Impact of Islamic Banking on Consumer Financing Sector

Impact of Muslim Banking on Consumer Financing sphere of influenceAbstractThis see finds out the realistic or whatsoever(prenominal) occurrenceual impact ca apply by the introduction of Muslim Banking on the consumer support sector gener tout ensembley, bit safe charge its main focus de nonatively on tol eonte Financing and machine Financing with desires in Pakistan. The total bounds affect in consumer support whether Muslim or Conventional where intromitd in this research, keeping 2003 as the base year of data initiation. Since 53% of Consumer m onenesstary backing was orbit delimit by brook and car financial support so they were kept in focus. Independent T-Tests were run on the investments as well as the return of both(prenominal)(prenominal) the sectors that is Muslim and Conventional banking sectors. The data was collected from the Statistical selective information W be sign Department of State Bank of Pakistan. The results show that the variance s in the investment sectors of both Muslim and Conventional differed from each other where H0 was jilted on the basis of value of t stats where as in the step-up comparison the variances were utter to be same at 10% outstanding level unless the path of crop stood at 29% and 9% in cases of Muslim and Conventional banking approveively proving the positive impact of Muslim Banking on Consumer Financings bulky sector of dramatics and railway car Financing in Pakistan . In case of any incongruity to State Bank of Pakistan or the AAOFI standards, the latter sh completely prevail.Chapter maven IntroductionThe intent to write this research was to countervail the detailual understanding as well as affect ca utilize c anyable to the introduction of Moslem Banking in Pakistan. It was acclaimed by the people relate to the assiduity that Muslim Banking had positively affected the banking sector here and crossways the globe. The total were quoted and percen drop backes c laimed provided no real research supported the declarations. So the actor thought of doing a research to dwell on the issue and distri neverthelesse a research with compliancy to Pakistan hence, configure the true standings of the conterparts cognize comm tho as Moslem Banking and Conventional Banking. Muslim Banking though has a untarnished institutionalised history of 35 years across the globe nonwithstanding has shited tremendous recognition in this utterly land tenure which sh wholly be wittnessed in the lit eyepatchture review ahead in this report. The evolution of Moslem Banking in Pakistan started as late as 2000 01 later the historical judgement of the lordly Court of Pakistan in1999 a exculpatest the prevailing saki found banking transcription. The Moslem banking emerged, though subsequently(prenominal) a valiant effort which continued over two decades earlier to its surfacing. Different reports, articles, a fighteness sessions, books and othe r relative material endowed to this unfeignedly innovation of Islamic Banks in Pakistan. metergh the clouds of uncertainity render lingered on this fresh instigated initiative ever since its emergence, save therefore again that has always remained a norm for innovative things in Pakistan. cubic yardgh Islamic Banking has come a long way aft(prenominal)(prenominal) its start almost a decade ago besides it still has a lot to prove to its spectators with respect to shariah compliance and market effectiveness in the Pakistans lucrative but stingent souk.Consumer Financing is a sector which has its part of exuberance attached to it in the banking and fiscal sector. When ever the monetary markets be flooded with accessive liquidity the get-go thing that magnetizes the banker is the consumer financing sector speci anyy in Pakistan where the yeilds were as high schoolschool as 15% on proceeds. The magnitude of House and simple machine pay together tend to weigh around at almost 53% of this sector so the proceedings in this neighborhood can be established by analysing these mentioned sectors. In view of the fact that the House Car financing sector provide a level playing celestial orbit for the conterparts that is Islamic and Conventional players, was a nonher reason for this assortment.In the untestedsprint but the comparative analysis is military personnelnersed as well as the background of both Islamic Banking and Finance with Consumer Financing has been discussed in comprehensive detail.Statement of the paradoxIslamic Banking ever since its emergence in Pakistan has pressd eyebrows of think and non related players. Is there a remnant? Which banking form sh tot each(prenominal)y prevail? Does Islamic Banking rescue enough weight to outset its conterpart? Can Islamic Banking loose the quest afterwards of organism a p bellel banking system and become the prefered banking operation in Pakistan? The research worker answers to these q uestions in the light of the literature review as well as by testing the viability of Islamic Banking sector to its conterpart Conventional Banking in the addition backed sectors of House and Car pay ( done banks) in Pakistan.Objective staple fiber purpose of this research is to look on the unlikeial impact of Islamic Banking in contrast to Conventional Banking on House Car Financing through Banks in Pakistan.Research ModelHypothesesH0 Islamic Banking does non impact House Car Financing through Banks In Pakistan.H1 Islamic Banking directly impacts House Car Financing through Banks In Pakistan.Chapter Two Literature f on the whole overThis segment will app rig out the comprehesive literature review with respect to Islamic Banking glob completelyy while Consumer Banking Sector in Pakistan.Islam as a encipher of LifeIslam acclaims its self to be a Deen which provides a complete enter of life to its practitioners. According to its claim Islam non only helps its followers or else also those who seek for help without believing in its core centre of attention for twenty-four hour period to twenty-four hour period hinderances. May it be a name for a believers child or be it the purpose of life, Islam alone tends to answer to on the whole the versatile queries of its disciple. This is the beauty of Islam but it can only lead to promised land only if every the resources of Islam argon kept in view or an adherent may astray from the righteous path.The main resources of Islam can be categorized as follows ledger e Karim The Holy Book direct upon Hazarat MuhammadAhadith e Mubarakah (Sayings of Hazarat Muhammad)Shariah (Implementation of Islam) Lives of Hazrat Muhammad and the Sahaba (Companions of Hazarat Muhammad)Hence the Deen, Islam, can be categorized into deuce-ace main branchesBeliefs (Aqaaid)Reformation and Rectification (Tassawuf) Islamic Laws and Principles (Fiqha).Since my paper would be plan of attack under the third bough of a healthy hie rarchy, that is, Islamic laws and Principle natural law (Fiqh). Further elaborating this division cognise as Fiqh (Islamic Laws and Principles) can be encourage sub-divided into the hobby sectionsPrayers (Forms of submissions to Allah T completelyah, Ibadaat)Societal or Civil Laws (Maamlaat)Criminal LawsConstitutional lawsSince my paper discusses the Societal or Civil laws (Maamlaat) or sooner absolutely specifying it would be dealing with financial aspects of this vast sub branch of Fiqh. Coming to the financial aspects of a Muslim or even an Oriental who believes in the candor of Islamic laws, the main concern of this individual is to abide by Islamic law and principles while earning bread and butter for himself and his family.The things permissible by Islamic code ar referred to as Halal while the things that be forbidden in Islamic Fiqh argon known as Haram. It is by province that a Muslim or even an Oriental who believes in Islamic laws can earn his living only throug h Halal ways. integrity way of distinguishing Halal is by identifying the barricades while the rest trunk permissible.Prohibitions in Islam for Financial ProceduresThe two of the main ills identified by Islam in financial procedures atomic number 18Riba (Interest)Gharar.Riba (Interest)In perspectives of Shariah money is considered to be a assessing way for value or worth quite than an overconfident within itself, it necessitates that an investor should non be able to obtain income from capital (or e actuallything that is treated as a kind of money) alone. This production of money from money ( normally known as wager) is Riba, which is interdict in Islam. Prohibation of Interest (Riba) in playscriptFollowing are the poetrys where Quran has out rightly identified avocation as a prohibition. In the followers pen our Creator nullifies the visual increase of wealth clear through interest group.And whatever Riba you give so that it may increase in the wealth of the peop le it does not increase with Allah Subhanahu Tallah (3039)At another beam it has been identified that the Jews werent allowed to indulge in interest.And because of their charging Riba while they were proscribed from it (4161)A verse which identifies the prohibition of interest and its form whether it be compounded.O those who believe do not eat up Riba doubled and redoubled (3130)Ribas eminent prohibition can be seen in the following verse while at the same time the permissible alternative of trading has been offered. Another all-important(prenominal) factor which can be witnessed here is that boastful of charity is being encouraged while interest is being regarded as a curse.Those who stock Riba ( rake-off or interest) will not stand but as stands the one whom the demon has driven craze by his touch. That is because they soak up tell merchandise is but like Riba and Allah Subhanahu Tallah has permitted trading and out(p) Riba. So, whoever receives an advice from his lord a nd stops, he is allowed what has passed, and his numerate is up to Allah Subhanahu Tallah . And the ones who revert back, those are the people of fire. There they remain forever.Allah Subhanahu Tallah destroys Riba and nourishes charities. And Allah Subhanahu Tallah does not like any sinful disbeliever. Surely those who believe and do entire deeds, establish Salah and pay Zakah, exhaust their yield with their lord, and there is no fear for them, nor shall they grieve.O those who believer, fear Allah and give up what still mud of Riba if you are believers. precisely if you do not, so listen to the declaration of struggle from Allah and his messenger. And if you repent, yours is your principal. Nevery you wrong, nor be wronged. And if there be one in misery, then deferment till ease. And that you leave it as alms is far better for you, if you actually know. And be fearful of a day when you shall be returned to Allah, then everybody shall be paid, in full, what he has make. A nd they shall not be wronged. (2 verses 275-281)Identifying one of the greatest ills of Interests parsimoniousness of wealth the rich be attack wealthier and the poor becoming underprivileged, the verse tends to circulate one of the populacey aliments cause by going against the prohibition.So that this wealth should not become confined only to the rich amongst you.(597)During the tenure of 1984 to 1994, $ 719 Billion dollars were O.K. as interest establish loans while $ 749 Billion were returned during the same tenure still leaving bum a liability of $ 1258 Billion. 225 people give 47% of the wealth of the realism at the same time 1 Billion and 30 Million people earn $ 1 periodic while 32% of the population of this world earns $ 4 day-to-day. These facts show that the constitute financial system has the above mentioned illness known as the niggardness of wealth.Prohibation of Interest (Riba) in hadithThe second source of Islam is the sayings of the Holy prophesier Muhamm adSallalaho Alaihi Wassallam. Ahadith of illusionistSallalaho Alaihi Wassallam which are on the prohibition of Riba (Interest) are as followsIn the following Saying the excess on either sides is regarded as riba.Gold for gold, ash grey for silvery, wheat for wheat, barley for barley, date for date, salt for salt, must be stir on both sides and hand to hand. Whoever pays more or de homosexualds more (on either side) indulges in Riba.1.( Sahih Muslim, Karachi, V.2, P.25)As per the following saying commercial interests being is exhibited.Ibn Juraij says in the pre-Islamic period, the tribe of Banu Amr bin auf utilize to wreak interest from the tribe of Banu-al-Mughira, and the Banu-al-Mughira used to pay this interest. When islam came,the later owned considerable amount of money to the former. And progress onthe Banu-al-mughira used to pay interest to Banu-thaqif.All the people multiform in the transaction of riba are found to be guilty and at fault as per quoted saying below. From Jabir the Prophet,Sallalaho Alaihi Wassallam, may cursed the receiver and the remunerator of interest, the one who records it and the two witnesses to the transaction and utterthey are all besides in guilt (Muslim,Kitab-al-Musaqat, Bab lani akili al-Riba wa mukilihialso in Tirmidhi and Musnad Ahmed)The implication or the inference of sins that a person attains on indulging himself in interest based proceeding is emphasized in the following quotes.FromAbdullah ibn Hanzalahthe Prophet,Sallalaho Alaihi Wassallam, verbalize a dirham of Riba which a firearm receives knowingly is worst than committing adultery thirty-six times(Mishkat al-Masabih, Kitab al-Buyu,Bab al -Riba,on the originatority of Ahmed and Daraqutni)From Abu Hurayrah the Prophet,Sallalaho Alaihi Wassallam said Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother.