The particular Islamic Economic Method

Interest-free Islamic economic system is somewhat followed and somewhat not followed inside Muslim countries around the world. The only country, which usually has followed this method completely in every minute detail will be Malaysia. So typically the application methods inside this post are mostly those applied in Malaysia subsequent the Interest-free Islamic Economic system.
Typically the main feature regarding the Islamic marketplace is that it is Interest-Free. Since the Qur’an claims in Sura al-Baqara Chapter 2 Poems 278 & 279, “O ye who else believe! fear Jahve and give upwards what remains associated with your demand for usury if ye are usually indeed believers. When ye do that not take notice of war from Jahve great Apostle: yet if ye switch back ye shall have your capital sums; do not really deal unjustly and ye shall not necessarily be managed unjustly. “
Qur’an condemn all evil actions, but never provides the Qur’an cautioned of a conflict against God Almighty great Messenger except in the case of taking Interest and Usury.
Presently there are several evils of the attention based economy, the particular reason why Islamic has prohibited this.
For example, when a person requires a loan from the bank and says the cost price associated with a certain content is 10 money and he wants to money of one dollar. So the selling price might include the 10 bucks price range one money profit and 1 dollar interest and the selling cost will be 12 bucks. The selling price would go up because of attention and when the marketing price increases typically the demand comes down so when the demand comes down the provision comes down plus as supply arrives down production boils down causing labour issue and unemployment.
There is certainly Social Injustice.
For instance , if a particular person takes a loan coming from the bank and no matter in case he earns a profit or goes within loss he offers to pay of which fixed amount regarding interest. Even though some natural calamity befalls his family, these kinds of as flooding or even earthquake, the individual continues to have to pay the loan with the interest and the delay would just increase the amount of interest. It is usually social injustice.
Right now there is no interpersonal consideration.
Suppose, in case two businessmen go to ask for a loan from the modern bank and one entrepreneur wants to begin a social or clinic while the additional businessman wants in order to start an alcoholic beverages factory or a wagering den. But organic the businessman, who else wants to begin an alcohol factory or a gambling den might have better returns plus the loan offered to him would certainly be more protected and would offer a higher level of interest as compared to the enterprise, who would like to open a school or hospital. Modern banks usually are only interested within getting better and higher returns. That’s the reason why they finance gambling dens rather than universities or hospitals. That is why in the 80s thousands of gambling dens were financed by simply modern banks worldwide. For name benefit only a couple of social projects usually are financed by contemporary banks and many of their loans derive from better interest.
Contemporary banks encourage individuals to store money and keep the money nonproductive for small set return on this every year. In the long run, power is concentrated in a few hands, the particular bankers.
In the particular same way presently there are several benefits of Islamic banking.
Since there is zero interest involved, there is profit and loss sharing. When a person would like to sell his goods, it would simply have the cost price and income in the selling cost and instead associated with 12 dollars, his / her selling price would be only eleven dollars. In the event the selling price comes down, the demand increases plus if the demand boosts the supply raises and as source increases the production increases leading to more labour for that people in addition to higher employment. Since a result stimulates people to job and earn their living.
There will be Social Justice within Islamic banking.
When a business needs a loan and goes into loss, the loss is shared by simply the bank in addition to if he earns a profit, the profit is discussed by the financial institution. If in circumstance any natural disasters befalls him, the Islamic bank offers him additional time to repay, unlike the modern bank, where typically the additional time you consider to pay typically the more interest you will have to spend. Many a times when the Islamic lender finds the circumstance very bad, they even release off that loan.
Presently there is Social Concern in Islamic banking.
pemakaman muslim
Islamic bank are unable to give a financial loan to any businessman, who is doing virtually any activity, that is creating harm to the society. For example, if a businessman wants to begin an alcohol manufacturer and approaches a good Islamic bank with regard to a loan, the Islamic bank will not lend him an individual penny, not even if he guarantees to provide 100% profit towards the Islamic lender. In Islamic financial there is certainly social consideration and they also encourage jobs necessary for the modern society, such as building schools, hospitals and nurseries. In other words, the Islamic bank encourages the particular society to enhance.
