Islamization of Monetary Policy of 27 OIC Muslim Countries in Asia: The Successes, The Barriers and The Future Directions

Abstract

The Islamization of banking, monetary policy, and the financial system began in 1975 after the setup of the Islamic development bank (IDB). Firstly, this paper discusses a concise framework of Islamic monetary policy. Then it presents the success and obstacles of the Islamization process of the monetary policy among the 27 OIC member Muslim countries in Asia and provides future directions to enhance the Islamization process. This paper employed secondary data and used the three criteria to measure the Islamization process: 1) Islamization of commercial banking; 2) making Islamic banking guidelines & regulations; 3) innovation and starting the Islamic monetary policy instruments. This paper finds that more than 154 Islamic commercial banks are operating under the Conventional monetary policy in 23 countries with very few Islamic monetary tools. On the contrary, Iran follows full-pledged Islamic monetary policy with 30 Islamic commercial banks. More precisely, in these countries, only 17% of total banks are Islamic bank, whereas 83% are still interest-based banks. Regrettably, two countries (Turkmenistan and Uzbekistan) do not have any tools of Islamic monetary policy. This paper also finds that though 64% of Islamic banks were established during 1970-2000 periods in 27 countries, only 25% of countries prepared Islamic banking regulation at this period. On the other hand, 75% of Islamic banking regulations were made during 2000-2015 periods. Most common Islamic monetary instruments are project-based Sukuk, project-based debt instruments, etc. Finally, this paper recommends six steps to enhance the Islamization process.

Sukuk and monetary policy transmission in Indonesia: the role of asset price and exchange rate channels

“…In addition, many previous studies have investigated the relevance of Islamic bank in monetary policy transmission channel (Kassim andMajid, 2008, 2009;Sukmana and Kassim, 2010;Muhammad et al, 2014;Kassim, 2014, 2015) and documented the importance of Islamic bank in the economic development agenda. Previous studies on the conceptual of sukuk (Zulkhibri, 2015) as one of the Islamic monetary instruments (Hossain, 2019), its monetary policy transmission channels (Selim, 2015) through asset price (Suriani, Majid et al, 2018 confirmed the essential role of sukuk as one of Islamic monetary transmission channels in the economies of Indonesia (Mahomed et al, 2018), Gulf cooperation countries (Said and Grassa, 2013) and worldwide (Smaoui and Nechi, 2017;Ahmad et al, 2012;Echchabi et al, 2016).…”

“…Sun (2010) compared several monetary policy transmission channels using the vector autoregression (VAR) approach. Project-based Sukuk and project-based debt instruments are considered the most common Islamic monetary instruments (Hossain, 2019).…”

Analisis Efektivitas Kebijakan Moneter Dalam Perspektif Konvensional dan Syariah Terhadap Inflasi di Indonesia Tahun 2013-2020

“…Hal ini dapat digambarkan sebagai pengelolaan permintaan dan penawaran mata uang untuk mencapai pertumbuhan ekonomi. (Hossain, 2019) Dalam pengertian khusus, kebijakan moneter adalah tindakan besar yang dilakukan pemerintah melalui bank sentral dengan cara mempengaruhi penciptaan uang (Ascarya, 2012). Melalui cara tersebut pemerintah dapat mempengaruhi jumlah uang beredar, pengeluaran investasi, permintaan agregat dan berakhir pada tingkat harga sehingga kondisi ekonomi akan tetap terjaga kestabilannya (Wahyudi, 2013) Dalam perspektif Islam, tujuan kebijakan moneter yaitu untuk menjaga stabilitas dari mata uang sehingga pemerataan pertumbuhan ekonomi tercapai.…”

Reflexivity of Salat and Hahslm as Pre Design by God Into Religion and Science Due to Economics with Covid-19

“…The diagram above shows that the source of all knowledge is from god. In the early days of human civilization, god passed down his science to the prophets, it was called the science of god [19]. This knowledge of God is meant to the divinely given knowledge of prophets, including the study of God.…”