Islamic Financial Movement

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Table of Contents

What is Financial System?2
Conventional Financial System2
Flaws & Failures in Prevailing system3
Depressions due to capitalism3
Islamic Financial System4
What is Islamic Banking4
Philosophy of Islamic Banking4
Origin of Islamic banking in Pakistan5
Initiatives Taken in Pakistan5
Development of Islamic banking in Pakistan6
Present scenario of Present scenario of Islamic Banking System in Pakistan7

What is Financial System?
“Processes and procedures used by a firm’s management to exercise financial control and accountability. These measures include recording, verification and timely reporting of transactions that affect revenues, expenditures, assets and liabilities.” Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow inter temporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Financial system depends on five major components which are following: * Money

* Financial Instruments
* Financial Market
* Financial Institutions
* Central Bank

Conventional Financial System
Capitalism is an economic system in which the means of production and distribution and industry are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning by the government; profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses. There is no consensus on the precise definition of capitalism, nor how the term should be used as an analytical category. There is, however, little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism. There are a variety of historical cases to which the designation is applied, varying in time, geography, politics and culture. Some define capitalism as where all the means of production are privately owned, and some define it more loosely where merely "most" are in private hands; while others refer to the latter as a mixed economy based toward capitalism. More fundamentally, others define capitalism as a system where production is carried out to generate profit, or exchange-value, regardless of legal ownership titles. Private ownership in capitalism implies the right to control property, including determining how it is used, who uses it, whether to sell or rent it, and the right to the revenue generated by the property. Economists, political economists and historians have taken different perspectives on the analysis of capitalism. Economists usually emphasize the degree that government does not have control over markets (laissez faire), and on property rights. Most political economists emphasize private property, power relations, wage labor and class. There is general agreement that capitalism encourages economic growth while further entrenching significant differences in income and wealth. The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy, and many states have what are termed mixed economies. Capitalism as a deliberate system of a mixed economy developed incrementally from the 16th century in Europe, although proto-capitalist organizations existed in the ancient world, and early aspects of merchant capitalism flourished during the Late Middle Ages. Capitalism became dominant in the Western world following the demise of feudalism. Capitalism gradually spread throughout Europe, and in the 19th and 20th centuries, it provided the main means of...
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