The American Journal of Islamic Social Sciences Vol. 8, No. I, 1991 181 

Seminars, Conferences, Addresses 

Report on the Third Seminar on Islamic Economics: 
Resource Mobilization and Investment in an Islamic 

Framework 
The Catholic University of America, Washington, D.C. 

Herefe/d Auduorium, Hannan Hall 
Jumada al Akhirah 4-5, /4ll/December 22-23, 1990 

The Third Seminar on Islamic Economics, held under the sponsorship 
of the International Institute of Islamic Thought (HIT) and the Association 
of Muslim Social Scientists (AMSS), took on an international character with 
delegates in attendance from as far east as Malaysia, Egypt, and Saudi Arabia 
in addition to participants from Canada and the United States. This year's 
theme for the conference, "Resource Mobilization and Investment in an Islamic 
Framework;' evoked considerable interest among both academicians and 
practitioners of the Islamic economic reform movement. Evidence of this 
interest was seen in the large number of research papers received on the 
subject although, regrettably, funding limitations prevented many a scholar 
from participating in the meetings. 

The first day's sessions opened with brief remarks from Sayyid M. Syeed, 
genera] secretary of the AMSS, and Zaidi Sattar, program director for the 



182 The American Journal of Islamic Social Sciences Vol. 8, No. 1, 1991 

seminar. Their remarks, while highlighting the significant strides made in 
the past decade in research on Islamic economics, pointed to the substantial 
financial and logistical constraints that remain in the advancement of future 
research in the area. IIIT and AMSS were commended for their past role 
in this endeavor, and hopes were expressed for a more vigorous role in the 
filture. 

The uhlight of the opening session was the thoughtfbl inaugural address 
by Ti212 Jibir al ‘Alwiini, President, IIIT, who emphasized the importance 
of the “human” element in the organization and management of economic 
resources as “. . . man is both intellect ready for thought, and hands ready 
for action.” Citing from the Holy Qur’an and the works of Islamic scholars, 
he stressed that Islamic thought has much to offer in the emancipation of 
the ummah from the debilitating influence of colonialism. Development of 
the mind, he argued, is as critical to a society’s growth process as is the 
development of economic resources. 

The first session of the seminar saw the presentation of conceptual papers. 
Mahmoud Abu-Saud reiterated the need for Muslim economists to conduct 
research within defined parameters of Islamic economics that differed 
fundamentally from the Western mentality based on materialism, individualism, 
and utilitarianism. He went on to define the Islamic economic framework, 
deriving its basic principles from the Shari‘ah underlining the purpose of 
human life as revealed in the Qur’an. Next, the meeting received a flavor 
of the Christian perspective on economics from a reputed scholar of ethical 
and Christian economics, Albert M. Piedra, Head, Dept. of Economics at 
the Catholic University of America. His paper highlighted the socioeconomic 
doctrines of the Catholic Church but, more importantly, revealed the 
remarkable similarities between them and those of Islam, particularly in the 
area of development. A common theme which he stressed was the need for 
collaboration in the development of the whole person and of every human being. 

In his paper, Masudul A. Choudhury (University College of Cape Breton, 
Canada) developed an Islamic concept of moral entitlement in resource 
allocation derived from the ethico-moral foundations of the Qur’an. In the 
light of this concept of entitlement, he presented a summary picture of the 
Islamic general equilibrium system. The final paper of the session was about 
the financing of the public sector in an Islamic perspective and was presented 
by Monzer Kahf (Islamic Development Bank, Jeddah, Saudi Arabia). His 
main thesis was that the Shari‘ah assigns substantial resources to the state 
for financing its administrative and developmental objectives, yet the size 
of the public sector is envisaged to be moderate vis4-vis the society. 