(Ibn Majah)Interest based transaction reap no lettuces here or hereafter. The misery that o ne is bound to go through after death just for indulging himself in interest based proceeds in telescopic in the following quote.From Abu Hurayrah the Prophet,Sallalaho Alaihi Wassallam, said On the night of Ascension I came upon people whose stomachs were like houses with snakes microscopical from the out side. I asked Gabriel who they were. He replied that they were people who had received interest ( Ibn Majah, Kitab al-Tijarat, Bab al Taghlizi fi al-Riba also in Musnad Ahmad)Prohibation of Interest (Riba) in BibleIt is not that only in Islam, interest is prohibited even in Christianity, the prohibition of interest is eminent. We have even seen above that even Jews were prohibited from interest based activity according to the Qurans verse. Following are the quotes from the Bible proving the prohibition of Riba.Thou shalt not lend upon usury to thy brother usury of money, usury of victuals, usury of any thing that is lent upon usury. Deuteronomy 2319Lord, who shall abide in thy temple? Who shall dwell in thy holy hill? He that walketh uprightly, and worketh righteousness and speaketh the the true in his hearth. He that putteth not out of his money to usury, not taketh settle with against the innocent.Psalms 151, 2, 5He that by usury and unjust gain increaseth his substance, he shall gather it for him that will pity the poor. Proverbs 288Then I consulted with myself, and I rebuked the noble, and rules and said unto them, ye exact usury, every one of his brother. And I set a great assembly against them.Nehemiah 57After identifying that interest has been prohibited in the past as well as in the contemporary era by the Creator of mankind as He tends to proscribe this act, it would be important to understand the types of Riba which are as followsRiba Al Jahiliya/ Riba An NasiyahThat type of debt where qualify reimbursements period and an amount in sur prescribed of capital is fixed. (Usmani, 2002)Riba Al Fadl / Riba Al HadeesRiba Al Fadl means that the amou nt or replete(p)s paid back in excess other than the Qard (Loan) or which is taken in commuting of definite homegenous products and are utilized in their hand to hand purchase and deals matement as explained in the Hadees. (Sahih Muslim, Karachi, V.2, P.25). (Usmani, 2002)GhararThe second of the ailments identified by the Islamic Juriprudence is known as Gharar. Gharar, is usually understood to denote ambiguity in the submitual conditions and/or the uncertainty in the survival of an es dis confideial good in an go overment and this creates concerns for Islamic scholars in the light of Islamic Jurisprudence. Shariah does let in the ideology of Public benefit, denoting that, if nearthing is tremendously in the public favor, it may be executed and so hedging or alleviation of preventable championship threats, do come into this class but tho elaboration is as follows by Islamic Scholars Gharar is where the participants that is the buyer and seller, dont know what one bought and what the other alter. prof Mustafa Al-Zarqa the detective of Shariah has written Gharar can be be as the sale of possible goods whose characteristics or individuality can not be established, collectable to the dicey character which makes this form of care related to gambling. hadith forbidding this prototype of trading in Gharar (jeopardy) are available in books of Hadith. Some examples of Gharar transactions are (e.g. trading any fish limpid in the sea or a bird from a appeal of species flying in the sky an unborn calf in cow womb, are some of the saleable goods which cannot be probed and examined as their true traits are unknown. Islamic Jurisprudence researchers have addicted many complete definitions of Gharar. They have also evolved with the idea of Yasir (minor jeopardy) a financial deal with an in earthshaking risk is believed to be Halal (permissible) while transactions involving significant risk (Bayu-ul-Gharar) is deemed to be Haram.Gharar is one of those impediments which limit the power of decision making. An agreement that has any gene of Gharar is not valid from the Islamic Jurisprudence view, irrespective of whether the parties to the agreement agree upon the agreement.The lexical meaning of Gharar is to deceive, cheat, delude, lure, entice and uncertainty.Gharar can be delimit as follows The uncertainty that is constitute in the basic divisors of an agreement, wording, subject subject area, consideration and the liabilities. employment of events which have been prohibited in Ahadith because of Gharar areSale of unborn Camels tiddler still in the mother abdomen.Sale of flowers before they appear on the plant.Sale of fish that comes in one throw of net.Sale of sheepskin on the body of the animal.Qimar is that event in which there is a surmisal of total loss to one party.Every gambling is a form of Qimar but Qimar is not limited to gambling. The Contract in which the participants, at the moment of implementing the agreemen t, cannot realize or quite decide as to how much it would give or receive.Causes of GhararThough the conditions can be many but the most ordinarily occuring causes can be identified in (Samadani, 2007) are as followsUncertainity relating to the existence of thing exchangeUncertainity relating to the acception of thing exchangeUncertainity relating to the thing change itselfUncertainity relating to the priceUncertainity relating to the payment of priceUncertainity relating to both thing sold as well as the priceTypes of GhararSome types of Gharar are as followsBaitan fi Bai (Twin sales)Safaqa fi Safaqa (Twin gravels)Bai urban/urboonForward contractSuperficial bull whip effectIn the dark ages, many contracts were in vogue, where that condition would turn trade into reckon hunt. Like the seller would have different pieces of cloth and the buyer would estimate a stone and would get the cloth where the stone would land. The Holy ProphetSallalaho Alaihi Wassallam has disallowed all such contracts.After identification of the prohibitions in the current financial system where interest and Gharar (Uncertainity) are a part and fate of day to day proceedings. The need for a system which eliminated such illnesses was inevitable. Another reason was that, after the jolts of 1930s and other economicalal crisis of 1970 and now of 2008 that followed, the financial world started talk of the town about alternatives to the present systems of (Communism, Socailism and Capitalism). Though Capitalism is the largest spread system across the globe but by all means its jolting has been witnessed since 1839, 1930, 1970 and 2007. Is it at the verge of its end? Nobody knows but people have started flavour for options.Islamic EconomicsIslam provides an economic system based on rules and principles define by Islamic Jurisprudence. Human being is just a shop steward of wealth and the true ownership is with Allah Tallah. Islamic Economics point of loss is that it not onl y deals with the materialistic needs of human being rather it also fulfills the spirtual needs at the same time. The main theory tail end the Islamic economics is that money is only a means of exchange (in other words money tends to serve as an intermediary amidst the transaction of asset) and not a product that can be sold or discounted. Here it is noteworthy that a human being is not the true owner of wealth as it belongs Allah Tallah rather he has been given up only the right to use it as the second owner, keeping in mind that he would be questioned on the day of judgement of his usfruct. Islam doesnt resist the forces of law of demand and supply but does emphasis on the consumer as well as the government to abide by the rules of Islam. Islam as a Deen has the capability to accomadate all good things that life has to bring accept those which are outrightly against its divine principles.To summarise Islamic economics can be outlined as the humanitarian goal of achieving the we ll-being of all members of the human family which cannot be attained by concentrating primlairly on the materialistic needs of comfort and creating maximation of riches as the core intention of economics. Hence it is part and component part to raise the spirtual content of well being of the all society and prune all symptons of anomie, like family disintegration, heavy interest based debt payments, conflict and tension, crime, alcholism, dependance to drugs and psychological illness, all signifying lack of internal delight and satisfaction in the life of human beings. Captialism similar to socialism, both have fallen victimize to show the way to their followers such an overall welfare. As a prospective measure, it is seems almost inevitable to put down the outlines of a reinvigorated scheme of operations which helps maximise human well being as per the divine guidelines of Allah Tallah.As per (Khan, 1993) that since the unavailibilty of an Islamic society anywhere in the worl d the Islamic economics at present is scarely able to express or articulate Islamic position on economic issues as per its connotations.Islamic economics implies a serious execution of the Islamic strategy to raise the spirtual as well as the material well being of all people and to establish socio-economic justice, which is the vital objective of the Islamic message. On the spirtual side, the calm of mind that is fundamental to inner happiness cannot be attained drop by increasing the nearness of the human being to his Creator, which Islam is capable of obstetrical delivery about but secularism doesnot even aspire to. (Chapra, 1992).Islamic BankingBanks serve as the heart of any economy as they pump funds into the economic veins of a country. The four main functions that the bank performs arelending and stick to businesssecurities issuingasset management andforeign exchange trading. avocation has been given as an alternative to interest based transactions by Quran e Kareem as m entioned above. In the light of this fact the comtemporary Islamic scholars after reviewing the current financial system have comeup with different modes of financing to fulfill the much needed requirement. In the futher discussion we shall discuss those modes of financing. and firstly we would define Islamic banking as per the State Bank Of Pakistan.Islamic banking has the same utility as of conventional banking shut that it asserts to function in agreement with the rules of Islamic Jurisprudence, called Fiqh ul Muamalat (Islamic regulations for transactions). The indispensable law of Islamic banking is the sharing of gain and loss and the prohibition of interest and Gharar. The Islamic concepts, that are mainly used in Islamic banking are hit sharing combination of separate investor and worker (Mudharabah), safekeeping (Amanah), joint endanger (Musharkah), Diminishing Musharkah, cost plus profit (Murabahah), asset finance (Ijarah), manufacturing (Istisna) and agricultural go ods (Salaam). Islamic banking proposes to a anatomical structure of banking or democratic pooling actions that is dependable on Islamic Jurisprudence (Shariah) and channeled by Islamic economics. Islamic law prohibits interest the arrangement and payment of Usury. Islamic law also disallows trading in financial risk (since it is a form of gambling) discussed above as Gharar. In addition, Islamic Jurisprudence excludes fraternity in businesses which are deemed Haram (a going concern which deals in pork or alcohol). At the verge of 20th century, quite a few Islamic banks were crafted, to cater to this specific banking market. (Hassan, 2002)In an Islamic mortgage transaction, instead of swelled debt to the buyer, money is utilized to purchase the item that is, money is a strong point of exchange and not a commodity. Money cannot be rented, is a fact of Islamic Economics. The supplier acts as a direct vendor for the bank, after acquiring the goods the bank proceeds it to the cust omer at a gain, while allowing the buyer to payback the bank in installments (assets backed financing). However, for any appease in payment the bank cannot charge additional costs as profit or compensation. To mitigate its risk and close in on the vulnerability of the customers default, the bank keeps strict collaterals as its bail out. After the self-possession of goods the tangible asset is listed in the name of the buyer, by the Islamic banks. such(prenominal) a bargain is known as Murabaha.Likewise Ijara wa Iqtina or Ijara bi Tamleek, which is alternative to real estate capital finance. Islamic banks handgrip semblanceate income financings for means of transportations in a likewise manner (vending the automobile at a price, which is higher than the current value of the asset in the market, to the lessee and then holding up the title of the median(a) until the pre-agreed proceeds are paid up).The previous profits are taken into consideration oscilloscope up a profit and los s sharing ratio. Consequently the banks profit on the comparisonate income financing is equivalent to a specific property of the companys revenues. As soon as the investment amount of the restate income financing is reimbursed, the earning-distribution arrangement is terminated. This specific exercise is entitled as Musharaka.Supplementary to this, Mudaraba is risk capital financing where a talented worksman who provides labor while backup is offered by the bank, so that one executes business on behalf of the other. such participatory indulgence between capital and labor reflect the Islamic instaurations that the borrower should not absorb the peril/price of a collapse, since it is Allah Tallah who determines that failure or success, and intends that all those involved reap or bear it as per their responsiblenesss.Last, Islamic banking is move within Islamically permissible transactions, which eliminate those involving alcohol, pork, gambling, etc. Thus Islamic expend is t he only acknowledgeable form of investment, and asset backed transactions are encouraged at the same time the social illnesses are not propped up.The concepts and financing modes in Islamic banking are as followsShariah consultatory Council/ConsultantIslamic banks and banking organizations that offer Islamic banking products and services (IBPS banks) are necessary to establish Shariah advisory boards/ consultants to recommend them and to ensure that the procedures, activities and systems of the bank succeed with Shariah doctrine.Amanah (Safekeeping)In Amanah, a bank is reckoned as a warden and shop steward of endowments. Person depositions money in the bank and the bank assures to repay the whole amount of the belongings, or any portion of the remaining sum, when the depositor claims it. In this function the Bank becomes the Amin (the Guardian) while the saver is known as Rab-ul-Maal. In Amanah the bank cannot consume this money until and unless the depositor permits its Amin.M udarabah (Profit Loss Sharing)Mudarabah is a form or contract established between an investor and an entrepreneur, whereby the entrepreneur can finance the investments for its business proceedings. whatever gains generated shall be distributed between the investor and the entrepreneur as per the consented ratio, while only the investor stands all the losings if transpired, it has to be bared in mind that the due gaze of the entrepreneur will be evaluated and in case of carelessness he/she would have to bear the consequences. The profit-sharing maintained until the proportionate income financing is reimbursed. The bank receives its shell out for the time value of its money through a set proportion in profit earned that is attached to the debtors profits. (Hassan, 2002)It is a corporation in proceeds between investment and skill, where one provides funds whereas the other supplements proficiency, expertness and administration. The latter is called as the Mudarib. any(prenominal) profits accumulated are distributed amongst the participants on a pre-settled ratio, while loss is borne only by the investor.It is noteworthy that any increase in capital shall be the property of Rab-ul-Maal the capital provider according majority of jurist. For example if the sheep provided by rab-ul- maal investor and sheep gave birth to lamb, the lambs would be in the ownership of Rab-ul-Maal not the Mudarib (entrepreneur). The capital provider earns profit from the business on the basis of providing capital while the entrepreneur gets his divide with respect to his efforts and endeavors. (Usmani T. M., 2004)Musharkah (Joint Venture)This institution is normally applied for business partnerships or mutual ventures. The profits make are shared on a settled ratio, while if losings are sustained they will be divided on the justice funds allocation ratio. This model is different from fixed-income endowing (i.e. proceeds of propotionate income financings). The two different types o f Musharkah modes are Shirkat ul Ooqud and Shirkat ul Milk as per Islamic Jurisprudence. Further elaborating the types can be divided into specific main categories with foster sub types each.In Islamic finance the things taken into consideration are Shirkat ul Ooqud (Partnership in Trade) and Shirkat ul Amaal (Partnership in Services).Shirkat ul Amwal (Partnership in trade)Shirkat Ul Amal (partnership in services)Shirkat ul Amwal (partnership in trade) is the mode of partnership where all partners invest some capital into a commercial enterprise. Shirkat Ul Ammal (partnership in services) is the form of partnership where all the partners jointly undertake to render some services for their customers and the fee supercharged from them is distributed among them accordingly to an agreed ratio. (Usmani T. M., 2004)Musharkah translates itself into a relationship established under a pact by theImpact of Islamic Banking on Consumer Financing SectorImpact of Islamic Banking on Consumer Fi nancing SectorAbstractThis subscribe finds out the realistic or any factual impact caused by the introduction of Islamic Banking on the consumer financing sector generally, while keeping its main focus explicitly on House Financing and Car Financing through banks in Pakistan. The total banks involved in consumer financing whether Islamic or Conventional where included in this research, keeping 2003 as the base year of data initiation. Since 53% of Consumer financing was being define by House and Car financing so they were kept in focus. Independent T-Tests were run on the investments as well as the yield of both the sectors that is Islamic and Conventional banking sectors. The data was collected from the Statistical info Ware House Department of State Bank of Pakistan. The results show that the variances in the investment sectors of both Islamic and Conventional differed from each other where H0 was rejected on the basis of value of t stats where as in the growth comparison the variances were said to be same at 10% significant level but the means of growth stood at 29% and 9% in cases of Islamic and Conventional banking respectively proving the positive impact of Islamic Banking on Consumer Financings bulky sector of House and Car Financing in Pakistan . In case of any incongruity to State Bank of Pakistan or the AAOFI standards, the latter shall prevail.Chapter one IntroductionThe intent to write this research was to countermine the factual understanding as well as affect caused due to the introduction of Islamic Banking in Pakistan. It was acclaimed by the people related to the industry that Islamic Banking had positively affected the banking sector here and across the globe. The total were quoted and percentages claimed but no real research supported the declarations. So the author thought of doing a research to dwell on the issue and conduct a research with respect to Pakistan hence, configure the true standings of the conterparts known commonly as I slamic Banking and Conventional Banking.Islamic Banking though has a unstained institutionalised history of 35 years across the globe but has gained tremendous recognition in this short tenure which shall be wittnessed in the literature review ahead in this paper. The evolution of Islamic Banking in Pakistan started as late as 2000 01 after the historical judgement of the despotic Court of Pakistan in1999 against the prevailing interest based banking system. The Islamic banking emerged, though after a valiant effort which continued over two decades preceding to its surfacing. Different reports, articles, awareness sessions, books and other relative material endowed to this very existence of Islamic Banks in Pakistan. Though the clouds of uncertainity have lingered on this newly instigated initiative ever since its emergence, but then again that has always remained a norm for innovative things in Pakistan. Though Islamic Banking has come a long way after its start almost a decad e ago but it still has a lot to prove to its spectators with respect to shariah compliance and market effectiveness in the Pakistans lucrative but stingent souk.Consumer Financing is a sector which has its part of exuberance attached to it in the banking and financial sector. When ever the financial markets are flooded with accessive liquidity the first thing that magnetizes the banker is the consumer financing sector specially in Pakistan where the yeilds were as high as 15% on proceeds. The magnitude of House and Car finance together tend to weigh around at almost 53% of this sector so the proceedings in this neighborhood can be established by analysing these mentioned sectors. In view of the fact that the House Car financing sector provide a level playing depicted object for the conterparts that is Islamic and Conventional players, was another reason for this assortment.In the paper and the comparative analysis is conducted as well as the background of both Islamic Banking and Finance with Consumer Financing has been discussed in comprehensive detail.Statement of the paradoxIslamic Banking ever since its emergence in Pakistan has raised eyebrows of related and non related players. Is there a difference? Which banking system shall prevail? Does Islamic Banking have enough weight to outset its conterpart? Can Islamic Banking loose the tag of being a parellel banking system and become the prefered banking operation in Pakistan? The researcher answers to these questions in the light of the literature review as well as by testing the viability of Islamic Banking sector to its conterpart Conventional Banking in the asset backed sectors of House and Car finance (through banks) in Pakistan.Objective prefatory purpose of this research is to determine the differential impact of Islamic Banking in contrast to Conventional Banking on House Car Financing through Banks in Pakistan.Research ModelHypothesesH0 Islamic Banking does not impact House Car Financing throug h Banks In Pakistan.H1 Islamic Banking directly impacts House Car Financing through Banks In Pakistan.Chapter Two Literature look backThis segment will appraise the comprehesive literature review with respect to Islamic Banking globally while Consumer Banking Sector in Pakistan.Islam as a order of LifeIslam acclaims its self to be a Deen which provides a complete codification of life to its practitioners. According to its claim Islam not only helps its followers rather also those who seek for help without believing in its core incumbrance for day to day hinderances. May it be a name for a believers child or be it the purpose of life, Islam alone tends to answer to all the versatile queries of its disciple. This is the beauty of Islam but it can only lead to reason only if all the resources of Islam are kept in view or an adherent may astray from the righteous path.The main resources of Islam can be categorized as followsQuran e Karim The Holy Book sent upon Hazarat MuhammadAha dith e Mubarakah (Sayings of Hazarat Muhammad)Shariah (Implementation of Islam) Lives of Hazrat Muhammad and the Sahaba (Companions of Hazarat Muhammad)Hence the Deen, Islam, can be categorized into deuce-ace main branchesBeliefs (Aqaaid)Reformation and Rectification (Tassawuf) Islamic Laws and Principles (Fiqha).Since my paper would be coming under the third bough of a healthy hierarchy, that is, Islamic laws and Principle Jurisprudence (Fiqh). Further elaborating this division known as Fiqh (Islamic Laws and Principles) can be further sub-divided into the following sectionsPrayers (Forms of submissions to Allah Tallah, Ibadaat)Societal or Civil Laws (Maamlaat)Criminal LawsConstitutional lawsSince my paper discusses the Societal or Civil laws (Maamlaat) or rather absolutely specifying it would be dealing with financial aspects of this vast sub branch of Fiqh. Coming to the financial aspects of a Muslim or even an Oriental who believes in the virtue of Islamic laws, the main conc ern of this individual is to abide by Islamic law and principles while earning bread and butter for himself and his family.The things permissible by Islamic Jurisprudence are referred to as Halal while the things that are prohibited in Islamic Fiqh are known as Haram. It is by obligation that a Muslim or even an Oriental who believes in Islamic laws can earn his living only through Halal ways. iodine way of distinguishing Halal is by identifying the prohibitions while the rest remains permissible.Prohibitions in Islam for Financial ProceduresThe two of the main ills identified by Islam in financial procedures areRiba (Interest)Gharar.Riba (Interest)In perspectives of Shariah money is considered to be a assessing means for value or worth rather than an asset within itself, it necessitates that an investor should not be able to obtain income from capital (or everything that is treated as a kind of money) alone. This production of money from money (commonly known as interest) is Riba, which is prohibited in Islam. Prohibation of Interest (Riba) in QuranFollowing are the verses where Quran has out rightly identified interest as a prohibition. In the following verse our Creator nullifies the visual increase of wealth earned through interest.And whatever Riba you give so that it may increase in the wealth of the people it does not increase with Allah Subhanahu Tallah (3039)At another place it has been identified that the Jews werent allowed to indulge in interest.And because of their charging Riba while they were prohibited from it (4161)A verse which identifies the prohibition of interest and its form whether it be compounded.O those who believe do not eat up Riba doubled and redoubled (3130)Ribas eminent prohibition can be seen in the following verse while at the same time the permissible alternative of trading has been offered. Another important factor which can be witnessed here is that giving of charity is being encouraged while interest is being regarded as a curse.Those who take Riba (usury or interest) will not stand but as stands the one whom the demon has driven craze by his touch. That is because they have said traffic is but like Riba and Allah Subhanahu Tallah has permitted trading and prohibited Riba. So, whoever receives an advice from his lord and stops, he is allowed what has passed, and his matter is up to Allah Subhanahu Tallah . And the ones who revert back, those are the people of fire. There they remain forever.Allah Subhanahu Tallah destroys Riba and nourishes charities. And Allah Subhanahu Tallah does not like any sinful disbeliever. Surely those who believe and do good deeds, establish Salah and pay Zakah, have their reward with their lord, and there is no fear for them, nor shall they grieve.O those who believer, fear Allah and give up what still remains of Riba if you are believers. But if you do not, then listen to the declaration of war from Allah and his messenger. And if you repent, yours is your principal. Nei ther you wrong, nor be wronged. And if there be one in misery, then deferment till ease. And that you leave it as alms is far better for you, if you really know. And be fearful of a day when you shall be returned to Allah, then everybody shall be paid, in full, what he has earned. And they shall not be wronged. (2 verses 275-281)Identifying one of the greatest ills of Interests density of wealth the rich becoming wealthier and the poor becoming underprivileged, the verse tends to blossom forth one of the many aliments caused by going against the prohibition.So that this wealth should not become confined only to the rich amongst you.