National and Global Islamic Financial Architecture:
Problems and Possible Solutions for the OIC Member Countries
24
Chart ‎2.13: Financial Markets-Stability
Source: Calculated from World Bank Global Financial Development database
In summary, the results show that while the banking sector in OIC MCs is close to the world
average, the insurance sector is relatively smaller. Similarly, whereas the debt securities
market is relatively smaller, the equity market has an average size that is larger than the world
average. In terms of various features of the financial sector, the results show that while
financial institutions of OIC MCs have a relatively lower depth, access and efficiency, they are
more stable. The capital markers appear to have depth that is closer to the world average and
have higher efficiency and stability, but their access is lower compared to the world average.
2.3. Islamic Finance: Foundational Principles and Contracts
Islamic law (Shariah) is comprehensive and covers various aspects of life including economic
dealings. Other than providing legal rules, Shariah also provides moral principles relating to
economic activities and transactions. It defines the founding concepts of an economic system such
as property rights, rationality, and the objectives of economic activities and principles that govern
economic behavior and activities of individuals, markets, and the economy. Al-Ghazali identifies
the essential goals of Shariah (maqasid al Shariah) to constitute safeguarding the faith (din),
self (nafs), intellect (‘ aql), posterity (nasl ), and wealth (mal) (Chapra 2006). The objective of
Islamic commercial law and an Islamic economy would strive to protect and enhance one or
several of the maqasid. Specifically, commercial transactions are sanctified and encouraged as
they preserve and support property and progeny (Hallaq 2004).
The implications of maqasid in an economy and the financial sector can be viewed in different
ways. One categorization of maqasid would be to classify them at the macro/general level
(maqasid ammah ) and micro/specific level (maqasid khassah) (Abozaid 2010, Dusuki 2009,
Dusuki and Bouheraoua 2011). While macro/general maqasid relates to the benefits and well-
being of the overall society, micro/specific maqasid deals with issues relating to individual
transactions. A brief overview of maqasid from these perspectives for the financial sector is
presented below.
Maqasid at the macro level is similar to the broader goals of Shariah and involve realizing
human wellbeing by enhancing maslahah (benefit) on the one hand and preventing mafsadah
(harm) on the other hand (Laldin and Furqani 2012). Different scholars suggest the macro
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5
10
15
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World High Middle Low OIC
15,2
16,1
14,6
9,4
12,2
Stock price volatility