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An Integral Approach to Development Economics pdf

An Integral Approach to Development Economics: Islamic Finance in an African Context

An Integral Approach to Development Economics
  • Book Title:
 An Integral Approach To Development Economics
  • Book Author:
Basheer A. Oshodi
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Before the development of the economics of information (and also the development of game theoretic models of political economy), economist lacked a broad framework for understanding of the sources of the imperfections in markets. Economist who tried to design policies to fit developing country markets generally assumed rigidities in markets, but did not explain them by reference to a choice-based perspective.

How do we start to revisit the issues around economic development – not just economic growth as championed by the West, but rather socio-economic development in a typical African context? Why would the world still continue to assume that all humans are somewhat alike, or rather, that all humans can be made to behave in a similar fashion, that patterns of economic development can be alike, that the economic ideas that developed the West will also develop the South? How about the political structure? Many parts of the West abandoned the feudal hierarchy for democracy. What a good thing this is. It yielded development and advancement in state formation. This then becomes the solution for other distinct political settlements.

I grew up first in Lagos Island, and listened to my father tell me the story of how the British sent Oba (King) Kosoko of Lagos and his army lord, Chief Oshodi Tapa, into exile and installed Oba Akintoye, whose son later ceded the island as a colony to the British. Soon after, organized Christianity emerged, which somewhat weakened traditional institutions and the already fragile Islam in that area of today’s Nigeria. Broad Street was built, and British financial institutions occupied it.

 The locals who agreed to adopt English names worked for the colonial masters, attended Kings College and imbibed the newly ‘civilized culture’. From Kings College to the University of London, many studied law and built on the English legal system when they returned home. Those who studied economics and business management stuck to neo-classical economic theories and disregarded the

wisdom in indigenous ideas. Many left Islam for Christianity and paid less attention to their extended families. It is this storyline that led me to examine the works of Ali Mazrui’s African triple heritage and its effects on socio- economic development. I, a Muslim, an African, a banker and researcher, tried to decolonize my heart and my perception as I let loose my thoughts. However, I have also been influenced by the forces of this triple heritage in my overall personal, emotional, spiritual, professional and academic affairs.

I have travelled quite widely, but have spent the bulk of my life in Nigeria, a country where the combined efforts of international economic experts, indigenous specialists in various fields of study, the consistent financial ‘aid’ from the ‘developed’ world and economic prescriptions have been somewhat fruitless, or less effective.

The reforms led to extractive institutions and even more aggressive corruption plus more current cases of terrorism and kidnap. Africans have indeed learnt so much from the West – from how financial aid is to be utilized to security consultancy, from the measures of development indicators to governance, and from capitalism to research methods and methodologies.

Until recently, Nigeria achieved consistent economic growth, but its socio-economic development realities worsen. More specifically, poverty and unemployment are reflected in the overall environment and in the lives of majority of the citizens. This concern evoked the burning issues in this book – why poverty, and why unemployment in the midst of plenty?

 It also influenced and shaped issues centred around evolving economic development theories based on the African triple heritage, implementation of Islamic banking principles on the foundations of moral economic cores based on the African triple heritage, and the creation of integral financial institutions addressing these. Governance and economic growth indicators for a developing country like Nigeria, just like many other African countries, have been unable to tell the true story of economic development since they are based on microdata, hence this book has adopted a more people-centred inquiry approach which gives a clearer picture of honest circumstances.

This book is structured in terms of an Integral Research Framework following the Eastern path of Realization, dwelling on narrative method, hermeneutics methodology, critical theory and co-operative inquiry. The research method is the knowledge-creating tool wherein tacit knowledge advances towards the explicit in order to achieve the narrative of ‘becoming’, thus sweeping through the concept and nature of economic development in the Nigerian state.

The research methodology is based on hermeneutics, which is a classical discipline aimed at the interpretation and understanding of texts that relates to modernization theories, dependency theories, world system theories and emerging twenty-first-century economic theories in the light of moral economics and Islamic economics. The critique is termed critical theory, which is associated with enforcing radical change and is different from the traditional theory spelling out the ingredients of moral economics associated with Islamic economics and finance and in connection with the African triple heritage.

The book then adopts integration, and more specifically co-operative inquiry derived from the field of psychological research, seeking inquiry based on human behaviour and intelligence within the development of a revolving theory in Islamic finance since it captures the moral core theoretically.

