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ISLAMIC FINANCE AND ECONOMIC DEVELOPMENT: The Case of Dubai

Student thesis: Doctoral ThesisDoctor of Philosophy

Emerging in the early 1970s, the Islamic financial industry has recorded impressive growth, in excess of 15 per cent per annum, and has spread across more than 70 countries. However, the widening dichotomy between the theory and practice of the Islamic economic paradigm seriously undermines the promise it holds as a potentially alternative system for greater social and economic justice. One of the key obstacles to achieve this is its inability to steer away from the path-dependence and straightjacket of the neoliberal economic doctrine. A case in point is that of Dubai, a city-state that has experienced impressive economic growth in the last two decades, pursuing an unconventional development strategy, while capitalizing on the economic and financial opportunities offered by the global economic system. Given this background, this research considers the extent to which Dubai’s economic development model may represent a useful framework to provide the new impetus sought for a more authentic development of Islamic finance. In that respect, we have addressed three research questions: Is the Islamic economic and finance paradigm worth operationalizing? Does Dubai have ingredients for a more substantial development of the industry? If so, is Dubai ready to implement the Islamic system more substantively? Given that the ideal Islamic economic system does not exist yet in practice, we first assess whether the Islamic economic paradigm and the Islamic financial system can constitute a viable alternative system to the conventional one. We then conduct a thorough analysis of Dubai’s development path, prospects, policies and institutions from the perspective of Islamic economics and finance. This has led us to put forward a novel interpretation and model of Dubai’s economic development. Lastly, we conduct semi-structured interviews with some of Dubai’s key protagonists of the business and financial industry to probe the direction of the industry’s development and Dubai’s readiness to implement the Islamic paradigm more substantively. We conclude that the paradigm indeed holds the promise for more sustainable and stable economic development. Moreover, we show that Dubai’s non-orthodox development approach has indeed significant ingredients to serve as catalyst for a more genuine development of the industry. However, our empirical research on Dubai’s readiness to capitalize on such ingredients to implement the Islamic economic framework more comprehensively has yielded rather mixed findings.
Original languageEnglish
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Award date2017

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