Inclusive Welfare: On The Role of Islamic Public-Social Finance and Monetary Economics

Juhro, Solikin M. and Syarifuddin, Ferry and Sakti, Ali (2022): Inclusive Welfare: On The Role of Islamic Public-Social Finance and Monetary Economics.

Abstract

The concept of inclusive economic development has gained traction among researchers due to the failure of old concepts to solve poverty and social inequality. Shifting of the economic development is needed, from the focus on good and service value to increasing economic participation of communities. To shed a light on the solution, this study aim to examine the lesson learned from Islamic social-public finance and monetary economics role in realizing inclusive welfare. Based on in-depth observation, we found that economic inclusion and inclusive growth are fully in line with the spirit and goals of the Islamic economy in terms of creating equitable welfare for all. There is also an existing linkage between the role of Islamic social-public finance and monetary economics.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic economy, Public and social finance, Monetary economics, Economic development, Inclusive welfare
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General

References

Abdullah, M., & Suhaib, A. (2011). The Impact of Zakat on Social life of Muslim Society. Pakistan Journal of Islamic Research, 8.

Abou-Youssef, M. M. H., Kortam, W., Abou-Aish, E., & El-Bassiouny, N. (2015). Effects of religiosity on consumer attitudes toward Islamic banking in Egypt. International Journal of Bank Marketing, 33(6), 786–807.

Abozaid, A. (2021). Towards New Sharia Governance for Islamic Financial Institutions. Justicia Islamica, 18(1), 39–58.

Abu Bakar, N., Rosbi, S., & Uzaki, K. (2017). Cryptocurrency Framework Diagnostics from Islamic Finance Perspective: A New Insight of Bitcoin System Transaction. International Journal of Management Science and Business Administration, 4(1), 19–28. ADB. (2017). Promoting Inclusive Growth through Health Development in Central and West Asia. Asian Development Bank (ADB).

Agrawal, T. K., Kumar, V., Pal, R., Wang, L., & Chen, Y. (2021). Blockchain-based framework for supply chain traceability: A case example of textile and clothing industry. Computers & Industrial Engineering, 154, 107130.

Agur, I. (2018). Central Bank Digital Currencies : an Overview of Pros and Cons. SUERF Conference Proceedings 2018/2.

Agur, I., Ari, A., & Dell’Ariccia, G. (2019). Designing Central Bank Digital Currencies. IMF Working Papers, 2019(252).

Ahmad, M. (2015). Role of Waqf in Sustainable Economic Development and Poverty Alleviation: Bangladesh Perspective. Journal of Law, Policy and Globalization, 14.

Al-Laham, M., Al-Tarawneh, H., & Abdallat, N. (2009). Development of Electronic Money and Its Impact on the Central Bank Role and Monetary Policy. InSITE 2009: Informing Science + IT Education Conference.

Al-Mubarak, T., & Osmani, N. (2010). Applications of Maqasid al-Shari’ah and Maslahah in Islamic Banking practices: An analysis. International Seminar on Islamic Finance in India, 4–6.

Allen, S., Čapkun, S., Zhang, F., Eyal, I., Fanti, G., Ford, B., Grimmelmann, J., Juels, A., Kostiainen, K., Meiklejohn, S., Miller, A., Prasad, E., & Wüst, K. (2020). Design Choices for Central Bank Digital Currency: Policy and Technical Considerations. Nber Working Paper Series, 1–5.

Anand, R., Mishra, S., & Peiris, S. (2013). Inclusive Growth: Measurement and Determinants IMF Working Paper Series. Andrews, C., Sanchez, I., Chaudary, S., Clay, T., de Montesquio, A., Dutta, P., Heisey, J., Paul, B., & Samaranayake, S. (2021). The State of Economic Inclusion Report 2021.

Askarova, M., Saddulaev, T., & Radjabov, B. (2021). Possibilities and challenges of inclusive economic growth in countries. E3S Web of Conferences, 244, 10039.

