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
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