The Islamic Economic Program


Interest-free Islamic economic system is partly followed and partly not followed inside Muslim countries close to the world. The particular only country, which has followed this technique completely in every minute detail is Malaysia. So the application methods in this post are mostly those applied in Malaysia following the Interest-free Islamic Economic system.
The main feature regarding the Islamic marketplace is that this is Interest-Free. As the Qur’an claims in Sura al-Baqara Chapter 2 Poems 278 & 279, “O ye who believe! fear Allah and give up what remains of your demand for usury if ye are indeed believers. When ye do this require notice associated with war from Thor and his Apostle: but if ye change back ye shall have your funds sums; do not really deal unjustly in addition to ye shall not necessarily be managed unjustly. “
Qur’an condemn all evil deeds, but never has the Qur’an aware of a battle against God Almighty and His Messenger apart from in the case of taking Interest and Usury.
There are several evils of the interest based economy, typically the reason why Islam has prohibited that.
For example, when a person will take a loan from your bank and according to the cost price regarding a certain post is 10 dollars and he wants to money associated with one dollar. So the selling price might range from the 10 dollars cost price one buck profit and one dollar interest in addition to the selling cost can be 12 dollars. The selling value would go upward because of interest and when the selling price rises the demand comes straight down so when the need comes down the supply comes down plus as supply arrives down production boils down causing labour trouble and unemployment.
There exists Social Injustice.
For instance , if a particular person takes a loan from the bank plus no matter if he earns money or goes in loss he offers to pay that fixed amount of interest. Even if some natural calamity befalls his family, such as flooding or perhaps earthquake, the individual still has to pay out the loan with the interest and a new delay would only boost the amount of interest. It is usually social injustice.
Presently there is no sociable consideration.
Suppose, if two businessmen arrive at ask for a new loan from a modern day bank and another businessman wants to start a social or hospital while the additional businessman wants to be able to start an alcohol factory or perhaps a gambling den. But normal the businessman, who else wants to start an alcohol manufacturing plant or perhaps a gambling living room could have better results and the loan provided to him might be more protected and he would provide a higher rate of interest as compared to the business, who would like to open a school or hospital. Modern banks usually are only interested within recovering and increased returns. That’s why they finance gambling dens as opposed to universities or hospitals. That will is why inside the 80s thousands of gambling dens were financed by simply modern banks globally. For name benefit only a number of social projects are usually financed by modern banks and lots of of their loans are based on better interest.
Modern day banks encourage visitors to store money and keep the money nonproductive for small fixed return on this every year. Ultimately, power is focused in a few hands, the bankers.
In typically the same way there are several benefits of Islamic banking.
As there is no interest involved, presently there is profit plus loss sharing. So if a person desires to sell their goods, it would just have the expense price and profit in the selling price and instead regarding 12 dollars, his / her selling price would certainly be only 11 dollars. If the selling price comes lower, the need increases plus if the necessity raises the supply boosts and as supply boosts the production raises causing more work for that people plus higher employment. As a result encourages people to job and earn their own living.
There is usually Social Justice within Islamic banking.
If a business needs a loan and goes into loss, the reduction is shared by simply the bank in addition to if he makes a profit, the profit is discussed by the bank. If in situation any natural disasters befalls him, typically the Islamic bank gives him more hours to be able to repay, unlike the modern bank, where typically the more time you consider to pay the more interest you should have to spend. Many a occasions if the Islamic bank finds the scenario very bad, they will even let go off that loan.
Right now there is Social Consideration in Islamic bank.
Islamic bank can not give a loan to any businessman, who else is doing virtually any activity, which can be creating harm to typically the society. For instance, if a business person wants to begin an alcohol manufacturing plant and approaches a great Islamic bank regarding a loan, the particular Islamic bank is not going to lend him an individual penny, not actually if he guarantees to provide 100% profit to the Islamic lender. In Islamic financial there exists social thing to consider and they also encourage projects good for the community, like building colleges, hospitals and nurseries. In short, the Islamic bank encourages the society to increase.
