Islamic Law, Adaptability, and Financial Development

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Islamic Law, Adaptability, and Financial Development

www.LearnIslamicFinance.com

Disclaimer
The views and opinions presented in this presentation are personal and do not represent those of Islamic Research and Training Institute or the Islamic Development Bank.

www.LearnIslamicFinance.com

Lecture Plan
• Session 1: Law, Adaptability, and Financial
Development—Introduction
– – – Common and Civil Laws Adaptability Features & Financial Development Islamic Law: Sources and Evolution

• Session 2: Adaptability of Islamic Law and
Financial Development
– – –

Adaptability of Islamic Commercial Law Islamic Legal Infrastructure & Financial Development Conclusion www.LearnIslamicFinance.com

Session 1
Law, Adaptability, and Financial Development—Introduction
– Introduction – Common and Civil Laws – Adaptability Features & Financial Development – Islamic Law: Sources and Evolution www.LearnIslamicFinance.com

Introduction
• Literature discusses the role of law and legal • • • • systems on financial development An important determinant—adaptability of law to changing conditions Adaptability—the ability of legal traditions to evolve Studies compare adaptability of common and civil legal systems and financial development This lecture looks at Islamic law and its adaptability features with implications to financial development www.LearnIslamicFinance.com

Basic Definitions (1)
• Legal system entails legal order and legal regime
– Legal order—legal norms of the system (constitution, statutes, regulations, juridical decisions, etc.) – Legal regime: legal institutions (legislature, administrative agencies, courts, etc.) – While we discuss law, some support legal institutions will be touched on – This paper focuses laws related to commercial/financial transactions www.LearnIslamicFinance.com

• The focus of this lecture is narrow

• Islamic law covers many subjects

Basic Definitions (2)
• Financial structure consists of financial
markets and intermediaries

• Financial Development—efficient

functioning of the markets and intermediaries in providing the financial needs www.LearnIslamicFinance.com

Contemporary Legal Regimes
• Western legal systems dominate the world • Most Muslim countries have adopted variants of these laws.
– English Common law – Continental (European) Civil law

• While they are different in form, they have
similar social objectives (individualism, liberalism, and personal rights) www.LearnIslamicFinance.com

• Roots in Justinian’s Roman Law • Strong central legal system, state above the • • • • •

Civil Law—Features

courts Civil laws are codified in complete, coherent, systematic and exhaustive codes Statutes complement and complete the codes Judges enjoy authority of reason—interpret codes and rules for specific cases. Judgments of one court has no bearing on other courts Continental Europe (France, Germany, Italy, Poland, etc.) and ex-French Colonies (Northern and sub-Saharan Africa). www.LearnIslamicFinance.com

Common Law—Features
• Developed in England in the 11th Century • Emphasis on property rights and law over the • • • • • state Jurisprudence (case law and judgments) forms the core of the law Judges can interpret and create new laws as circumstances change Reason of authority exists—lower courts are bound by decisions of higher courts (stare decisis) Statutes completes the case laws UK, USA, ex-British Colonies www.LearnIslamicFinance.com

Adaptability of Laws
• Adaptability focuses on ‘process of law
making’ • Ability of the law to evolve in response to changing conditions • Adaptability can be measured by: – Sources of law: juridical decisions versus statutory law/codes – Legal justifications: juridical decisions based on equity or statutory law www.LearnIslamicFinance.com

Sources of Law & Financial Development
• Case law enables inefficient laws to be replaced • • by efficient laws through litigation and jurisprudence Law based...
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