ISLAMIC SOCIAL FINANCE AND CONTEMPORARY WELFARE ECONOMICS: THEORETICAL FOUNDATIONS, AND THE DEBATE ON COMPLEMENTARITY
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Abstract
The research is based on the examining the theoretical foundations and emerging empirical evidence concerning Islamic Social Finance within the broader analytical framework of contemporary welfare economics. It relates to the questions that how Islamic sources of public revenue and related instruments influence factors such as poverty alleviation, food security, income generation, financial inclusion, and overall wellbeing. More evidently, this paper combines empirical studies from Middle East, South and Southeast Asia, and Africa, highlighting variations in research designs, welfare indicators, and institutions. The inference drawn from these studies show that Islamic social finance can yield measurable welfare benefits, particularly when financial transfers are connected to productive assets, enterprise development, and empowerment. Nonetheless, the effect of Islamic public finance instruments varies, effected by factors such as efficiency, governance, transparency, managerial capabilities, beneficiary traits, market conditions, and integration with larger system of social safety. The results of this debate further challenge the notion of one system being superior to the other, instead proposing a conditional-complementarity view where Islamic finance and state-based welfare complement each other in redistributive, protective, and growth-oriented. This study implies that Maqasid al-Shariah and modern capability-oriented welfare economics can coexist, despite differing normative bases, in assessing multidimensional welfare and further research can focus on the specific welfare outcomes of different ISF instruments, the populations they benefit, and the necessary institutional conditions, suggesting a pathway for integrating the modern welfare and development strategies into the Islamic social finance.
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