Islamic finance and economics from a new institutional approach

Abstract

This thesis proposes a framework to explain and analyse Islamic financial and economic theories at par with conventional positive economic thought. Islamic Shariah law consists of stipulations on contracts that are fundamentally different from conventional finance. It requires going beyond an assessment of mere financial transactions towards a deeper analysis of the all types of contracts that can be entered into by all factors of production. Hence, this thesis examines conventional theories of production and distribution and proposes a narrative of distribution from a New Institutional Economic perspective that puts emphasis on institutional arrangements and contracts entered by various economic agents. It then explains the institutional environment by examining types of contracts that are allowed under Islamic Shariah in order to describe production and distribution in an economy that is governed by its rules. The main contributions of this thesis are in its re-examinations on distribution theory and Islamic financial theory. In regards to the theory of distribution it proposes a narrative that can be used to explain and analyse any economic system by examining the types of contracts that are allowed and those that are restricted. In regards to Islamic finance, it proposes a move away from the oversimplified explanation oflslamic finance as 'interest-free' and towards looking at its contractual restriction