Atmaja, F., Asmuni, A., & Andriansyah, Y. (2019). An Islamic Economic Perspective Of Public Finance In Indonesia Based On Ad-Dawudi‘s Thought In Kitab Al-Amwal. International Journal of Scientific and Technology Research, 8(6).

Ayuniyyah, Q., Pramanik, A. H., Md Saad, N., & Ariffin, M. I. (2022). The impact of zakat in poverty alleviation and income inequality reduction from the perspective of gender in West Java, Indonesia. International Journal of Islamic and Middle Eastern Finance and Management.

Bakar, N., & Rosbi, S. (2017). Bitcoin Transaction Framework Analysis from Perspective of Islamic Finance: A Contemporary Challenge of Islamic Finance in Digital Money Globalization Condition. Prosiding 3rd Muzakarah Fiqh & International Fiqh Conference Shah Alam Vol.15.

Bakar, N., Rosbi, S., & Uzaki, K. (2017). Cryptocurrency Framework Diagnostics from Islamic Finance Perspective: a New Insight of Bitcoin System Transaction. International Journal of Management Science and Business Adinistration, 4(1), 19–28.

Bank of England. (2021). New forms of digital money. Bech, M., & Garratt, R. (2017). Central bank cryptocurrencies. BIS Quarterly Review, September, 55–70.

Belouafi, A., & Chachi, A. (2014). Islamic Finance in the United Kingdom : Factors behind Its Development and Growth. Islamic Economic Studies, 22(1), 37–78.

Berumen, M. (2003). Public Sector Pricing Behavior and Inflation Risk Premium in Turkey. Eastern European Economics, 41(1), 68–78.

Billah, M. (2019). Islamic Financial Products: Principles, Instruments, and Structures. Palgrave Macmillan.

Bin Salamon, H., Ebrahimi, M., & Yusoff, K. (2015). Speculation: The Islamic Perspective; A Study on Al-Maisir (Gambling). Mediterranean Journal of Social Sciences.

BIS, SIX Group AG, & Bank, S. N. (2020). Project Helvetia: Settling tokenised assets in central bank money.

Bordo, M. D. (1999). The Gold Standard and Related Regimes. Cambridge University Press.

Boukhatem, J., & Ben Moussa, F. (2018). The effect of Islamic banks on GDP growth: Some evidence from selected MENA countries. Borsa Istanbul Review, 18(3), 231–247.

Brito, D. L., & Hester, D. D. (1974). Stability and Control of the Money Supply. The Quarterly Journal of Economics, 88(2), 278.

Brugge, J., Denecker, O., Jawaid, H., Kovacs, A., & Shami, I. (2018). Attacking the cost of cash. McKinsey&Company.

Burgos, A., & Batavia, B. (2018). Currency in Digital Era (Working Paper).

Canada Minister of Environment and Climate Change. (2020). A Healthy Environment and A Healthy Economy: Canada’s strengthened climate plan to create jobs and support people, communities and the planet.

Caponi, V. (2017). The effects of public sector employment on the economy. IZA World of Labor.

Caporale, G. M., & Helmi, M. H. (2018). Islamic banking, credit, and economic growth: Some empirical evidence. International Journal of Finance & Economics, 23(4).

Chapra, M. (1983). Monetary Policy in an Islamic Economy. International Centre for Research in Islamic Economics.

Conte, M. A., & Darrat, A. F. (1988). Economic Growth and the Expanding Public Sector: A Reexamination. The Review of Economics and Statistics, 70(2), 322.

Cooper, R. (1982). The Gold Standard: Historical Facts and Future Prospects (No. 1; Brookings Paper on Economic Activity).

CPMI. (2018). Central bank digital currencies. Markets Committee, March.

CPSS. (1996). Security of Electronic Money. https://www.bis.org/cpmi/publ/d18.pdf

Cutsinger, B. P. (2020). On the feasibility of returning to the gold standard. The Quarterly Review of Economics and Finance, 78, 88–97.

Dabla-Norris, E., Kocchar, K., Suphaphiphat, N., Ricka, F., & Tsounta, E. (2015). Causes and Consequences of Income Inequality: A Global Perspective.

