The Islamic Foundation, UK, in cooperation with the Islamic Research and Training Institute (IRTI),Islamic Development Bank, Jeddah, Saudi Arabia and Loughborough University of Technology, UK, organized the third Intensive Orientation and Trailing Course in Islamic Economics, Banking and Finance at its premises known as Markfield Conference Centre, Markfield, Leicestershire, from 9th to 12th November 1995.  

A large number of bankers, lawyers, university teachers, researchers and students from UK, USA, Belgium, Spain, Sweden, Switzerland, Kuwait, Saudi Arabia, Malaysia and Mauritius participated in the 4-day course.

The list of guest-speakers included pioneers of Islamic economics and banking such as Dr. Ziauddin Ahmad, former Deputy Governor of the State Bank of Pakistan, Dr. Umer Chapra, Senior Advisor to the Saudi Arabian Monetary Agency, Dr. Monzer Kahf, Researcher at IRTI, Islamic Development Bank, Dr. Mohsin Khan, Researcher at the International Monetary Fund, Prof. John Presley, Head, Department of Economics, Loughborough University of Technology, and Prof. Rodney Wilson, Reader, Department of Economics, Durham University.  

The course, among others, provided an invaluable opportunity for the participants to have direct contact with some of the pioneers of Islamic economics and banking and to frankly and honestly discuss the issues related to Islamic economics and banking in detail.  

Apart from the concluding session, eleven sessions were held in this course. Compared to the two previous courses held in 1993 and 1994, the distinctive feature of this course was that considerably more time was allowed to the participants to raise questions and to receive answers from the speakers. There were also presentations made by the participants themselves; in two separate sessions and two workshops. Some of the questions which could not be asked or answered in the earlier sessions were discussed in these and two reporters reported the outcome of those discussions in the workshops to the participants.  

As far as the subjects are concerned, nine presentations were made at the course. These included: one presentation on Islamic economics; one on the history of Islamic economic thought; one on Islamic economy; four on Islamic banking and finance; one on Islam and economic development and one on public finance and budget deficit in Islam.  

Dr. Ziauddin Ahmad spoke on the present state of Islamic economics and banking. He pointed out that though Islamic economics is as old as Islam itself, the contemporary Islamic resurgence has infused a new light on the subject.

On the history of Islamic economic thought, references were made in many presentations on the contributions made by eminent Islamic scholars to the development of Islamic economic thought over the past several centuries. Particular mention was made of the contributions of Abu-Yusuf, Abu-Ubaid, Al-Ghazali, Ibn Taymiyyah, Al-Maqrizi, Ibn Al-Qayyim and Ibn Khaldoun. Professor Rodney Wilson made a specific presentation on the work of Ibn Khaldoun.

 In his presentation on social justice in an Islamic economy, Dr. Ziauddin Ahmad mentioned two important aspects of distributive justice in the context of social justice in Islam. One was, how does the Islamic system ensure the fulfillment of the basic needs of all citizens? He mentioned that Islam makes use of both moral exhortations on infaq fi-sabil Allah and legal measures comprising of the collection and disbursement of zakah under the state auspices. The other was the idea of a two-tier budget concept in which there is u welfare budget and a general budget. Resources are transferred from the general budget to the welfare budget in case the proceeds of the latter are not sufficient for meeting the basic needs of the citizens.

 On the subject of Islamic banking, Dr. Mohsin Khan outlined the theoretical framework of an Islamic banking system and demonstrated how the Islamic system is both Viable and stable. In his second contribution, he showed that central banking functions can be effectively performed even when interest-based system is replaced by the interest-free system. He also mentioned that the control of the monetary base can take place through the mechanism of reserve requirements and several other measures which will remain available to the central bank in an Islamic economy.

Dr. Umer Chapra, in his presentation on the Socioeconomic Implications of Applying Islamic Banking and Finance, discussed the rationale for the prohibition of interest. He mentioned that the main objectives of Islam are efficient use of scarce resources, need fulfillment, equitable pattern of income distribution, economic growth and full employment. He tried to demonstrate that interest is an impediment in the achievement of these objectives. If interest is abolished and replaced by profit and less sharing system, these objectives can be attained in a better way. Profit and loss sharing system, he said, worked well for centuries. He raised the question as to why this fell into disuse later and said that this is a fruitful area of research for scholars in Islamic economics.

 During the course of the presentations on the subject of Islamic banking by Dr. Mohsin Khan and Dr. Umer Chapra and in the discussion that followed these sessions, a lot of time was devoted to the discussion of the actual practice of Islamic banking by individual banks in some of the Muslim countries and the economy-wide Islamization of banking in Pakistan and Iran. In general, a great deal of dissatisfaction was expressed with the way in which the Islamic banks were operating. It was found that they were perhaps, not fulfilling the socioeconomic objectives that were expected of Islamic banks. Also some of the practices adopted by some Islamic banks did not fully conform to the shari'ah requirements.

 Prof. John Presley presented a paper on the empirical evidence on Islamic finance in which he referred to four studies based on sample surveys. The main point that he wanted to bring out from those surveys was that if you ask the users of bank funds, you will find that there is a high degree of rejection of musharakah and mudarabah. Most of the people do not go in for musharakah and mudarabah, even if these options are offend to them. However, he acknowledged, and some of the participants also pointed out, that these kinds of surveys are subject to a great deal of limitations. He himself noted that a number of persons from whom questions about their preferences for various modes of financing were asked, didn't have sufficient knowledge as to what is musharakah and mudarabah.

 Dr. Umer Chapra also presented a paper on developing a proper strategy for growth. The main emphasis in his presentation was that the development strategy of an Islamic economy should be based on Islam's world view. He pointed out that according to Islam, the owner of everything is Allah (swt), man is just a trustee. Hence the economic life of man should be organized in accordance with the guidance provided by Allah (swt). He said that Allah enjoins justice in all human affairs and shari'ah provides guidance on how the economic affairs should be administered. According to him the strategy of development should consist of: (1) reinvigoration of the human factor, that is infusing moral values of Islam in the population at large; (2) reduction in inequalities of income and wealth and (3) abolition of the feudal system.

 Finally, Dr. Monzer Kahf gave a thought-provoking presentation on public finance and budget deficit in Islam. He said that in the early history of Islam, there was hardly any taxation. Resources essentially came from public property, i.e. land revenue from state ownership of land and other natural resources. The second major source was zakah. He was of the view that taxation is not disallowed in Islam, but it has to be subject to certain conditions.