In the Islamic bank, you are not encouraged to be able to keep your money idle. You are usually encouraged to invest your own money and be a partner in the particular business and in the end, power will be not concentrated inside the hands of a few individuals. Because within the Islamic banking the money and loss usually are shared by the business, the banker and also the depositor. Typically the power is similarly shared among all the people.
The excellent philosopher, Aristotle offers beautifully defined Interest as “An making in line with the use of money rather than on labour, and everything this kind of earnings(interests) are in opposition to nature. “
Lets quickly analyze the particular objectives in the Islamic economic order prior to we analyze the theory and program of the Islamic economy.
The Targets of the Islamic Economical Buy
1- Financial well-being
Islam stimulates a person to appreciate the bounties of God Almighty, to work for his / her living and stay away from begging.
2- Common Brotherhood and Rights
Qur’an says inside Sura al-Hujurat Chapter 49 Verse thirteen, “O mankind! We all created you coming from a single (pair) associated with a male in addition to a female and made you into countries and tribes of which ye may know each other (ofcourse not that ye may despise each other). Verily the many honored of you in the view of Allah is (he who is) the most righteous of you. “
Using this we appear to know the particular criteria that typically the criteria of judgement in the sight of God is not really wealth, not sexual intercourse, not color, not Caste, but it is “Taqwa” God consciousness, piety plus righteousness.
Qur’an states in Sura an-Nisa Chapter 4 Passage 135, “O ye who believe! remain out firmly regarding justice as witnesses to Allah also as against yourselves or your parents or your kin and whether it be (against) abundant or poor: regarding Allah can finest protects all. inch
In accordance with this we have to stand for truth and proper rights be it against anybody even in opposition to our very own selves plus sacrifice your own interests.
3- Equitable Distribution of Wealth
Islam is against the philosophy that will the wealth ought to be concentrated in the few hands. Typically the difference between the rich and typically the poor ought to be reduced. Otherwise they might come to be enemies unto each other. For this particular, Islam has devised a system of “Zakat” that each Muslim, who else has excess wealth exceeding the quantity equal to or even more than 85 grms of Gold. This particular amount is spent on the indegent, orphans, needy and so forth. In case every individual in the world practices this system of “Zakat”, not necessarily a single particular person in the complete world would die of hunger. Islam teaches to locate lawful employment regarding the unemployed and also to pay him a good remuneration.
According to Islam if a new person dies their wealth ought to be distributed among his spouse, children or other loved ones according to typically the guidelines laid straight down in Qur’an in addition to Ahadith and it should not go to just one or even two individuals inside the society as this is done nowadays.
4- Individual Independence within the Framework of Social Well-fare
According to Islamic man is born free and nobody not even the state can abrogate their freedom nor subject matter his life to strict regimentation. Every individual is totally free as long since he does not harm the society because in Islamic the larger wellbeing of the community takes precedence over the individual independence.
Working and work as well as the benefit inside business are each important principles of Islam, but working and labour take precedence over the benefit in business. In case you are performing business, a large damage can not end up being inflicted to relieve a small reduction, nor can a big profit can become sacrificed for a small profit. Inside short, Islam features individual within typically the context of interpersonal welfare.
There are usually mainly four factors involved in manufacturing;
1- Land
In both the Modern in addition to Islamic theories, you pay rent about the land.
2- Labor
You spend wages within the labour in both the current and Islamic theories.
3- Capital
In the present00 theory, you spend Interest on funds, while in the particular Islamic theory presently there is profit and loss sharing.
4- Organization
In typically the fourth factor associated with production, Organization, there is profit plus loss sharing within both theories.
And so the major difference in the four factors associated with production is typically the third factor associated with Capital. The Modern day Theory says that will a fixed attention should be billed within the capital, whilst the Islamic concept says that there is revenue and loss posting on capital. Due to the fact Islamic theory really does not differentiate between third factor Funds and the fourth factor Organization since the money loaned by the financial institution does not are supposed to be to the bank itself, it is one of the depositor. The depositors usually are the part regarding Organization and the money deposited within the bank (the capital) should end up being within the Organization. In the Islamic principle Capital and Corporation are clove together and there will be profit and reduction sharing on the capital.
