privatization is another source of revenue through which third world countries
may generate financial resources to pay back outstanding public debts and
cater to their future financial needs.
5- The modes and instruments discussed in this paper serve as a vehicle for
resource mobilization from the private sector within the country as well as
from external sources.
25. 25
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