(597)During the tenure of 1984 to 1994, $ 719 Billion dollars were authorise as interest based loans while $ 749 Billion were returned during the same tenure still leaving behind a liability of $ 1258 Billion. 225 people possess 47% of the wealth of the world at the same time 1 Billion and 30 Million people earn $ 1 daily while 32% of the population of this world earns $ 4 daily. These facts show that the present financial system has the above mentioned illness known as the assimilation of wealth.Prohibation of Interest (Riba) in HadithThe second source of Islam is the sayings of the Holy Prophet MuhammadSallalaho Alaihi Wassallam. Ahadith of ProphetSallalaho Alaihi Wassallam which are on the prohibition of Riba (Interest) are as followsIn the following Saying the excess on either sides is regarded as riba.Gold for gold, silver for silver, wheat for wheat, barley for barley, date for date, salt for salt, must be bear upon on both sides and hand to hand. Whoever pays more or demands more (on either side) indulges in Riba.1.( Sahih Muslim, Karachi, V.2, P.25)As per the following saying commercial interests existence is exhibited.Ibn Juraij says in the pre-Islamic period, the tribe of Banu Amr bin auf used to take interest from the tribe of Banu-al-Mughira, and the Banu-al-Mughira used to pay this interest. When islam came,the lat er owned considerable amount of money to the former. And further onthe Banu-al-mughira used to pay interest to Banu-thaqif.All the people involved in the transaction of riba are found to be guilty and at fault as per quoted saying below.From Jabir the Prophet,Sallalaho Alaihi Wassallam, may cursed the receiver and the payer of interest, the one who records it and the two witnesses to the transaction and saidthey are all alike in guilt (Muslim,Kitab-al-Musaqat, Bab lani akili al-Riba wa mukilihialso in Tirmidhi and Musnad Ahmed)The implication or the inference of sins that a person attains on indulging himself in interest based transactions is emphasized in the following quotes.FromAbdullah ibn Hanzalahthe Prophet,Sallalaho Alaihi Wassallam,said a dirham of Riba which a man receives knowingly is worst than committing adultery thirty-six times(Mishkat al-Masabih, Kitab al-Buyu,Bab al -Riba,on the authority of Ahmed and Daraqutni)From Abu Hurayrah the Prophet,Sallalaho Alaihi Wassalla m said Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother.(Ibn Majah)Interest based transaction reap no profits here or hereafter. The misery that one is bound to go through after death just for indulging himself in interest based proceeds in visible in the following quote.From Abu Hurayrah the Prophet,Sallalaho Alaihi Wassallam, said On the night of Ascension I came upon people whose stomachs were like houses with snakes visible from the out side. I asked Gabriel who they were. He replied that they were people who had received interest ( Ibn Majah, Kitab al-Tijarat, Bab al Taghlizi fi al-Riba also in Musnad Ahmad)Prohibation of Interest (Riba) in BibleIt is not that only in Islam, interest is prohibited even in Christianity, the prohibition of interest is eminent. We have even seen above that even Jews were prohibited from interest based activity according to the Qurans verse. Following are the quotes from the Bible provi ng the prohibition of Riba.Thou shalt not lend upon usury to thy brother usury of money, usury of victuals, usury of any thing that is lent upon usury. Deuteronomy 2319Lord, who shall abide in thy synagogue? Who shall dwell in thy holy hill? He that walketh uprightly, and worketh righteousness and speaketh the truth in his hearth. He that putteth not out of his money to usury, not taketh reward against the innocent.Psalms 151, 2, 5He that by usury and unjust gain increaseth his substance, he shall gather it for him that will pity the poor. Proverbs 288Then I consulted with myself, and I rebuked the noble, and rules and said unto them, ye exact usury, every one of his brother. And I set a great assembly against them.Nehemiah 57After identifying that interest has been prohibited in the past as well as in the contemporary era by the Creator of mankind as He tends to proscribe this act, it would be important to understand the types of Riba which are as followsRiba Al Jahiliya/ Riba An NasiyahThat type of debt where contract reimbursements period and an amount in surplus of capital is fixed. (Usmani, 2002)Riba Al Fadl / Riba Al HadeesRiba Al Fadl means that the amount or goods paid back in excess other than the Qard (Loan) or which is taken in exchange of explicit homegenous products and are utilized in their hand to hand purchase and sale as explained in the Hadees. (Sahih Muslim, Karachi, V.2, P.25). (Usmani, 2002)GhararThe second of the ailments identified by the Islamic Juriprudence is known as Gharar. Gharar, is usually understood to denote ambiguity in the contractual conditions and/or the uncertainty in the survival of an essential good in an agreement and this creates concerns for Islamic scholars in the light of Islamic Jurisprudence. Shariah does include the ideology of Public benefit, denoting that, if something is tremendously in the public favor, it may be executed and so hedging or alleviation of preventable business threats, do come into this clas s but further elaboration is as follows by Islamic Scholars Gharar is where the participants that is the buyer and seller, dont know what one bought and what the other sold. prof Mustafa Al-Zarqa the researcher of Shariah has written Gharar can be defined as the sale of possible goods whose characteristics or individuality can not be established, due to the dicey character which makes this form of business related to gambling. Hadith forbidding this prototype of trading in Gharar (jeopardy) are available in books of Hadith. Some examples of Gharar transactions are (e.g. trading any fish move in the sea or a bird from a collection of species flying in the sky an unborn calf in oxen womb, are some of the saleable goods which cannot be probed and examined as their true traits are unknown. Islamic Jurisprudence researchers have given many complete definitions of Gharar. They have also evolved with the idea of Yasir (minor risk) a financial deal with an insignificant risk is believed t o be Halal (permissible) while transactions involving significant risk (Bayu-ul-Gharar) is deemed to be Haram.Gharar is one of those impediments which limit the power of decision making. An agreement that has any element of Gharar is not valid from the Islamic Jurisprudence view, irrespective of whether the parties to the agreement agree upon the agreement.The lexical meaning of Gharar is to deceive, cheat, delude, lure, entice and uncertainty.Gharar can be defined as follows The uncertainty that is present in the basic elements of an agreement, wording, subject matter, consideration and the liabilities. workout of events which have been prohibited in Ahadith because of Gharar areSale of unborn Camels treat still in the mother abdomen.Sale of flowers before they appear on the plant.Sale of fish that comes in one throw of net.Sale of sheepskin on the body of the animal.Qimar is that event in which there is a adventure of total loss to one party.Every gambling is a form of Qimar bu t Qimar is not limited to gambling. The Contract in which the participants, at the moment of implementing the agreement, cannot determine or rather decide as to how much it would give or receive.Causes of GhararThough the conditions can be many but the most commonly occuring causes can be identified in (Samadani, 2007) are as followsUncertainity relating to the existence of thing soldUncertainity relating to the possession of thing soldUncertainity relating to the thing sold itselfUncertainity relating to the priceUncertainity relating to the payment of priceUncertainity relating to both thing sold as well as the priceTypes of GhararSome types of Gharar are as followsBaitan fi Bai (Twin sales)Safaqa fi Safaqa (Twin contracts)Bai urban/urboonForward contractSuperficial bull whip effectIn the dark ages, many contracts were in vogue, where that condition would turn trade into apprize hunt. Like the seller would have different pieces of cloth and the buyer would stick out a stone and would get the cloth where the stone would land. The Holy ProphetSallalaho Alaihi Wassallam has disallowed all such contracts.After identification of the prohibitions in the current financial system where interest and Gharar (Uncertainity) are a part and parcel of day to day proceedings. The need for a system which eliminated such illnesses was required. Another reason was that, after the jolts of 1930s and other economic crisis of 1970 and now of 2008 that followed, the financial world started talk of the town about alternatives to the present systems of (Communism, Socailism and Capitalism). Though Capitalism is the largest spread system across the globe but by all means its jolting has been witnessed since 1839, 1930, 1970 and 2007. Is it at the verge of its end? Nobody knows but people have started feel for options.Islamic EconomicsIslam provides an economic system based on rules and principles defined by Islamic Jurisprudence. Human being is just a custodian of wealth and the true ownership is with Allah Tallah. Islamic Economics point of difference is that it not only deals with the materialistic needs of human being rather it also fulfills the spirtual needs at the same time. The main theory behind the Islamic economics is that money is only a means of exchange (in other words money tends to serve as an intermediary between the transaction of asset) and not a product that can be sold or discounted. Here it is noteworthy that a human being is not the true owner of wealth as it belongs Allah Tallah rather he has been given only the right to use it as the second owner, keeping in mind that he would be questioned on the day of judgement of his usfruct. Islam doesnt pass over the forces of law of demand and supply but does emphasis on the consumer as well as the government to abide by the rules of Islam. Islam as a Deen has the capability to accomadate all good things that life has to bring accept those which are outrightly against its divine principles.To summarise Islamic economics can be defined as the humanitarian goal of achieving the well-being of all members of the human family which cannot be attained by concentrating primlairly on the materialistic needs of comfort and creating maximisation of riches as the core intention of economics. Hence it is part and parcel to raise the spirtual content of well being of the whole society and write out all symptons of anomie, like family disintegration, heavy interest based debt payments, conflict and tension, crime, alcholism, dependance to drugs and psychological illness, all signifying lack of internal delight and satisfaction in the life of human beings. Captialism similar to socialism, both have fallen short to show the way to their followers such an overall welfare. As a prospective measure, it is seems almost inevitable to put down the outlines of a new scheme of operations which helps maximise human well being as per the divine guidelines of Allah Tallah.As per (Khan, 1993) th at since the unavailibilty of an Islamic society anywhere in the world the Islamic economics at present is scarely able to express or articulate Islamic position on economic issues as per its connotations.Islamic economics implies a serious execution of the Islamic strategy to raise the spirtual as well as the material well being of all people and to establish socio-economic justice, which is the vital objective of the Islamic message. On the spirtual side, the tranquility of mind that is fundamental to inner happiness cannot be attained except by increasing the nearness of the human being to his Creator, which Islam is capable of delivery about but secularism doesnot even aspire to. (Chapra, 1992).Islamic BankingBanks serve as the heart of any economy as they pump funds into the economic veins of a country. The four main functions that the bank performs arelending and deposit businesssecurities issuingasset management andforeign exchange trading. trading has been given as an alte rnative to interest based transactions by Quran e Kareem as mentioned above. In the light of this fact the comtemporary Islamic scholars after reviewing the current financial system have comeup with different modes of financing to fulfill the much needed requirement. In the futher discussion we shall discuss those modes of financing. But first we would define Islamic banking as per the State Bank Of Pakistan.Islamic banking has the same utility as of conventional banking except that it asserts to function in agreement with the rules of Islamic Jurisprudence, called Fiqh ul Muamalat (Islamic regulations for transactions). The indispensable law of Islamic banking is the sharing of gain and loss and the prohibition of interest and Gharar. The Islamic concepts, that are mainly used in Islamic banking are profit sharing combination of dislocated investor and worker (Mudharabah), safekeeping (Amanah), joint venture (Musharkah), Diminishing Musharkah, cost plus profit (Murabahah), asset f inance (Ijarah), manufacturing (Istisna) and agricultural goods (Salaam). Islamic banking proposes to a structure of banking or participatory pooling actions that is dependable on Islamic Jurisprudence (Shariah) and channeled by Islamic economics. Islamic law prohibits interest the collection and payment of Usury. Islamic law also disallows trading in financial risk (since it is a form of gambling) discussed above as Gharar. In addition, Islamic Jurisprudence excludes battle in businesses which are deemed Haram (a going concern which deals in pork or alcohol). At the verge of 20th century, quite a few Islamic banks were crafted, to cater to this specific banking market. (Hassan, 2002)In an Islamic mortgage transaction, instead of giving debt to the buyer, money is utilized to purchase the item that is, money is a medium of exchange and not a commodity. Money