Damon, J. (2016). The socio-economic impact of social security. https://ww1.issa.int/sites/ default/files/documents/publications/2-ISSA_SEISS-205770.pdf

Davoodalhosseini, M. (2018). Central Bank Digital Currency and Monetary Policy. Staff Working Paper. https://www.bankofcanada.ca/2018/07/staff-working-paper-2018-36/

Davoodalhosseini, M., Rivadeneyra, F., & Zhu, Y. (2020). CBDC and Monetary Policy. https://www.bankofcanada.ca/2020/02/staff-analytical-note-2020-4/

Deloitte. (2018). Private sector participation in public sector financing: An introduction. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Public-Sector/gx-ps-funding-and-financing-smart-cities-20181.pdf

Diwany, T. (2002). History of Banking: an Analysis. International Conference on Stable and Just Global Monetary System.

Doumenis, Y., Izadi, J., Dhamdhere, P., Katsikas, E., & Koufopoulos, D. (2021). A Critical Analysis of Volatility Surprise in Bitcoin Cryptocurrency and Other Financial Assets. Risks, 9(11), 207.

Durani, F. (2019). The Economic Dangers of the Fiat Money System: A Conceptual Analysis. Eastern Journal of Economics and Finance, 4(1), 1–13.

Dyson, B., & Hodgson, G. (2016). Why Central Banks Should Start Issuing Electronic Money. Positive Money, 1–36.

Enoksen, F. A., Landsnes, C. J., Lučivjanská, K., & Molnár, P. (2020). Understanding risk of bubbles in cryptocurrencies. Journal of Economic Behavior & Organization, 176.

Everett, E. (2022). Combining the Circular Economy, Doughnut Economy, and Permaculture to Create a Holistic Economic Model for Future Generations. ICSD 2021, 19.

Farooq, M. O., & Selim, M. (2019). Conceptualization of the real economy and Islamic finance: Transformation beyond the asset‐link rhetoric. Thunderbird International Business Review, 61(5), 685–696.

Garrido, J., & Nolte, J. (2021). Making Electronic Money Safer in the Digital Age. IMF. https://blogs.imf.org/2021/12/14/making-electronic-money-safer-in-the-digital-age/

Greenwood, D. T., & Holt, R. P. F. (2010). Growth, Inequality and Negative Trickle Down. Journal of Economic Issues, 44(2), 403–410.

Hadi, R., Adji, K., & Ari, P. (2021). The Foundation of a Fair Mudarabah Profit Sharing Ratio: A Case Study of Islamic Banks in Indonesia. The Journal of Asian Finance, Economics and Business, 8(4).

Hardianto, D. S., & Wulandari, P. (2016). Islamic bank vs conventional bank: intermediation, fee based service activity and efficiency. International Journal of Islamic and Middle Eastern Finance and Management, 9(2), 296–311.

Hartman, M., Gijsel, L., Plooij, M., & Vandeweyer, Q. (2019). Are instant payments becoming the new normal? A comparative study (No 229; Occasional Paper Series).

Harwick, C. (2016). Cryptocurrency and the Problem of Intermediation. The Independent Review, 20(4), 569–588. https://www.jstor.org/stable/44000162

Hasan, Z. (2008). Markets and the role of government in an economy from Islamic perspective. In MPRA Paper (No. 12233; MPRA Paper).

Hasan, Z. (2011). Money Creation and Control from Islamic Perspective. Working Paper, 1(1). https://jibm.org/archieves/volume1-issue1/volume1-issue1-article3/

Hidalgo, C. A. (2021). Economic complexity theory and applications. Nature Reviews Physics, 3(2), 92–113. https://doi.org/10.1038/s42254-020-00275-1

Hossain, M. (2012). Zakat in Islam: A Powerful Poverty Alleviating Instrument For Islamic Countries. International Journal of Economic Development Research and Investment, 3(1).

Ibrahim, M. H., & Law, S. H. (2020). Financial Intermediation Costs in A Dual Banking System: The Role of Islamic Banking. Buletin Ekonomi Moneter Dan Perbankan, 22(4), 531–552.