When you have to carry out business, there are usually naturally two varieties of units. A single is the excess unit, who have excess of riches, but do not necessarily know how to spend it. Next may be the deficit device, the folks who perform not have funds, but have good ideas for people who do buiness. The best examples associated with a surplus and deficit unit within the Islamic background is Lady Khadijah (may Allah be pleased with her) had excess of wealth, but was missing avenues to devote in and becoming a female she couldn’t travel in foreign countries too much in order to deal in business purchases. The deficit unit, in terms of wealth, had been Prophet Mohammed (peace be upon him). He had good ideas and use of company avenues, but do not have wealth. So Lady Khadijah (may Allah be pleased with her) gave wealth, which usually Prophet Mohammed (peace be upon him) used business techniques onto her behalf plus the profit has been shared on the set pre-determined ration.
The System of Islamic Banking and Modern day Banking
Lets analyze the options open for seperate depositors in order to deposit their cash in an Islamic bank.
pemakaman muslim
Current Bank account
The money you deposit in a Islamic bank is utilized with your permission, nevertheless if the financial institution goes into loss, the particular loss is not discussed by the depositor. If the financial institution goes into profit, neither may be the profit shared by the depositor. Typically the depositor is serious in the particular safety of his money, not profit. The Islamic banks gives you a examine book and a new slip book together with the functions since that of the modern bank.
Cost savings Account
Even right here the depositor is principally interested in the safety of his money. Since the lender gets a profit through this money, the lender can gift a part of that revenue to the depositor, when the bank wants, but the depositor can not demand a fixed part.
In Islamic banking, if a financial institution goes bankrupt then your depositors get their particular money first in addition to then, the creditors. While in Contemporary Banking creditors obtain their money first plus majority of the particular depositors lose their own 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 similar to the Fixed Accounts of recent banks and are additional divided into several sorts
Mudariba (Profit & Loss Sharing)
The depositor debris a set amount associated with money in the bank for a fixed period of time, which maybe a several of three or a multiple of several. Here the excessive unit will be the depositor and the shortage unit is typically the bank. The financial institution uses this funds to do business with the businessmen plus whatever profit the Islamic bank can make, it really is divided about a pre-determined percentage, which can be negotiated. In the Islamic Banking associated with Malaysia, the ratio is 7 component to 3 component, meaning 70% goes toward the depositor in addition to 30% is held by the bank. So there will be sharing of income, the greater the net income the greater the share of each and every.
Suppose, if there is the loss of $ 100, then hundred can be deducted from the depositor’s money. Thus theoretically only the particular depositor bears the loss. Practically analyzing even the Islamic bank is going in loss due to the fact they are having to pay money for the rent, administration in addition to salary, however the reduction ratio of the lender is less compared to regarding the depositor, as even the profit of the bank is less as compared to that of the depositor.
Project Financing inside the Mudariba System
If a business person approaches an Islamic bank with a project idea plus requests a financial loan for a set period, the Islamic bank analyzes the particular project, then the businessman and the Islamic bank work out the profit percentage. In Modern banking interest is discussed, in Islamic banking profit ratio will be negotiated.
Suppose, the particular businessman takes the loan of $5000 from your Islamic lender for six a few months and the pre-determined profit ratio is 60% to the particular bank and 40% to the businessman. When the businessman will be working for their business, even their salary would end up being a part of that $5000 and suppose the salary of the particular businessman is $200 per month.
Imagine, if the business person earns a profit of $5000, the business would get (his 40%) $2000 through the profit in addition to the businessman would certainly get paid one-hundred dollar salary per month from the $5000 loan, amounting $1200 with regard to six months. So typically the businessman gets his / her profit and also the wage for his time, if he or she is operating for his business.




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