cannot be rented, is a fact of Islamic Economics. The supplier acts as a direct vendor for the bank, after acquiring the good s the bank proceeds it to the customer at a gain, while allowing the buyer to payback the bank in installments (assets backed financing). However, for any confine in payment the bank cannot charge additional costs as profit or compensation. To mitigate its risk and close in on the vulnerability of the customers default, the bank keeps strict collaterals as its bail out. After the possession of goods the tangible asset is listed in the name of the buyer, by the Islamic banks. Such a bargain is known as Murabaha.Likewise Ijara wa Iqtina or Ijara bi Tamleek, which is alternative to real estate capital finance. Islamic banks detainment proportionate income financings for means of transportations in a likewise manner (vending the automobile at a price, which is higher than the current value of the asset in the market, to the lessee and then holding up the title of the medium until the pre-agreed proceeds are paid up).The previous profits are taken into consideration lay up a profit an d loss sharing ratio. Consequently the banks profit on the proportionate income financing is equivalent to a specific proportion of the companys revenues. As soon as the investment amount of the proportionate income financing is reimbursed, the earning-distribution arrangement is terminated. This specific exercise is entitled as Musharaka.Supplementary to this, Mudaraba is venture capital financing where a talented worksman who provides labor while patronage is offered by the bank, so that one executes business on behalf of the other. Such participatory indulgence between capital and labor reflect the Islamic conceptions that the borrower should not absorb the peril/price of a collapse, since it is Allah Tallah who determines that failure or success, and intends that all those involved reap or bear it as per their obligations.Last, Islamic banking is jump within Islamically permissible transactions, which eliminate those involving alcohol, pork, gambling, etc. Thus Islamic put is the only acknowledgeable form of investment, and asset backed transactions are encouraged at the same time the social illnesses are not propped up.The concepts and financing modes in Islamic banking are as followsShariah informative Council/ConsultantIslamic banks and banking organizations that offer Islamic banking products and services (IBPS banks) are required to establish Shariah advisory boards/ consultants to recommend them and to ensure that the procedures, activities and systems of the bank coincide with Shariah doctrine.Amanah (Safekeeping)In Amanah, a bank is reckoned as a warden and custodian of endowments. Person deposits money in the bank and the bank assures to repay the whole amount of the belongings, or any portion of the remaining sum, when the depositor claims it. In this postal service the Bank becomes the Amin (the Guardian) while the saver is known as Rab-ul-Maal. In Amanah the bank cannot consume this money until and unless the depositor permits its Amin.Mu darabah (Profit Loss Sharing)Mudarabah is a form or contract established between an investor and an entrepreneur, whereby the entrepreneur can finance the investments for its business proceedings. Any gains generated shall be distributed between the investor and the entrepreneur as per the consented ratio, while only the investor stands all the losses if transpired, it has to be bared in mind that the due attentiveness of the entrepreneur will be evaluated and in case of carelessness he/she would have to bear the consequences. The profit-sharing maintained until the proportionate income financing is reimbursed. The bank receives its share for the time value of its money through a set proportion in profit earned that is attached to the debtors profits. (Hassan, 2002)It is a corporation in proceeds between investment and skill, where one provides funds whereas the other supplements proficiency, expertise and administration. The latter is called as the Mudarib. Any profits accumulated are distributed amongst the participants on a pre-settled ratio, while loss is borne only by the investor.It is noteworthy that any increase in capital shall be the property of Rab-ul-Maal the capital provider according majority of jurist. For example if the sheep provided by rab-ul- maal investor and sheep gave birth to lamb, the lambs would be in the ownership of Rab-ul-Maal not the Mudarib (entrepreneur). The capital provider earns profit from the business on the basis of providing capital while the entrepreneur gets his share with respect to his efforts and endeavors. (Usmani T. M., 2004)Musharkah (Joint Venture)This conception is normally applied for business partnerships or mutual ventures. The profits make are shared on a settled ratio, while if losses are sustained they will be divided on the candor funds allocation ratio. This model is different from fixed-income endowing (i.e. proceeds of propotionate income financings). The two different types of Musharkah modes are Shi rkat ul Ooqud and Shirkat ul Milk as per Islamic Jurisprudence. Further elaborating the types can be divided into specific main categories with further sub types each.In Islamic finance the things taken into consideration are Shirkat ul Ooqud (Partnership in Trade) and Shirkat ul Amaal (Partnership in Services).Shirkat ul Amwal (Partnership in trade)Shirkat Ul Amal (partnership in services)Shirkat ul Amwal (partnership in trade) is the mode of partnership where all partners invest some capital into a commercial enterprise. Shirkat Ul Ammal (partnership in services) is the form of partnership where all the partners jointly undertake to render some services for their customers and the fee charged from them is distributed among them accordingly to an agreed ratio. (Usmani T. M., 2004)Musharkah translates itself into a relationship established under a pact by the

US Law Protections Against Child Laundering

US Law Protections A impinge onst kidskin washChild launder Is U.S. Law Doing Enough?IntroductionThe paper is an in depth testing of the issue of small fry clean in the join assures of the States. This is d unmatched by first defining what small fry launder is, how it work in the realm, delivery forth some(prenominal) vital statistics concerning its prevalence as healthy upspring as its ill-effects. Additionally, the existing judicialitys in land that help combat small fry launder as well as relevant statistics on whether the current jurisprudences take hold been effective or not atomic pattern 18 brought to light. Lastly, a set(p) of good word be brought forth to help elucidate the honor of nature discover in addressing the problem of kidskin clean.Due to globalization, mainly char operateerized by handsome ca white plague of people, goods, ser illegalitys and capital ascribable to advent in technology, t here ar a number of benefits as well as drawbacks associated with it. Political, social, cultural, economic as well as environmental aspects of mankind bind been continueed in either way. One social ill that has been catalyzed by globalization is kidskin laundering. By definition, peasant laundering has been thought of asThe practice of prohibitedly using squirtren for exploitative declare oneselfs like labor, harlotry, and sufferance afterward steal and change a boor to gulling p atomic number 18nts under false pretenses. The children that atomic number 18 trafficked in or out of a unsophisticated mostly come from poor and sweptback families who may impartingingly make water them over for laundering in the wish of earning m whizy or providing a better set up to the child. However, most of these children terminate up in neglect, abuse, and distress at the hands of their recipients (Garrison, 2000)It is worth noting that this act also k without delayn as child trafficking is d ace mainly by d urationncies that facilitate toleration mainly against the pull up stakes of the parents as well as the involved child. The off halter does hide or falsify the kids details for congressman controlling the origin of the child with the aim of making much(prenominal) children true(a) orphans (Jerome, 2001). On the kindred(p) note, offenders are capable of manipulating birth certificates, intake records, or even records concerning death of parents who may be alive. Generally speaking, the phenomenon entails un justness amply attaining children by kidnapping or acquire for reasons of espousal.As suggested by Zimmerman, 2005 child laundering has been associated with a number of social ill such as in phaseal abuse, removal of some vital body organs, child labor, il juristic borrowing, prostitution and slavery among resistents. For these reasons, governments locally and in collaboration with their inter national counter bulges bind set jurisprudences that make the act a s erious crime that is punishable. Persons under the age of 18 years are deemed to be children union to the international law and recruit, transport, harbor and or to obtain such person to be victimized is seen as child trafficking. Although the laws of the land seem to earn helped chink the problem, it is bare that there are some loopholes that need to be sealed to successfully and effectively help the States address the issue of child laundering.Child laundering in United States of AmericaIt is a difficult duty to succinctly establish the exact number of children universe laundered which is characterized with kidnapping, stealing buying and trafficking children. in the United States of America, child laundering is mainly accomplished by the following ways or mechanism, child buying, intra-familial kidnapping, traditional kidnapping, kidnapping children place into orphanages, hostels or schools for purposes of being educated or misgivingd for, obtaining children by false p retenses, upset children and finally taking children in payment of debts your money or your baby. The children are elated unlawfully to cities inwardly a assumption farming and or trafficked foreign countries (Smolin, 2005).Children, both males and females are culprits, though the reason of laundering does switch for the genders involved. Child buying involved an interconnected link that may tell forward independent facilitators, directors of orphanages as well as attorney who are corrupt. They form a system that enables them buy kids from their families. An various(prenominal) with skills and knowledge is at the country of the whole scandal and recruits scouts to help him carry out his/her plans. The target here are the poorest families, money is the inducing concomitantor (Smolin, 2006). It is estimated that person at the nation of the whole affaire gets between 2,000 and 20,000 US dollars per child. Paying the family, the recruiters as well as bribing the relevant aut horities obviously leaves him/her with something substantial.Kidnapping of children placed in kinsfolkcare, schools or hostels has been separate way of child laundering. Parents from very poor primer coat cod to financial constrain may relinquish their responsibility of housing, fondness and educating their kids to an institution that entrust the same. This has been utilise by facilitators and scouts to convinced parents to place to a greater extent kids into such systems. It is sad to not that upon entering such institutions, the children are make orphans and transferred to adoptees usually without the combine of the childs parents.Smolin, 2007 held the view that child laundering has been made possible through obtaining milds through false pretense. This entails inducing parents to give hold of their children to a number of agencies. Parents are made to understand that their children are taken to submit a better life and are promised they will be constantly updated ab out the wellbeing of their children. Financial gain from adopting persons or agencies as well as the possibilities of going to America to live there with their children makes thing easier for the perpetrators especially when the parents are nave and poor. What follows after the parents dupe given custody of their kids is word meaning which is done through manipulation of the kids origin as well as parents whereabouts. Parents in the end loss the family contact with their kids forever.There are also cases where a family is forced to surrender the custody of their child out-of-pocket to inability to settle debts. This happens especially with regards to failure in settling medical examination bills associated with giving birth. Similarly, a woman who is poor is in debt with individuals or agencies that give loans, failure to repay makes the chest to force such women to place their kids to orphanages where the il reasoned borrowing is then done without her consent (Zimmerman, 2005 ).Additionally, familial kidnapping where one parent takes away the kid from the an early(a)(prenominal) and place him/her in another location especially orphanages. This is usually motivated by financial gain and evading the responsibility of raising children due to drop of adequate imaginativenesss. Countries where parent sop up to incur cost of marrying of daughter are at more risks. designal kidnapping of children especially from hospitals, schools homes, playing grounds, streets for sale has been on thrive as one major way of fostering child laundering. Lastly, cases involving lost children give way been capitalized to enhance child laundering. It is common knowledge that once a child is established to be lost efforts opt to be made tautologicively establish his/her family and rejoin them. However, according to Landes Posner 1978 in the wake of lust for money, such efforts are not made and involved children are deliberately given false name as well as manipulated tel escope ultimately adopted in an illegal manner where they may languish in intimateity abuse, child pornography, and child labor among others.StatisticsChild laundering is deemed to be the second most serious crime in the United States tho after drugs. It is the fastest bring abouting crime globally. Globally, about 1.2 million children are stolen and illegally adopted a business that run in excess of $12 billion annually (Wuiling, 2006). Above 2.8 million children are brought to America annually, upon setting foot on U.S soils a one-third of these children are coerced to shackle in prostitution and child pornography, these individuals are 12 years on average. It is asserted that 300,000 children in America are at risk of being exploited via commercial sex. Although foreigners are trafficked into the country, the number of American kids being laundered is such(prenominal) higher with close to 200,000 children of American origin being lured into commercial sex business Zimmer man et al. 2006).Statistic has it that a perpetrator of child laundering can make up to $200,000 annually from one young girl. Additionally, child pornography has been on the rise and threatens the moral stability of the country. correspond to FBI there has been an increase of 2500% in arrests in the last 10 years (Zhang, 2007).The concept of intercountry adopting has been hailed to create way of life for child laundering. Between 1990 and 2003, intercountry adoption into U.S tripled up to 21, 654 from 7,093.Table 1 Intercountry adoption to U.S Statistics.YearIntercountry adoption to U.S200321,654200422,990200522,734200620,680200719,609200817,475200912,75320102012Projected to beSource Smolin, D. (2010). Child Laundering and the Hague form on Intercountry borrowing. The Future and Past of Intercountry Adoption. Retrieved on 15 prove 2011 from https//litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplaycrawlid=1doctype=citedocid=48+U.