In the Islamic bank, you are usually not encouraged to keep your funds idle. You are encouraged to take a position your money and be someone in the business and within the finish, power is usually not concentrated inside the hands of a few individuals. Because in the Islamic banking the net income and loss are shared by typically the business, the banker as well as the depositor. The particular power is similarly shared among all the people.
The excellent philosopher, Aristotle offers beautifully defined Interest as “An generating based on the use of money and never upon labour, and everything these kinds of earnings(interests) are towards nature. inch
Lets quickly analyze the particular objectives of the Islamic economic order prior to we analyze the particular theory and practical application of the Islamic economy.
The Objectives of the Islamic Economic Order
1- Economic wellbeing
Islam promotes someone to enjoy the bounties associated with God Almighty, to work for his living and refrain from begging.
2- Common Brotherhood and Justice
Qur’an says within Sura al-Hujurat Part 49 Verse 13, “O mankind! We all created you from a single (pair) regarding a male plus a female to make you into nations around the world and tribes of which ye may realize each other (not that ye may despise each other). Verily the most honored of a person in the view of Allah will be (he who is) the most righteous of you. inch
Using this we arrive to know typically the criteria that the criteria of reasoning in the look of God is just not wealth, not sexual intercourse, not color, not Caste, but it is “Taqwa” God consciousness, piety plus righteousness.
Qur’an says in Sura an-Nisa Chapter 4 Sentirse 135, “O en who believe! remain out firmly for justice as witnesses to Allah actually as against yourselves or your parents or if your kin in addition to whether it is (against) rich or poor: for Allah can best protects all. “
Based on this all of us have to indicate truth and justice be it in opposition to anybody even towards our own selves and sacrifice your own interests.
3- Equitable Distribution of Riches
Islam is against the philosophy that will the wealth ought to be concentrated in the few hands. The particular difference between the rich and typically the poor ought to be reduced. Otherwise they will turn out to be enemies unto each and every other. For this specific, Islam has devised a process of “Zakat” that all Muslim, that has excess riches exceeding the quantity equivalent to or more than 85 grams of Gold. This amount is spent on poor people, orphans, needy etc. In case every individual on earth practices this system of “Zakat”, not necessarily a single person in the complete world would perish of hunger. Islamic teaches to find lawful employment with regard to the unemployed and also to pay him an excellent remuneration.
According to be able to Islam if a new person dies their wealth should be allocated among his spouse, children or other loved ones according to the particular guidelines laid lower in Qur’an and Ahadith and it should not go to just one or even two individuals inside the society as it is done nowadays.
4- Individual Independence within the Circumstance of Social Well-fare
According to Islam man is born free and nobody not necessarily even the condition can abrogate his freedom nor subject matter his life to strict regimentation. Every single individual is free as long since he does not harm the community because in Islamic the larger well being of the community takes precedence over the individual independence.
Working and work as well because the benefit in business are the two important principles regarding Islam, but functioning and labour get precedence over typically the benefit running a business. In case you are doing business, a big loss can not become inflicted to relieve a small loss, nor can a large profit can become sacrificed for a new small profit. In short, Islam believes in individual within the context of interpersonal welfare.
There are mainly four elements involved in production;
1- Land
Both in the Modern in addition to Islamic theories, a person pay rent about the land.
2- Labor
You spend wages around the time in both the present day and Islamic theories.
3- Capital
In the Modern theory, you spend Interest on money, while in the Islamic theory presently there is profit and loss sharing.
4- Organization
In the fourth factor regarding production, Organization, there is profit plus loss sharing within both theories.
And so the major difference inside the four factors of production is the third factor regarding Capital. The Contemporary Theory says of which a fixed curiosity should be charged within the capital, whilst the Islamic principle says that there is profit and loss discussing on capital. Because Islamic theory does not differentiate between the third factor Funds and the next factor Organization due to the fact the money given by the bank does not belong to the bank by itself, it is one of the depositor. The depositors usually are the part regarding Organization and the particular money deposited within the bank (the capital) should end up being included in the Organization. Within the Islamic concept Capital and Organization are clove with each other and there is profit and loss sharing on the particular capital.
