Interrelationship between Zakat, Islamic bank and the economy A theoretical exploration

• Published in: Managerial finance Vol. 34; no. 9; pp. 610 - 617
• Main Authors: Alam Choudhury, Masudul, Syafri Harahap, Sofyan
• Format: Journal Article
• Language: English
• Published: Patrington Emerald Group Publishing Limited 01.08.2008
• Subjects: Banking; Banking industry; Banks; Causality; Consumption; Economic growth; Economic theory; Epistemology; Expenditures; GDP; Gross Domestic Product; Islamic financing; Knowledge; Learning; Mathematical models; Ontology; Stockholders; Studies; Variables; Middle East
• ISSN: 0307-4358; 1758-7743
• DOI: 10.1108/03074350810890967

The purpose of this paper is to formalize a general equilibrium circular causation relationship model in the Islamic economic framework between wealth tax (Zakat), Islamic bank and the real economy. Mathematical modeling along with explanation. The integrative interrelationships can be formalized only under the assumption of unity of knowledge as derived from the foundation of oneness of the divine law (shari'ah) according to the Qur'an, Prophetic traditions (Sunnah) and social discourse. A future work would be to empirically estimate the general equilibrium model. A guidance to Islamic banks on the constructive utilization of Zakat fund for productive transformation in the real economy. A general equilibrium model guided by the episteme of oneness of the divine law at work, hence unity of knowledge at work in real problems of ethics and economics according to the Islamic worldview. (PUBLICATION ABSTRACT)