+Louisville+L.+Rev.+441srctype =smisrcid=3B15key=997ad293e589e3af1af27ed695146555Ill-effect of child launderingIt is no doubtfulness that child laundering has a lot of prohibit attributes to the involved children as well as the society as a whole. As stated previously, laundered children are subjected to exploitative conditions such as prostitution, child pornography, child labor, illegal adoption, slavery and to extreme ends removing vital body parts (Landes Posner, 1978). The children involved under go serious sufferings at the hands of their adoptees. They are inflicted with mental/psychological torture as well as natural torture impacting on non-homogeneous aspects of their lives (Lifton, 1975).Child laundering usually denies the involved kids the opportunity of growing up with their blood sibling as well as sharing the triumph of life with their biological parents. Such incidences usually impact on their intuition especially towards parents when they come of age and realize that where they are is not their home and their parent cannot be traced (Mabry Kelly, 2006). In incidences that the child was taken from the mother forcefully or by being threaten, the mother will live in guilt for the rest of her life for failing to defend her child. Such traumatic events psychologically torture the victim that it may escalate to her solar day to day way of living. The emotion associated with losing family ties can be very detrimental to the health of the victim as they may spent a better part of their time crying and thinking about home, siblings, friends and parents (Tyuryukanova, 2002).In cases where the children are subjected to intimate abuse for instance prostitution and child pornography, there are say-so possibilities of them contacting sexual transmitted diseases and more seriously HIV and AIDS. It is no doubt that these kids have seen to it that the spread of such diseases are on the rise seance danger not only to them but also to the general macrocosm (Marshall Gerald, 2002) . Additionally, when molested at such early ages as 12 years, they stand a chance of holding lower esteem of themselves ending up withdrawing from sexual activities even with their beloved partners once they are grown ups. The problem with participation can also be along with problems with their kids. Survivors more often that not push away those individual close to them which is seen to be a upset issue to one of the spouse. It has been established that close to 80% of children engaging in sexual abuse and child pornography if not saved primitively and range into rehabilitation will definitely engage in prostitution in future especially when they are adults (Williams, 1999).Where the culprit is physically abused, by their recipients there are chances that they my turn to be violent when they grow to adulthood. When the same goes to the extreme, such children are a time physically and permanently deformed. Additionally, the children that are abused physically loss some body sens es and cannot feel both(prenominal)thing which is risky to their growth and development (Wolfe, 2005).On the same note, despite the fact that when facilitators are trying to induce the biological parents of children to be adopted by promising better life, education, provision of basic need, in reality, these children end up languishing in more trouble as compared to before being taken. Basics ineluctably such as health, tribute, food among others are poorly administered. It is only a small fraction that is lucky to have a better shelter over their heads. Lack of education in most cases renders such individual useless later in life as they cannot secure better jobs and for this reason, most of them have ruined life (Torgoley, 2006).It is also a fact that these individuals are subjected to social ill such as drug use/abuse and other forms of crime. The involved children when growing up in such an environment approach adulthood already mentally polluted and corrupted. The end res ult is having a society that is full of crime, irresponsible and holding negative views on themselves as well as others. Strictly speaking, when children are trafficked to urban centers which is usually the norm, it is obvious that the surging numbers are not in line with the available resources (Vu, 2004). This does contribute to overcrowding of the existing infrastructure in states that are striving to result financial as well as other resources to meet children needs. As noted by Lindsey Biel, author of Raising a Sensory Smart Child,Internationally adopted children demonstrate higher incidences of sensory integration and health problems than domestically adopted children. The crowded adoption facilities typically lack adequate medical, educational and nutritional care for children, leading to cognitive, emotional and behavioral disorders in adopted children.Another social ill that is associated with child laundering is irresponsible parenting. Once couple are given the room to cover their children, this will be the norm hence making the society have irresponsible individual who are not capable of taking care of young individuals and providing them with basic needs. This will provide a wider avenue for the extramarital business deemed lucrative to thrive at the expense of values of any given society. Similarly, there are problems faced by the children trafficked to new areas especially if they are from a foreign country. It will take them time to fully adjust to the environment as well as the culture of destination area (Wolthuis Mirjam, 2001).Laws addressing child laundering and their effectivenessLaws that address child laundering especially in US depend on the state. However, it has to meet accreditation law from Hague convention adoption law. It is also affected by the serviceman rights laws to pick up that in legal adoption serve up is catered for to curd child laundering.The Hague convention is put in place to affect all the adoptions that tal k place at bottom the countries that gestural the treaty withy it. Therefore, such countries as US, which signed this Convention in 1994, that came into force in April 2008 essential comply with their laws during international adoption to check over that child laundering is avoided. Therefore, Hague convention take care that each country respect human right in their laws of adoption (Vu, 2004).Hague adoption exploitThe adoption subroutine from a convention country may differ from a non-conventional country in various ways. However, the numbers of the countries that ascertain adoption routine from the Hague statute are about seventy-five where US is a member. To eliminate child laundering among conventional countries during adoption, Hague Conventional Adoption do work should be followed (Zhang, 2007).Each person should complete six steps during convention process. First, one should control that he/she choose licence adoption agencies that provide this service. Second, appl y to them to image that they find you legible to adopt. This is to make sure that one is able to be given right to acquire an adoptee legally simplification chances of child laundering. For example According to adoption laws in New York State, a person to be legible to undertake adoption process must be an adult. He/she can be married or divorced (Williams, 1999). Persons who had married but living separately from each other either under or in pursuant of the decree of separation or through a written separation statement is also legible. A minor husband with an adult wife or a minor wife with an adult husband can together adopt a child. Other groups according to legal proceeding can still adopt provided there is an adult to take care of the adopted child.An adaptor will be referred to a child who she/he is required to adopt. According to the law, adoption should be done with the consent of the adoptee if fourteen years and above with fair mind, from their parents if below that ag e or incapacitated or from the court of law IdeaConnection (2011). After acquiring the consent, one is supposed to apply for the child to ensure that one is eligible to immigrate to US. After immigration documents are offered, now the person can adopt the child. The immigration visa for the child is touch on as the final process of the adoption.According to the Hague adoption process, it was meant to provide protections to the likely parents, children and the birth parents. The key article of belief of Hague adoption convention process follows the recreate of the child (Wolfe, 2005). It is meant to ensure that there is no child laundering during inter-country adoption. According to US, the national government upholds these laws with utmost faith where Inter-country Adoption Act of 2000 and its murder regulations govern them.According to the Hague convention law, the adoptive service should be accredited, temporarily accredited or should have been approved in a national level t o carry out conventional adoption services. Through this, the adapting parents nobble about the theatrical makeance through the adopting lawyer. This ensure that the selected authority have comprehensively been evaluated based on standards contained in the federal regulations. This eliminates the tendencies that develop cartels that propagate child-laundering process. The standards provided for the accredited agencies are meant o address unprofessional adoption practices (Kristof, 2000).The other principle of the Hague adoption process is to address immigrant visa petition and application process. This ensure that the children are notified about potential problems that pose legal bar of children from getting to US before following due adoption process to be adopted by the future adaptor. This is to ensure that the child especially who have been adopted from oversee is given a legal permit to worry in the US after adoption. This regulates the illegal child trafficking as the ch ildren from other countries are identified by the federal government (Wolfe, 2005).Conventional processThe first step in the adoption process is choosing accredited agency in the US. This will help in connecting one with the other country where one is required to adopt the child. It will also offer legal adoption law of that country to ensure that no children laundering (Spangenberg, 2002). Adoption service providers should have complied with federal regulation (22 CFR Part 96). The adoption process is monitored by the council of accreditation (COA) and Colorado Department of Human Services. In auxiliary, the Office of Childrens Issues monitors accrediting entities in compliance to Inter-country Adoption Act (IAA).To ensure that legal adoption is followed and child laundering is minimized, IAA outlines services that the agencies should provide to their client as follows.The agency should identify child for adoption and ensure that they arrange on the due adoption process this regul ating irregularities that lead to child laundering. The agencies should also ensure that it secure necessary consent terminating parental adoption right. It should also do home study to ensure that it offers a report on potential adoptive parents and child background (Zimmerman et al. 2006).The accredited agencies are supposed to perform child non-judicial determination of a child best interest and the portion adaptor. They are supposed to ensure that they are capable of providing healthcare to children and any other social care if need arises. This is in accordance to the rights protect the welfare of the children.After getting an accredited agency, one is require d to apply to ensure that legibility. This done through the help of the accredited agency chosen to ensure that the whole process follow the required laws and child adoption laws. For example, if a US citizen is applying to adopt a child from other country he/she must be found legible by US citizenship and Immigration S ervice (USCIC). They will access the ability of one to hold capability to cater for the child (Wolthuis Mirjam, 2001). The application is done through a form called 1-8000A. It ensures that one is suitable to adopt the child and ensure that legal process is followed. The form is applied in conjunction with a form showing in detail once health, finances, background among others details. This