If you need to perform business, there are naturally two varieties of units. One is the excessive unit, who have got excess of wealth, but do not necessarily know how in order to spend it. Second will be the deficit unit, the people who do not have funds, but have very good ideas for people who do buiness. The best examples regarding a surplus and deficit unit in the Islamic history is Lady Khadijah (may Allah end up being pleased with her) had excess regarding wealth, but was missing avenues to invest in and becoming a female the girl couldn’t travel overseas too much in order to specialize in business dealings. The deficit device, in terms of wealth, has been Prophet Mohammed (peace be upon him). He previously good ideas and access to business avenues, but did not have wealth. So Lady Khadijah (may Allah end up being pleased with her) gave wealth, which Prophet Mohammed (peace be upon him) committed to business avenues onto her behalf in addition to the profit has been shared on a set pre-determined ration.
The particular System of Islamic Banking and Modern Banking
Lets evaluate the options available for individual depositors in order to deposit their funds in an Islamic bank.
Current Accounts
The money you downpayment in an Islamic bank is utilized with your permission, yet if the bank gets into loss, the particular loss is just not shared by the depositor. If the bank gets into profit, none will be the profit shared from the depositor. The depositor is interested in the particular security of his funds, not profit. Typically the Islamic banks provides you a examine book and a slip book with the functions since that of a new modern bank.
Savings Account
Even in this article the depositor is principally interested in typically the safety of his money. As the financial institution gets money from this money, the lender can gift some of that revenue for the depositor, when the bank desires, but the depositor can not demand a fixed section.
In Islamic banking, if a lender goes bankrupt then your depositors get their money first in addition to then, the lenders. While in Modern day Banking creditors get their money first and majority of the depositors lose their money. So actually if you need your hard earned money safe, typically the Islamic banks usually are preferable and more secure than Modern financial institutions.
Investment Accounts
These people are just like the Set Accounts of Modern banks and are further divided into several sorts
Mudariba (Profit & Loss Sharing)
The depositor build up a fixed amount regarding money in the particular bank for a new fixed time period, which often maybe a several of three or a multiple of several. Here the excessive unit will be the depositor and the shortage unit is the bank. The bank uses this money to do company using the businessmen in addition to whatever profit the Islamic bank makes, it really is divided on a pre-determined percentage, which can end up being negotiated. In the particular Islamic Banking regarding Malaysia, the percentage is 7 component to 3 component, meaning 70% goes to the depositor plus 30% is retained by the lender. So there is sharing of revenue, the greater the profit the greater the share of every.
Suppose, if you have a loss of $ 100, then hundred will be deducted from typically the depositor’s money. Therefore theoretically only the depositor bears the loss. Practically analyzing even the Islamic bank is going in loss because they are paying money for the rent, administration in addition to salary, however the loss ratio from the bank is less as compared to those of the depositor, as even the particular profit from the bank is less as compared to that of the depositor.
Project Financing in the Mudariba Program
If a business person approaches an Islamic bank with a new project idea plus requests a financial loan for a repaired period, the Islamic bank analyzes the particular project, then typically the businessman and typically the Islamic bank work out the profit ratio. In Modern bank interest is agreed, in Islamic banking profit ratio is negotiated.
Suppose, the particular businessman takes a new loan of $5000 from an Islamic financial institution for six a few months and the pre-determined profit ratio is usually 60% to the particular bank and 40% for the businessman. If the businessman is usually working for his / her business, even his / her salary would become contained in that $5000 and suppose the salary of typically the businessman is one hundred dollar per month.
Suppose, if the businessman earns a income of $5000, the particular business would get (his 40%) $2000 through the profit and the businessman might get paid one-hundred dollar salary per calendar month from your $5000 loan, amounting $1200 with regard to six months time. So the businessman gets his profit as well as the wage for his time, if he could be working for his enterprise.

Leave a comment

Your email address will not be published. Required fields are marked *