ASSESSING THE INTERFACE LINKING THE ISLAMIC ECONOMIC SYSTEM (IES) WITH THE GLOBAL ECONOMIC PARADIGM

Abstract

Islamic economics, guided by Sharia and the Quran, emphasises the prohibition of speculative transactions, a key factor contributing to economic stability. However, concerns have been raised about the practical implementation of Islamic economic principles and their compatibility with modern economic structures. The Islamic Economic System (IES) prioritises stability and fairness, avoiding usury, monopoly, hoarding, and speculation, leading to a current account deficit. A self-sufficient model characterises its industrial policy, reluctance to rely heavily on Foreign Direct Investment (FDI), and a commitment to economic justice and equitable distribution of resources. The IES’s primary objective is to provide a robust system focusing on balanced, moderate and sustainable economic development and appreciating state involvement in heavy sectors to balance private ownership. IES encourages limitless liability in shareholding, creating accountability, such as the prohibition of bankruptcy with monopoly, which could lead to wealth concentration and economic inequities in society. The IES’s guiding principle of “Itedal” emphasises fiscal prudence, where spending should be less than earnings, and plays a pivotal role in controlling fiscal deficits that could undermine the overall economic well-being of society.