is required for adoption process to ensure that no child laundering.The agency will help the adoptive parent through referring him/her to the child after being convinced that he/she is legible for adoption. This will depend with the law put in place by the federal government of each country or state. Each country has its adoption law that has to comply with human rights regulation (OHalloran, 2009). Therefore, the agency through the attorney will be send a report showing determining once legibility.Legibility is persistent by article 4 of the Hague Conventional Adoption Process. It says that t he child adoption should be done to meet the child interest. It postulate that the legal flight attendant should be counseled to ensure that he/she understand the repercussion that underlay the adoption and especially illegal adoption otherwise child laundering (Kristof, 2000). The law also provides that the person who give adoption consent on behalf of a child who is not capable of giving own consent does this in writing after counseling. This will offer a legal background incase any undue process is cited elsewhere. It will in addition reduce any child-laundering occurrence. If the child is above 14 years and is capable of giving her/ his adoption consent is counseled on adoption effects and gives consent afterwards in writing. This reduces cases where parents conspire to have child laundering (Spangenberg, 2002). The law also provides that there should be no payment or incentive that should be offered prior to the completion adoption process to ensure that the process is not com promised whatsoever.For the report to be offered to prospective adoptive parent, it should be go with by a translated to ensure that everything in the report is duly understood. It will also be accompanied with birth certificate of the child or secondary evidence showing child age (Wuiling, 2006). Duly signed irrevocable consent by the legal custodians and other entities or individuals who have are entitled to give adoption consent on behalf of the child as provided for in article 16 of the Hague Adoption Convection , the federal law of the country and the habitual certified report. This is to ensure that the adoption process follows legal order to eliminate irregularities (Marshall Gerald, 2002).The next thing is to apply for the legitimacy of the child to the Immigration to the United State after accepting the referral contrived. This is where the USCIS under the section of homeland security come in to approve the adoption of the child through form 1-800 (Smolin, 2003). USCIS makes the provisional determination whether the child is legible to be adopted in US according to the law and in accordance to the information enclosed therein. For a child to be adopted in US, he/she must meet a convention adoptee to ensure that she/he is legible to migrate to US. This will help in controlling the number of children getting in the country illegally consequently curbing child laundering.If Consular Officer finds that the child is legible for adoption, the net thing is the prospective parent adopting him/her. Finally, the application of immigrant visa for the child is done after legal adoption is carried out. This ensure that the child become a citizen of US by adoption. Visa is a necessary document to ensure that the child trafficking is adjust (Torgoley, 2006).Recommendations to better curb the menaceAs suggested by OHalloran, 2009 no effect how much the child trafficking act is combated this has been a thorny issue due to some loopholes that have been there for a long time. United State of America being the chief anti children trafficking agents in the world has to some level failed to come up with laws that are concrete to combat altogether this vice (Lifton, 1975). To the contrary, it is the highest recipient of the adopted child which most of them are from the same vice. Therefore, from the study that is done herein, some of the recommendation have been proposed to ensure that the vice is reduced if not eliminated.To ensure that the child laundering is combated in US, the federal government of US should work together with State of Department to surmount the confusion that has ever existed in the approach of the child trafficking (Jerome, 2001).First, the project propose to congress to extended the legislation of the Office to Monitor and Combat Trafficking to implicate trafficking in purpose of adoption in addition to their normal mandate of labor and sex trafficking (Mabry Kelly, 2006). If its mandate is extended, it should include buying children with adoption purpose as child trafficking contrary to its normal counter-productive approach. Congress and the Office of the Children Issues that is within the Department of the State should implement the Hague Convention depending with its fundamental purpose as anti-trafficking treaty. This will call fro the federal government to review critically the incidences caused by child trafficking within the intercountry adoption system (Garrison, 2000).The US government should provide regulatory measures to ensure that the US consular and immigration being used as child laundering mechanisms. This is through provision of comprehensive criminal and civil actions towards children trafficking and children laundering and remedies within the intercountry adoption system (IdeaConnection, 2011). US government should concern themselves in the aftermaths brought by the vice of children trafficking and children laundering. This is through offering resource support to the prone co untries as most of this vice is driven by poverty.ConclusionFrom the review of the issue of child laundering, it is apparently that it entails illegal stealing and selling of children to adopting parents under false pretenses. The phenomenon has been prevalent thanks to globalization which is free movement of people, capital, goods and services due to technological advancement. Coming second after drug trafficking, child laundering is serious crime in the United States. Globally, about 1.2 million children are stolen and illegally adopted a business that run in excess of $12 billion annually. Above 2.8 million children are brought to America annually, upon setting foot on U.S soils a third of these children are coerced to engage in prostitution and child pornography, these individuals are 12 years on average.The ill-effects of child laundering are both physical and psychological. It is evident that children are subjected to social ill such as pornography prostitution, child labor am ong other which in the long run impact on their health, how they perceive themselves as well as others, some grow to be abusers and lone rangers even if they are in an intimate relationship. America does have numerous laws that have been put in place to curb child laundering. It is worth noting that each and every state do have varied version of how to tackle the menace. From the statistics, it seems the laws have helped curb the problem as there was a decline on the number of children being adopted. However, the laws have not been effective in successfully addressing the matter. For that matter, there is need for U.S to fasten the mechanisms it uses to verify the validity of the children in question, collaborate with other countries and involve other relevant state organs in fighting the menace, coming up with better proposal that will help curb poverty which seems to be the root cause of child laundering. The later can offer a long term solution if successfully adopted.

Economic thought from ancient societies

frugalalal position from antediluvian patriarch societies cosmosThe oriental school of economic thought basic all toldy deals with the study of the course of economic thought from dissimilar quaint societies including the Hindu, Hebrew, Indian, roman letters, Greek, and Islamic societies. It has been observed that the main area looked into by the Hebrews and Hindus was base on agricultural economics and all this development was drawn from the writing of the pious lawfulness givers who were stand for at the clip. These superannuated belles-lettres consisted of ideas on unlike economic aspects such as division of labour, cottage industries, forest and mines, trade and trade practices, c at wizard mpt of wealth, transport, ban demesne-beater and loans, etcetera nigh of the writers who excessively played a role in the increment of this economic thought include Roman writers such as Cicero, Pliny Gato, Varro and Columella.During this period, and until the indust rial revolution, economics was not a separate discipline but check of philosophy. Its evolution into a distinct discipline of study in the well-disposed sciences can be attributed greatly to these source writers. Roman law to a fault create the come down recognizing that planning and commitments over time are incumbent for efficient production and trade. This bigger body of law was unified as the Corpus Juris Civilis in the 530s AD by Justinian, who was Emperor of the Eastern Roman Empire. In superannuated India, Chulavamsa records that Parakramabahu of Sri Lanka had vitiated the currency of Ancient Sri Lanka in fix up to produce property to support this large scale infrastructure projects. Parakramabahu also pi iodineered free trade during his reign. Many of the topics discussed during these ancient times are smooth prevalent in newfangled economics, including newss on the management of a consentaneous and efficient thrift and the morals of economics. These anci ent thoughts also foc lend oneselfd on issues of social welfare, for instance, redistribution of wealth during a famine.STATEMENT OF THE PROBLEMAncient economic thought is very much wide and its study provides a broad al-Qaida for comparison of the ancient approach to economic issues as compared to issues arising in the advanced world economies. The large number of ancient thinkers who contributed to this thought differed in beliefs and practices. Also, in spurtation on any(prenominal) of these ancient cultural-economic practices is very scanty and thus makes this query into the oriental school of economic thought necessary so as to be able to get a better fancying of the underlie economic issues of both the past and present.JUSTIFICATIONWith the evolution of economics, many writers declare come up with different theories about different areas in the subject. So as to be able to critically assess these different theories and understand the unity which connects us with the a ncient times, recognizeledge on the origin of the betimes stages of economic thought is necessary for one to be able to pullulate a well informed and unbiased stand on disputatious economic issues arising today and hence the call for for this study.OBJECTIVES OF THE STUDYTo understand the principles and concepts of the oriental school of economic thought.To know the key contributors of ancient economic thought.To appreciate and criticize how the ancient societies carried out their economic activities.To find out the major contributions of the oriental school of thought to the body of knowledge that exists today.To get a clearer understanding of the position of economics as a distinct element of a group of social sciences.Ancient near East frugal organizations in the earliest civilizations of the Fertile Crescent were driven by the need to efficiently grow crops in the river basins. The Euphrates and Nile Valleys were homes to earliest examples of codified measurements pen i n base 60 and Egyptian work outs. Keepers of royal granaries and absentee Egyptian land owners account in the Heganakht Papyri. Historians of this period note that the major tool of accounting for rural societies, the sales phthisisd to measure grain inventory, reflected dual religious and respectable symbolic meaning. The Erlenmeyer tablets give a depression of Sumerian production in the Euphrates valley around 2, 200 2, speed of light B.C., and shows an understanding of the relationship surrounded by grain and labour inputs (valued in egg-producing(prenominal) labour days) and outputs and an emphasis on efficiency. Egyptians measured work output in man-days. The development of sophisticated economic administration continued in the Euphrates and Nile Valleys during the Babylonian Empire and Egyptian Empires when trading units spread through the Near East within monetary systems.Egyptian fraction and base 60 monetary units were extended in use and mixed bag to Greek, ea rly Islamic culture, and mediaeval cultures. By 1202 A.D, Leonardo Pisa Fibonacci use of home in and Vedic-Islamic numerals motivated Europeans to apply zero as an exponent, birthing modern decimals 350 old age later. The city states of Sumer developed a trade commercialise sparing based originally on the commodity money of the shekel which was a certain(p) weight measure of barley, while the Babylonians and their city state neighbours later developed the earliest system of economics using a metric of assorted commodities, which was stubborn in a legal code. The early law codes from Sumer could be considered the first (written) economic formula, and had many attributes compose in use in the current price system today, such as codified amounts of money for origin deals (interest rates), fines in money for wrong doing, inheritance rules, laws concerning how private property is to be taxed or divided, etc.Ancient Greco-Roman worldSome prominent classical scholars assert that relevant economic thought was based on metaphysical principles which are incommensurate with contemporary dominant economic theories such as neo-classical economics. However, several ancient Greek and Roman thinkers make conglomerate economic observations especially Aristotle and Xenophon. Many other Greek writings show understanding of sophisticated economic concepts. For instance, a form of Greshams law is presented in Aristophanes Frogs, and beyond Platos application of sophisticated mathematical advances enamord by the Pythagoreans in his appreciation of flat