The second session of the seminar was devoted exclusively to research 
on models of investment in an Islamic framework. Fahim Khan (Islamic 
Development Bank) highlighted the weaknesses in existing models of demand 



The American Journal of Islamic Social Sciences Vol. 8, No. 1, 1991 183 

while presenting an alternative formulation of a demand function based on 
the profit-and-loss-sharing system. He was followed by Ali Darrat, Abdel- 
Hameed Bashir, and M. 0. Solaiman (Louisiana Tech and Grambling State 
universities), who presented a theoretical model with an empirical test which 
showed that equity capital and the profit-sharing ratio were among the primary 
determinants of investment, both in a positive way. The final paper on 
investment from Zaidi Sattar (The Catholic University of America) involved 
a dynamic model of investment in an interest-free economy. Again, the rate 
of profit-share proved to be a critical variable in the investment function. 
However, the comparative statics of the aggregate macroeconomic model 
revealed the potency of monetary policy over fiscal policy under the stipulated 
investment relationship. 

The final session of the day began with a paper on zakah contributions 
and resource allocation authored by Jamal Abu-Rashed and Dr. Abdulhafid 
k l a r b i  (Xavier and Cincinnati universities). The paper applied optimal growth 
modelling and dynamic analysis to find that the optimal growth path for an 
Islamic economy corresponds to that of the golden rule of capital accumulation 
implying, in the long term, an efficient allocation of resources through the 
process of institutionalizing zakah contributions. Next, J. J. Harrington (Seton 
Hall University) presented a paper on the role of insurance and insurers in 
developing Islamic countries. His analysis showed how insurance and insurers 
can help Islamic nations increase their rate of development and how insurance 
practices of other nations can be used, sometimes in modified form, in Islamic 
societies. The session concluded with a paper from Sami S. Gandy, who 
demonstrated the relevance of insurance within the Islamic financial system. 
He argued for a role for insurance in wealth conservation within a social 
structure based on the precepts of the Qur’an and the Sunnah. 

The highlight of the second day of the seminar was the roundtable 
discussion on problems of Islamic banking by a distinguished panel of experts 
assembled from Egypt and Saudi Arabia. However, the day began with a 
session consisting of three research papers. Abdul Aziz and S a d  Mortazavi 
(Humboldt State University) presented the fundamentals of a time-state 
preference model in an interest-free environment. Their main findings were 
that common stock was definitely an acceptable security according to Islamic 
jurisprudence, as none of the two types of return on it (i.e., dividends and 
capital gains) are risk-free. They contended that further investigation was 
required to determine whether options, futures, risky debt, and preferred 
stock were also valid financial instruments. 

Akbar A. Khan (Bangladesh Embassy, Washington, D.C.) presented a 
historical analysis of the practice and rates of usury in ancient South Asia, 
finding that these societies did not consider interest as morally shameful 
because it was viewed as a compensation for risk and loss. Bankruptcy and 



184 The American Journal of Islamic Social Sciences Vol. 8, No. l, 1991 

destitution were not the results of wicked exploitation by money-lenders; they 
were considered just punishment for sins committed in previous lives. Yet, 
he concluded that high rates of interest were not in the long-term interest 
of South Asia; they perpetuated a low-level equilibrium trap where all surplus 
was attracted to money-lending and not to productive investment. 

Finally, Jamshed Uppal (The Catholic University of America) presented 
Ausaf Ali's paper on the investment of capital as an economic resource. Ali 
toyed with the notion of an accounting rate of interest to replace the actual 
rate of interest in an Islamic economy, and then went on to propose a theory 
of capital allocation suggesting that those projects which hold the prospects 
of a higher profit rate, or return on capital, rather than the accounting rate 
of intere t will attract capital resources. 

The Third I lamic Economics Seminar concluded with a lively roundtable 
discussion by a panel of experts on fiqh and Shari'ah as they relate to the 
issues and problems of Islamic banking. The session was moderated by Jamal 
Barzinji (illT) with the participation of Gama! Atiyyah (IIlT, Egypt), Sheikh 
Ali Jumah (Al-Azhar University), and Nazeeh Hamad (Umm al Qura 
University). The discussions emphasized the importance of maintaining the 
complete independence of Shari'ah committees on Islamic banking to avoid 
the appearance of conflict of interest. 

Zaidi Sattar 
Program Director of the Third Seminar 

on Islamic Economics 
Dept. of Economics and Business 
Catholic University of America