The Islamic economic model

The Islamic economy today
While in the case of Egypt oligarchy and corruption had brought the Islamic model to upgrade the so called ‘borghesia compradora’ hence a corrupted middle class with privileged network with the politic power, as Samir Amin has stated; the case of Malaysia has shown how this model can join the traditional capitalistic economies, improving them. Therefore if a common bank would be organized as a guarantee society: the members would bring the goodwill capital, then – following the schemes analyzed before- the credit institution activities would focus on gaining money through mudaraba contracts and so to subsidize loans. Mudaraba contracts would bring back to the banks a profit in the amount of the shared percentage which must be agreed before the signature, finally, the left over income will be dived into deposits and capitals proportionally. Shareholders’ benefits would be hold by the bank as part of the profit. In that case the project would fail, the bank would gain the loaned amount through deposits, as deal at the moment of the signature of the contract.
This system represent the main difference between the traditional and the islamic bank, indeed, this kind of economic contracts allowed the islamic credit institution to do not task for the interest rate rather prefer to be one of the main actor on the contract with a profit-loss sharing agreement. It is also true that, if from one hand this model entail conspicuous financial beneficiary duty which are variable according to the project success; from the other hand this mechanism could bring the investment to finance modernization area. This is another breaking point with the time-honored system, breaking down the asymmetry between interest rate and profit mark up uncertainty, typical of the western economies. Double Mudaraba contract could be seen as the solution for the economic instability because it create a strong network between deposits and investments which involve both the economic and the social sphere. This way the bank play a double role -financier-entrepreneur- where the target would be the profit mark up of the project. This approach do not just limit the possibility of bankruptcy or failure, but even in that case of loss, consider the loss as shared within the three parties in the contract: employer, banks and depositors.
Malaysian successful example draw the most dynamic worlds’ economies attention, indeed, as stated by Moody rating agency: Saudi Arabia and Malaysia will continue to led the islamic financial markets, ruling on the sukuk (Islamic bond) market while Turkey and Indonesia, on a long run level of analysis would become other two reference points for the Islamic financial markets. Moreover, Moody’s long run analysis forecast has presumed that the highest islamic bonds volume will remain along the Gulf Council Cooperation (GCC) area where islamic financial resources go from 10% in the Emirates to 50% in Saudi Arabia. The annual global sukuk emission grew up from $ 3,3 billion in 2002 to $ 81 billion in 2012. According to Moody’s, real estate sector has been the most profitable among all islamic financial services, while from the governance side, the most important results was reached with the International sukuk standardizations. This two points together allowed the islamic financial markets to grow of the 28% in the 2012.
As stated by Ashar Nazım, Global Islamic Banking economic analyst and Ernest & Young partner, the Islamic finance had recently shown important steps forward also in Turkey, increasing the capital volumes, possible also thanks to a new Turkish financial regulation, even if there still is a long way to go – he concluded. Until the year 2023, the Turkish government has stated that they would reach the 15% of the entire global islamic financial markets, and it means an amount of $ 200 billion. Through the Istanbul stock Exchange, will those capitals be able to reach European hiccup economies?
In this case follow Mahmud Shaltut (well-known jurist at Azahar) statement, it will depend on the public economic governance and from banks’ attitude to sustain development. Today, over 120 Islamic investments banks born out in about fifty different countries for a total amount of $ 800 billion, while over three hundred Islamic commercial banks are spread all over the world. Standard & Poor’s data had demonstrated that the growing islamic capital flown (increased of 28,6%, from $ 639 billion to $ 822 billion, between 2008 and 2009) do not depends just on those countries which have adopted the Islamic structure also into both public and social institutions, such as Iran or Pakistan. In Turkey, for example this new model is led by the private sector. This way, the other sixty five countries allowed to offer islamic services through the intermediation system. Follow this theory, Islamic model widespread could be thwarted just by monetary, fiscal or direct foreign investment restrictive control.