Based on the platform of the four types of knowing in a co-operative inquiry – experiential knowing, presentational knowing, propositional knowing and practical knowing – it sets forth a theory. It states that where most necessary effective regulations are in place, in line with the values of the goals of Islam – which primarily translates into achieving human well-being and a communal good life – Islamic finance will fulfil its primary purpose of maintaining socio-economic justice in society, hence resolving the challenges of poverty and unemployment if the moral core values embedded in the overall Islamic economic system are embedded in ‘effective regulation’ while borrowing, where necessary, from other ethical socio-economic and political models or theories grounded in African humanism.

This is validated by the ongoing cyclical review of regulations over time. Furthermore, in a bid to translate research into action, three more economic development models emerge. The first model is the Integral African Development Theoretical Economic Model, which inter-relates development theories, the African triple heritage, Islamic banking and the esusu (rotational savings/labour) model. The second model is the Integral African Development Practical Economic Model Establishing Islamic Finance in Nigeria, which achieved the successful operation of Islamic banking in three Nigerian banks, influenced financial regulators, led to the setting up of the Centre for Islamic Socio-Economic Research (CISER), and laid the groundwork for new integral financial institutions. The third model is the Generic Integral Development Economics Model, which is trans-cultural, acknowledging the relevance of market co-ordination, state co-ordination, spiritual co-ordination and people co-ordination in order to achieve overall economic development in any jurisdiction. A new global institution, the Centre for Integral Social and Economic Research (CISER), is positioned to lead this transformational process.

I have reflected my own personal experience of poverty and that of a few Nigerians in this study; I have provided images that demonstrate unimaginable poverty in Africa – even in oil-rich Nigeria; I have redefined poverty outside the common people living on less than US$1 or US$2 per day; I have thus dedicated this book to all those who have experienced one form of poverty or the other – not just among those in yesterday or today’s Africa, but also those living in that one room in central London who cannot afford their next meal, those working for the royal family in Saudi Arabia who do not have rights, those who are being displaced from their land in the USA, in the Middle East and in Australia. Again, I look at China and India and their vast population. Many have forgotten that the poorest people live in these sub-continents – all they say is, ‘

They are tomorrow’s greatest economies.’ I dedicate this book to all these poor households which do not have access to basic medical care. I also dedicate this book to all those who are suffering from the poverty of political exclusion – they are oppressed and killed merely because they ask for simple rights. I will also not forget our past heroes – the free men and women taken away from the comfort of their villages in West Africa, dehumanized, humiliated, treated worse than animals and shipped to the Americas by the slave merchants. Finally, I dedicate this book to all seekers of justice – women across the world who are being marginalized and oppressed, children who are being traded and abused, and the voiceless.

How would I have been able to acquire this knowledge of socio-economic history, of economic development patterns, and further appreciate ingenious thoughts if not for Professor Ronnie Lessem, who discovered my strengths? I published a write-up immediately after I completed my MRes. at the London Metropolitan Business School where I worked on good governance matters and state-led development issues. Professor Lessem saw that little piece and invited me for a chat at the Business School at the University of Buckingham.

He listened as I discussed my completed work, and said, ‘You will be a good PhD candidate, Basheer.’ He is a patient teacher, a gentle father and an eminent scholar. A year into my PhD, I shared material on Islamic finance with him, and he said, ‘Basheer, we are going to include Islamic finance in your work, and that will be your niche specialization theoretically and practically.’ This was after I had written more than 20,000 words on governance and economic matters.

Thereafter, I gradually started to develop more theoretical competencies in this area and other indigenous ideas. He and Dr Alexander Schieffer supervised my PhD and encouraged me to write this book. Dr Schieffer was abundantly helpful and offered invaluable assistance and guidance at all times. He would reply to emails and share his thoughts within minutes.

His graphic design skills are exceptional, and he also advised that theories are better illustrated in diagram form. My deepest gratitude also goes to Professor Bennie Anderson, CEO of the DaVinci Institute for Technology Management, South Africa. He exposed me to unique and innovative concepts required to implement my research models. Special thanks go to Dr Sam Rima, since I borrowed so much from his Spiritual Capital Theory.

His understanding of Aristotle’s work and Marx’s Capital concept is amazing. Professor Mashood Baderin of the School of Oriental and African Studies (SOAS) at the University of London and a UN Independent Expert on Human Rights in the Sudan has also contributed so much in terms of fatherly advice, professional career guidance, my PhD thesis and this book.

In May 2012, at the fourth WANA (West Asia-North Africa) forum, I met a great man with unique charisma, a pluralist with sound leadership characteristics, a man who is not only visionary but who offers feasible solutions, the greatest speaker I know, yet the most friendly monarch – His Royal Highness Prince El Hassan bin Talal. He took much interest in my presentation at the forum and shared some ideas in the process of writing this book. I extend my utmost gratitude to him.