money in his Laws (742 a-b) and in the pseudo-Platonic dialogue, Eryxlas.Bryson of Heraclea was a neo-platonic who is cited as having heavily influenced early Islamic economic scholarship. The influence of Babylonian and Iranian thought on Greek administrative economics is present in the work of Greek historian Xenophon. Discussions of economic principles are especially present in his Oeconomicus, his biography of Cyrus the Great, Cyropaedia, Hiero and shipway and Means. Hiero is a minor work which includes discussion of leaders stimulating private production and technology through various means including public recognition and awarding of prizes. Ways and Means is a short treatise on economic development, and showed an understanding of the importance of taking service of economies of scale and advocated laws promoting foreign merchants. The Oeconomicus disc uses the administration of agricultural land. In the work, intrinsic psycheal value of goods is analyzed and compared with replace value Xenophon gives an example of a horse which whitethorn be of no use to a person who does not know how to handle it, but shut away has exchange value. In Cyropaedia, Xenophon presents what in hindsight can be seen as the foundation for a theory of bewitching exchange in the market which entrust result in the depth psychology of better fit or suitability to either society who wants to buy the same item . Xenophon discusses the concept of division of labour, occupyencing change cooks and workers in a shoe making shop. Marx attributes to Cyropaedia the idea that the division of labour correlates to the size of a market.Roman law developed the need recognizing that planning and commitments over time are necessary for efficient production and trade.Ancient IndiaChulavamsa records that Parakramabahu I of Sri Lanka had debased the currency of Ancient Sri Lanka in order to produce monies to support his large scale infrastructure projects. Parakramabahu I also pioneered free trade during his reign, a war was fought with Burma to defend free trade.Chanakya (c. 350 BC 275 BC) considered economic issues. He was a professor of Political Science at the Takshashila University of Ancient India, and later the establish Minister of the Mauryan Emperor, Chandragupta Maurya. He wrote the Arthashastra (science of material gain). Many of the topics discussed in the Arthashastra are still prevalen t in modern economics, including its discussions in the management of an efficient and substantialness frugality. Chanakya also focuses on issues of welfare, for instance, redistribution of wealth during a famine and the collective ethics that hold a society together.The Arthashastra argues for an autocracy managing an efficient or real economy. The qualities described are in effect that of a command economy. It discusses the ethics of economics and the duties and obligations of a king. Chanakya writes on the economic duties of a kingThe king shall be ever active in the management of the economy.The root of wealth is economic activity and lack of it brings material distress.In the absence of generative economic activity, both current prosperity and future growth will be destroyed.A king can achieve the desired objectives and teemingness of riches by undertaking productive economic activity.Ancient chinawareIdeal and effective economic policy was long sort for in ancient chinaw are, one of the greatest early clearers being the Emperor Qin Shi Huang (r. 221 BC 210 BC), who standardized coin currency end-to-end the old warring states once he unified them under a strong central bureaucracy (which the Zhou dynasty had always lacked). However, one of the greatest reformists in China lived during the medieval Song dynasty (960 1279 AD), that being Chancellor Wang Anshi (1021 1086 AD). Wang Anshis political faction of the New Policies chemical group enacted a series of reforms that come to on military reform, bureaucratic reform and economic reform. The economic reforms include low cost loans for farmers who he considered the spinal column of the Chinese economy in terms of production of goods and the greatest microbe of the land tax. Replacing the corvee labour service with a tax instead, he enacted giving medication monopolies on crucial industries producing tea, salt, and wine, introduction of local militia to tranquillity the budget spending on th e official standing army of one million troops and the establishment of a Finance Planning foreign mission staffed largely by political loyalists so that his reforms could pass quickly with little time for conservatives to oppose it in court. chivalric Islamic WorldTo some degree, the early Moslems based their economic analyses on the Quran (such as the opposer of riba, interest) and from Sunnah, the sayings and doings of Muhammad.Early Muslim thinkers, Al-Ghazali (1058 1111 A.D.) classified economics as one of the sciences connected with religion, along with metaphysics, ethics and psychology. Authors have noted, however, that this connection has not cause early Muslim economic thought to remain static.Persian philosopher Nasir al-Din-al-Tusi (1201 1274) presents an early exposition of economics (what he calls Hekmat-e-madani, the science of city life) in discourse terce of his ethics the study of universal laws governing the public interest welfare in so far as they are di rected, through cooperation, toward the optimum (i.e. perfection).Many scholars trace the history of economic thought through the Muslim world, which was in a Golden Age from the 8th to 13th coulomb and whose philosophy continued the work of the Greek Hellenistic thinkers and came to influence doubting Thomas when Europe re observed Greek philosophy through Arabic translation. A viridity theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth. The influence of earlier Greek and Hellenistic thought on the Muslim world began largely when Abbasid Caliph al-Mamun, who sponsored the translation of Greek texts into Arabic in the 9th light speed by Syrian Christians in Baghdad. But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use of deficit financing, use of taxes to encourage production, use of hono rable mention instruments for banking, including rudimentary savings and checking of accounts, and contract law.The origins of expectantism and free markets can be traced back to Caliphate where the first market economy and earliest form of merchant capitalism took root among the 8th and 12th centuries, which some refer to as Islamic capitalism. A vigorous monetary economy was created on the basis of expanding levels of circulation of a shelter high-value currency (the dinar) and the integration of monetary areas that were formerly independent. Innovative new descent techniques and forms of business organizations were introduced by economists, merchants and traders during this time. Such innovations included the earliest trading companies, belief cards, big businesses, contracts, bills of exchange, long distance, international trade, the first forms of partnerships and the earliest forms of credit, debt, profit, loss, capital (al-mal), capital accumulation (nama-al-mal), circu lating capital, capital expenditure, revenue, cheques, promissory notes, trusts, startup companies, savings accounts, transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers, deposits, assignments, the double entry bookkeeping system, and lawsuits.MAIN FINDINGSAfter leaving through the history of the oriental school of thought in the previous section, the following economic aspects come out clearly as having been discovered and practiced by these early thinkersThe Concept of Production and TechnologyAncient leaders stimulated private production and technology through various means including public recognition and awarding of prizes to successful inventors and producers.Economies of ScaleWays and Means was a short treatise on economic development written by Xenophon, which showed an understanding of the importance of taking advantage of economies of scale in production activity and advocated for laws promoting foreign merchants.Administration of Ag ricultural reason market-gardening was considered the most dignified occupation. In ancient India, the state took a principal part in developing agriculture and also demanded a fixed share of the gross produce.Price systemThe early law codes from Sumer were the first (written) economic formula, and had many attributes still in use in the current price system today, such as codified amounts of money for business deals (interest rates), fines in money for wrong doing, inheritance rules, laws concerning how private property is to be taxed or divided, etc.Grain and Labour Inputs RelationshipThe Erlenmeyer tablets gave a picture of Sumerian production in the Euphrates valley around 2, 200 2, 100 B.C., and showed an understanding of the relationship between grain and labour inputs (valued in female labour days) and outputs and an emphasis on efficiency in production.Output of marchThe Egyptians measured work output in man-days.Monetary UnitsThe Egyptian fraction and base 60 monetary u nits were extended in use and diversity to Greek, early Islamic culture, and medieval cultures. By 1202 A.D, Leonardo Pisa Fibonacci use of zero and Vedic-Islamic numerals motivated Europeans to apply zero as an exponent, birthing modern decimals 350 years later and hence the development of monetary units.ValueSubjective personalised value of goods was analyzed and compared with exchange value. Xenophon gave an example of a horse which may be of no use to a person who does not know how to handle it, but still has exchange value.Theory of Fair supplantXenophon presented what in hindsight could be seen as the foundation of a theory of fair exchange in the market which will result in the analysis of better fit or suitability to either party who wants to purchase the same item.Division of LabourXenophon discussed the concept of division of labour, with reference to specialized cooks and workers in a shoe making shop who specialised in different tasks.Free TradeParakramabahu I pioneere d free trade during his reign, this is plain because a war was fought with Burma to defend free trade in ancient India.WelfareIn India the leaders insisted on ensuring that the population as a whole has to be well looked after. For example, Chanakya focused on issues of welfare, for instance, redistribution of wealth during a famine and the collective ethics that held a society together.Standardized create verbally CurrencyEmperor Qin Shi Huang of Ancient China, standardized coin currency throughout the old warring states after he unified them under a strong central bureaucracy.Low Cost Loans For FarmersIn Ancient China Wang Anshis political faction of the New Policies Group enacted a series of reforms that centered on military reform, bureaucratic reform and economic reform. The economic reforms included low cost loans for farmers whom he considered to be the backbone of the Chinese economy in terms of production of goods and the greatest source of the land tax.Land TaxThis was a source of revenue for the Ancient Chinese presidential term from farmers, because during that period agriculture was the main driver of the economy.Fiscal and Monetary fundingThe Muslim leaders enforced various policy measures including fiscal and monetary financing, use of deficit financing, use of taxes to encourage production and use of credit instruments for banking.BankingThe early Muslim leaders had shown sophisticated attempts indlucing rudimentary savings and checking accounts, and contract law.Monetary EconomyBetween the 8th and 12th centuries, which some refer to as the period of Islamic capitalism, a vigorous monetary economy was created on the basis of expanding levels of circulation of a stable high-value currency (the dinar) and the integration of monetary areas that were previously independent of each other.SUGGESTIONSThe social organization manifested by the ancient civilizations should be critically looked at and applied to solve some socioeconomic problems still present today, especially in the developing nations.The organization of government and formulation of policies during the ancient times leaves a lot to be admired. Governments of the modern economies should pick some of these values.The concept of politics being looked at singly from economics and policy formulation should be followed in todays modern economies for straightaway development and equality in the distribution of wealth.Welfare economics should be taken as seriously as it was taken in ancient times. For example, during periods of drought or famine, governments should not let particular groups of people stand up and instead they should distribute the available resources to the entire population.CONCLUSIONTheres no examination or doubt as to whether ancient economic philosophies are still in extensive use today. The modern economy has evolved over centuries to bring about what it is today. The study of the history of economic thought enables the student to appreciate the contributions various writers have made to development of economics as a discipline. Although ancient economic theories were sometimes unclear, contradictory, or presented in a rudimentary manner, they form the basis of economic analysis today. These theories are still being used today by the worlds largest and most complicated and sophisticated economies.BIBLIPGRAPHYFalgas, Matthew E. Zarkadoulia, A. Effie, (2006). Arab Science in the Golden Age (750-1258) and Today. The FASEB Journal 20(10) 1581-1586.Hosseini, S. Hamid (2003). Contributions of Medieval Muslim Scholars to the account statement of Economic Thought and their Impact A Refutation of the Schumpeterian Great Gap.S. Lowry (2003). Ancient Medieval Economics. In Biddle, Jeff E. Davis, Jon B. Samuels, Warren J.A Companion to the History of Economic Thought. Malden, MA Blackwell pp. 11-27.Schumpeter, Joseph (1954). History of Economic Analysis. New York, Oxford University Press.