The Regulation and Supervision of Interest-Free Banking in Ethiopia

Abate, Alyu (2015) The Regulation and Supervision of Interest-Free Banking in Ethiopia. Masters thesis, Addis Ababa University.

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Hitherto, the western principles and laws have dominated the life of Muslims in different parts of the world. As part of the Islamic resurgence and revival of Islamic identity, the political freedom of the Muslim world from the western colonizers has opened the road for the actualization of Islam in the political, social and economic stand of the Muslim communities around the globe. The same kind of development has also been reflected in the field of economic transactions and financial dealings of Muslim populations. And due to the rising interest and attention from Muslim scholars of deferent periods, Islamic banking and finance has able develop rapidly during the years following its emergence until the current state of the art. The development process of the Islamic economic and financial system has passed a lot of hurdles before reaching to present status, mainly owing to the dominance of the conventional financial industry that holds totally opposing values to the Islamic economic system. In the past 40 years, Islamic economics and finance had to encounter with the deeply rooted and widely accepted economic philosophy of capitalism. The principles of Islamic economics are directly linked to the foundational concept of monotheism (Tawheed - oneness of God) of Islam which basically articulates that God has created the universe and man, and made man a vicegerent on earth.1 Life of man on earth has got grand objectives to achieve through following the guidance of God in every aspect of his life. God has revealed His guidance from the time man has set his foot on earth up to the last nation of Prophet Muhammad. This guidance of God is revealed to human kind through prophets and messengers who are sent for every nation up to the last nation (Ummah - the community of Muslim believers) to whom Prophet Muhammad is sent with the speech of God i.e. the Holy Qur‟an and the Sunnah2. These two revelations of God constitute the primary sources for principles and laws governing the life of a Muslim in every sphere of life, not being limited only to spiritual and ritual matters, as in other religions.3 In fact, we see the Qur‟an and the Sunnah laying down some foundational principles and some specific laws governing relationships in the society while leaving the wide area to be filled through Ijtihad (juristic reasoning). The same approach is reflected in Islamic economics and finance. We find only a handful of verses in the Qur‟an regarding economic dealings and somewhat explanatory narrations thereof from the Sunnah. Hence, the jurists of the Sharia, since its emergence 200 years after the demise of Prophet (PBUH) up until the contemporary scholars, have been able to deduce the Sharia laws of wider perspective in the field of Islamic finance. In trying to understand the Sharia from the vantage point of finance and banking, the hierarchical authority of the sources must be kept, meaning that the Qur‟an, the Sunnah, Ijmae’ (general consensus of Muslim jurists) and Qiyas (analogical reasoning ) comprise the first up to the fourth legal sources of the Sharia respectively. The secondary status of the latter two reasoning sources of Sharia i.e. Ijmae’ and Qiyas indicates the evident superiority of Godly revelations over reason, as these sources are susceptible to fall into errors particularly when it is confused with „human desire and instincts‟ which would result in destructive decisions in various political, social and economic issues of the society. Therefore, in an attempt to comprehend the principles of Islamic finance and other accepted practices, the necessary precedence to the higher norms and objectives of the Sharia (Maqasid ash-Sharia) must be kept. I hope that this effort of introducing theoretical aspect of Islamic banking together with much emphasis on the regulatory and supervisory framework of interest free banking industry in Ethiopia would enhance the meager level of knowledge of its stakeholders mainly of the policy makers and regulatory authorities at the government level and the general population, and provide a fertile ground for further exposition of the literature and improvement of the regulatory and supervisory practice of interest free banking in Ethiopia.

Item Type: Thesis (Masters)
Subjects: B Philosophy. Psychology. Religion > BP Islam. Bahaism. Theosophy, etc
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
K Law > K Law (General)
Divisions: Africana
Depositing User: Tim Khabala
Date Deposited: 24 May 2018 14:09
Last Modified: 24 May 2018 14:09

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