Imam, P., & Kpodar, K. (2016). Islamic banking: Good for growth? Economic Modelling, 59, 387–401.

IMF. (1989). Public Finance in Islam. IMF Working Papers, 89(68), 1.

IMF. (2018). Money, Transformed The future of currency in a digital world. https://www.imf.org/external/pubs/ft/fandd/2018/06/index.htm

Ishak, M. S. I. (2019). The principle of maṣlaḥah and its application in Islamic banking operations in Malaysia. ISRA International Journal of Islamic Finance, 11(1), 137–146.

Ismail, A., & Shaikh, S. (2017). Role of Islamic Economics and Finance in Sustainable Development Goals (SDGs) (No. 5; ESTAC Working Paper Series).

Ismal, R. (2011). Central bank Islamic monetary instruments: a theoretical approach. Studies in Economics and Finance, 28(1), 51–67.

Jaffer, M. A. (2020). Can Zakat Charity Help Reduce Economic Inequality? International Conference of Zakat, 279–294.

Jiang, J., & Lucero, K. (2021). Background and Implications of China’s E-CNY. SSRN Electronic Journal, 1–26.

Juhro, S., Syarifuddin, F., Sakti, A., & Suryanti, E. (2019). Keuangan Publik dan Sosial Islam: Teori dan Praktik. PT Rajagrafindo Persada.

Kagan, J. (2020). Financial Technology - Fintech. https://www.investopedia.com/terms/f/fintech.asp

Kahf, M. (1995). Ekonomi Islam, Telaah Analitik terhadap Fungsi Sistem Ekonomi Islam. Pustaka Pelajar.

Kameel, A., Meera, M., & Larbani, M. (2006). Seigniorage of fiat money and the Maqasid al‐Shari’ah. Humanomics, 22(2), 84–97.

Kanbur, R., & Rauniyar, G. (2009). Conceptualizing Inclusive Development: With Applications to Rural Infrastructure and Development Assistance. Occasional Paper, (7).

Khan, H., & Bashar, O. K. M. R. (2008). Islamic Finance: Growth and Prospects in Singapore. SSRN Electronic Journal.

Khatat, M. (2016). Monetary Policy in the Presence of Islamic Banking (WP/16/72; IMF Working Paper).

Klinec, I. (2004). Design of Holistic Economics for a Global World. Conference: The First Prague Workshop on Futures Studies Methodology.

Kuran, T. (2018). Islam and Economic Performance: Historical and Contemporary Links. Journal of Economic Literature, 56(4), 1292–1359.

Kvasnička, M. (2007). Stability of Gold Standard and Its Selected Consequences. Procesos de Mercado: Revista Europea de Economía Política, 4(2), 33–56.

Ma, D. (2021). Chinese governor says CBDC must balance privacy and anti-crime measures. Central Banking. https://www.centralbanking.com.

McGinnis, J., & Roche, K. (2019). Bitcoin: Order Without Law in the Digital Age. Indiana Law Journal, 94(4).

Meera, A. (2018). Cryptocurrencies from Islamic Perspectives: The Case of Bitcoin. Bulletin of Monetary Economics and Banking, 20(4), 475–492.

Meera, A., & Aziz, H. (2002). The Islamic Gold Dinar: Sosio-Economic Perspectives. International Conference on Stable and Just Global Monetary System.

Muamar, A., & Alparisi, A. (2017). Electronic money (e-money) dalam perspektif maqashid syariah. Journal of Islamic Economics Lariba, 3(2), 75–84.

Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin. https://bitcoin.org/bitcoin.pdf

Omar, M. A., & Inaba, K. (2020). Does financial inclusion reduce poverty and income inequality in developing countries? A panel data analysis. Journal of Economic Structures, 9(1), 37.

People’s Bank of China. (2021). Progress of Research & Development of E-CNY in China.

Politou, E., Casino, F., Alepis, E., & Patsakis, C. (2019). Blockchain Mutability: Challenges and Proposed Solutions. IEEE Transactions on Emerging Topics in Computing, 1–13.

