Business and Accounting Ethics in Islam

Abstract

The present book represents the first serious attempt to explore Islamicbusiness and accounting ethics. After placing their subject in a broad Islamicframework, which they have documented quite ably, they then compare thedistinctive features of Islamic business and accounting principles with Westerntheory and practice. While the book has several strong points and breaks newground in a number of areas, it also lacks clarity and specific authority fromIslamic sources on quite a few points.To begin with, the authors argue quite convincingly that the logical corollaryof prohibiting riba (interest) is the negation of any time value for money.Thus the theory and practice of capital budgeting, which feature in the use discountedcash flow techniques in the West, become redundant. This point,seemingly so obvious to economists, has not found favor with the economicthinking of the Islamic establishment. Rather, many Muslim economists andaccountants have been busy justifying it on one pretext or another. This is thefitst time that somebody has come out with a compelling discussion of this question.The authos have also argued that Islam absolutely forbids the nonrepaymentof a debt. Thus the concept of limited liability, one of mainsprings ofeconomic power in a capitalist society, is not recognized by Islam. However,the related theory of incorporation, the legal mechanism for justifying limitedliability, is found in Islamic societies. Again, such an obvious and sensiblepoint remains unacceptable to Muslim economists. They continue looking forexcuses to accept these ideas, thereby betraying their intellectual poverty.Although the authors do not devote a single chapter to the state’s economicrole in Islam, they discuss this question throughout the book Theyargue for a strong regulatory and framework role for the Islamic state.Gambling and Abdel Karim deal with several other important issues. Forinstance, they argue that the Islamic concept of economic development revolvesaround the development of human resources rather than capital formation,as is the main focus of the popular theory of development in the West.In their discussion of the Islamic concept of shura (consultation) and khilafa(vice-gerency), they also bteak new ground. They opine that these conceptsquestion ...