How Islamic Economic Models Contribute to the Productivity Increase

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1.1 -------------------------------------------------
INTRODUCTION

1.2.1 Islamic Finance
In this day and age, crisis and challenges had continuously interrupted the worldwide financial environment. However, Islamic finance remains as a tough and viable financial intermediation. Moreover, it has become more important in the international financial system. As a result of developing a comprehensive Islamic financial system, Malaysia has gain experiences which brought it ahead toward development as well as advancement of the industry. Furthermore, Islamic country was not the only player of Islamic financing but also non Islamic countries. We can observe globally that there are many countries have already encountered with Islamic finance and those which plan to develop Islamic finance in the future such as Japan, Russia, India, Bahrain, France, and so on. Expansion of Islamic finance leads to improvement in the economics of Islam. Islamic economics are discussed next.

1.2.2 Relationship between Islamic economic models and increase in productivity
Both Western classical and Islamic economists classify economic activities as productive or unproductive. An economic model defined as a simplified framework designed in order to illustrate complex processes. Islamic economic model is a simplified framework designed by a regime in order to reflect Islam’s overarching ethical vision of economic processes. Islamic economic model is also known as Islamic economic system. It is an economic system or framework which is based on the Shariah principles and rules.
Krugman, 1994 defines productivity as a measures of how efficiently production inputs, such as labour and capital, are being used in the economic to produce a given level of output. He noted that the productivity is considered as a key source of economic growth and competitiveness and thus it is also a basic statistical information for many international comparisons and country performance



References: Bank Negara Malaysia. (2010). Monthly Statistical Bulletin. Malaysia: BNM. Erusan, d. d., & Ibrahim, H. (2007). Analysis of The Islamic Banking Profit Rate and Conventional Banking Interest Rate in Malaysia for The Period of Four Years (2002-2006). Islamic Finance Expert. (2010, September 19). Islamic Finance to Double in Size in Five Years. Retrieved February 2, 2011, from Islamic Finance Expert: http://www.islamicfinanceexpert.com Islamic Finance Expert Kadir, M. R. (2009). Islamic Finance in Malaysia - Evolution & Current Development. Malaysia: Bank Negara Malaysia. KFH Research Ltd. (2010). Islamic Home Financing. Islamic Finance Research . KFH Research Ltd. (2010). Malaysia Islamic Banking. Islamic Finance Research . Krugman, P. (1994). Defining and Measuring Productivity. The Age of Diminishing Expectations Malaysia Productivity Corporation Naqvi, S. N. (May 1997). The Dimensions of an Islamic Economic Model. Islamic Economic Studies Vol.4, No.2 , 1-18. Productivity Report. (2009). Economic and Productivity Development. Malaysia. Shahrim, Z. (2011, February 25). How Islamic Economic Model Contribute to Productivity Increase? (N. Fridrict, Interviewer) Sufian, F The Economist. (2009). Islamic Finance: What Role In The New World Order? Economist Conference. London: The Economist Intelligence Unit Limited. Wan, S. B. (2008). Malaysian Experiences on The Development of Islamic Economics, Banking and Finance. 405-417.

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