Qardhawi, Y. (1997). Norma dan etika ekonomi Islam. Gema Insani Press..

Reid, F., & Harrigan, M. (2011). An Analysis of Anonymity in the Bitcoin System. ArXiv. http://arxiv.org/abs/1107.4524

Riksbank. (2021). E-krona pilot Phase 1. 1–21.

Rooney, K. (2018). Much of bitcoin’s 2017 boom was market manipulation, research says. CNBC.

Rosskoph, L., & Rutersten, R. (2020). Gold as a safe haven investment in a financial crisis [Jonkoping University].

Salama, A. (1995). Fiscal Policy of An Islamic State. Readings in Public Finance in Islam. IDB.

Salleh, M., & Nasarudin, A. (2020). Herding and Financial Decision: Proposing an Islamic Model of Tabayyun. Empirical Economics Letters, 19(10), 1243–1251.

Saratian, E. T. P., Arief, H., Soelton, M., Vizano, N. A., & Mugiono, M. (2019). Dinas and dirham: Sustainable Money for Sustainable Society. ICCD, 2(1), 517–521.

Seetharaman, A., & Raj, J. R. (2009). Evolution, Development and Growth of Electronic Money. International Journal of E-Adoption, 1(1), 76–94.

Shaikh, S., & Ismail, A. (2017). Role of Zakat in Sustainable Development Goals. International Journal of Zakat, 2(2), 1–9.

Shin, H. S. (2020). Central banks and the new world of payments. Bank for International Settlements.

Sidiqqi, M. (1996). Role of the State in the Economy: An Islamic Perspective. The Islamic Foundation.

Siswantoro, D., Handika, R., & Mita, A. F. (2020). The requirements of cryptocurrency for money, an Islamic view. Heliyon, 6(1), e03235.

Solat, S. (2017). Security of Electronic Payment Systems: A Comprehensive Survey. ArXiv.

Srivastava, P. (2005). Poverty Targeting in India. In Poverty Targeting in Asia. Edward Edgar.

Stiglitz, J. E. (2018). Where modern macroeconomics went wrong. Oxford Review of Economic Policy, 34(1–2), 70–106.

Sulaeman, S., Majid, R., & Widiastuti, T. (2021). Zakat and Its Impact on Socio-Economic Welfare Before COVID-19 Pandemic in Indonesia. International Journal of Zakat, 6(2), 75–90.

Syakir, M. F., Risfandy, T., & Trinugroho, I. (2021). CEO’s social capital and performance of zakat institutions: Cross-country evidence. Journal of Behavioral and Experimental Finance, 31, 100521.

Theis, T. N. (2000). The future of interconnection technology. IBM Journal of Research and Development, 44(3), 379–390. https://doi.org/10.1147/rd.443.0379

Tsiakis, T., & Sthephanides, G. (2005). The concept of security and trust in electronic payments. Computers & Security, 24(1), 10–15.

Ubale, A. Z., & Abdullah, A. H. (2015). The Effects Of Spirituality In Shaping The Human Behaviour (An Islamic Perspective). International Journal of Academic Research in Business and Social Sciences, 5(9).

UN ECLAC. (2015). Inclusive social development The next generation of policies for overcoming poverty and reducing inequality in Latin America and the Caribbean. Regional Conference on Social Development in Latin America and the Caribbean.

Vadillo, U. (2002). The Architecture of the Gold Dinar Economy: an Academic Perspective. International Conference on Stable and Just Global Monetary System.

Wolf, M. (2021). The time to embrace central bank digital currencies is now. https://www.ft.com/content/7a93fb0a-ae95-44fc-a3d2-1398ef0ce1af

Woodbridge, M. (2015). From MDGs to SDGs: What are the Sustainable Development Goals?.

World Bank. (2017). Distributed Ledger Technology (DLT) and Blockchain. FinTech Note (1).

Yaacob, S. E., & Ahmad, S. (2014). Return to Gold-Based Monetary System: Analysis Based on Gold Price and Inflation. Asian Social Science, 10(7).