In less than three months working in my new organization, I have learnt so much from my boss, friend and mentor Abubakar Suleiman, the Chief Financial Officer at Sterling Bank – whom I refer to as my jewel of inestimable value. He is an economist, a seasoned banker, a distinguished gentleman and a sound strategist. He is very practical in his approach to problem-solving and has supported me in completing this book, mainly by sharing from his fund of experience in banking and finance. He also agreed to write the Foreword for me. I am indeed exceedingly grateful to him…

Introduction The Story I Am

This book, titled An Integral Approach to Development Economics: Islamic Finance in an African Context, is built on the foundation of the Integral Research Framework. It is unique and integral in its approach to overall analysis of a typical African state, Nigeria, and its socio-political setting, which has shaped the country’s economic prospects. This chapter will give a general overview of the entire research. It is further focused on my personal GENE (Grounding, Emerging, Navigating and Effecting). Chapter 2 draws out the elements of economic development.

Chapter 3 focuses on the African socio-economic world, highlighting the continent’s nature from its inception. Chapter 4 covers moral economics – the glowing light of my thesis. Chapter 5 examines the constituents of economic ideas. Chapter 6 details the characteristics of Islamic economics and finance. Finally, Chapter 7 translates the overall research theory into action. The ultimate aim of this book is to evolve an economic system that is cast in a newly integral guise, thereby effecting connection between theoretical models and the achievements of reality.


Social innovation, according to Lessem and Schieffer (2010b), has its source in six core ingredients known as EUREKA – Energizing, Understanding, Research, Education, Know-how and Application. Energizing happens when a particular issue of concern energizes the social innovator-to-be. Understanding happens when the researcher is immersed in nature and culture in order to evoke deep understanding of the real issues concerning social development. Research here represents the researcher’s grasp of past and present activities that build the foundation for later innovation. In education, the researcher sets forth the path to add to the body of knowledge. Know-how is the glue or path

2 An Integral Approach to Development economics

that binds and links theory with practice, which further sets the stage for social innovation, while application brings social innovation to life, transforming self, organizations and society. The EUREKA framework then becomes a model that helps the scholar to purposefully build on his or her area of interest in a defined manner that will resist the pressure of analytic criticism while standing the test of time.


Increased economic growth and the good performance of Nigeria’s development indicators, especially since the beginning of the new and stable democracy, have raised the novel question of whether a strong relationship exists between economic growth and economic development. Real issues of poverty have yet to be addressed via the constant economic growth recorded by the Nigerian government and international agencies. This reality calls for a review and reappraisal of economic models adopted by a developing country like Nigeria. From my perspective, within the Islamic Banking unit at Stanbic IBTC Bank – a member of Standard Bank Group, EFInA (Enhancing Financial Innovation and Access, the Department for International Development’s financial  inclusion project), Sterling  Bank  and  recent  developments  in  the world at large, there is need for an integral economic model that recognizes moral elements in economics, with particular reference in our case to the Islamic economic system. Such a model, economically speaking, specifically takes up where the Ali Mazrui’s African triple heritage left off. This research is energized by my socio-economic and religio-political experience in Nigeria, as well as statistical records on Nigeria’s growth pattern, which has not improved the lives of Nigerians. My storyline as a Muslim, in terms of self, others and social context, has led to experiences which have generally influenced my thoughts and burning desire, leading to some unanswered questions. A stable democracy over the past fourteen years has attracted huge foreign funds and investments in the Nigerian economy, leading the country to graduate from ‘low-income’ to ‘lower-middle-income’ based on World Bank’s 2010 Gross National Income (GNI) indicator of US$1,006–3,975. Wealth-creation or capital- formation through foreign investments and aid are now constant activities in the economy, usually channelled via government agencies, non-governmental organizations (NGOs) and financial institutions.

However, this has not reduced the number of Nigerians without good drinking water, electricity, two good meals a day, adequate household income, effective primary healthcare, nor addressed the income and education inequality gap and the 50 million working-class still unemployed, according to the World Bank. More than half of the Nigerian population is Muslim, with the northern population constituting the Nigerian government and the military.

 However, Muslims are also the least educated, the most unemployed, and suffer the worst health challenges. Nigeria is one of the least developed states, whose unskilled labour force, which is mainly Muslim, also has a very small manufacturing industry.

Out of the 46 million financially excluded Nigerian adults, over 30 million are Muslims (EFInA 2008). On one hand, at least in theory, we have morally infused Islamic economics and finance, and on the other hand, we have rampant poverty and dereliction among practising Muslims.

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