The particular Islamic Economic Program

Interest-free Islamic economical system is partially followed and partly not followed in Muslim countries about the world. The only country, which has followed this technique completely in every minute detail will be Malaysia. So typically the application methods inside this post are usually mostly those implemented in Malaysia subsequent the Interest-free Islamic Economic system.
The particular main feature of the Islamic economic system is that this is Interest-Free. Since the Qur’an states in Sura al-Baqara Chapter 2 Verses 278 & 279, “O ye that believe! fear Allah and give upwards what remains associated with your with regard to usury if ye are indeed believers. If ye do this require notice associated with war from Thor and his Apostle: nevertheless if ye change back ye should have your money sums; do not necessarily 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 conflict against God Changeless wonderful Messenger other than regarding taking Attention and Usury.
Presently there are several evils of the curiosity based economy, the reason why Islamic has prohibited this.
For example, in case a person requires a loan from your bank and says the cost price of a certain content is 10 bucks and he wants to money regarding one dollar. And so the selling price would are the 10 dollars cost price one buck profit and one dollar interest and the selling price will be 12 money. The selling price would go upwards because of curiosity so when the promoting price goes up the particular demand comes lower and once the demand comes down the provision comes down in addition to as supply will come down production passes down causing labour issue and unemployment.
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There is Social Injustice.
For example , if a individual requires a loan through the bank plus no matter in case he earns money or goes in loss he offers to pay of which fixed amount of interest. Even if several natural calamity befalls his family, this kind of as flooding or even earthquake, the particular person still has to pay out the loan using the interest and a delay would simply boost the amount of interest. It is social injustice.
Right now there is no social consideration.
Suppose, in case two businessmen go to ask for a new loan from the modern bank and something businessman wants to start up a social or clinic while the additional businessman wants to start an alcoholic beverages factory or even a wagering den. But normal the businessman, that wants to begin an alcohol factory or perhaps a gambling den could have better returns and the loan given to him might be more safe and he would offer a higher rate of interest as compared to the enterprise, who would like to open a new school or medical center. Modern banks usually are only interested inside improving and increased returns. That’s the reason why they finance betting dens instead of colleges or hospitals. That will is why within the 80s countless numbers of gambling dens were financed simply by modern banks around the world. For name benefit only a couple of social projects are financed by contemporary banks and many of their loans are based on better interest.
Modern day banks encourage people to store money and maintain the money idle for small set return on that every year. In the end, power is targeted in some hands, the particular bankers.
In the same way presently there are several great things about Islamic banking.
Since there is no interest involved, right now there is profit in addition to loss sharing. So if a person desires to sell their goods, it might only have the cost price and profit in the selling value and instead of 12 dollars, his / her selling price would be only 11 dollars. When the marketing price comes lower, the necessity increases plus if the need raises the supply raises and as provide increases the production increases resulting in more time for that people in addition to higher employment. As a result promotes people to work and earn their living.
There is usually Social Justice in Islamic banking.
If a business requires a loan and goes into loss, the loss is shared simply by the bank plus if he makes a profit, typically the profit is contributed by the lender. If in situation any natural disasters befalls him, the particular Islamic bank provides him additional time to repay, unlike the current bank, where typically the more time you consider to pay the particular more interest you will have to pay out. Many a occasions when the Islamic lender finds the circumstance very bad, they will even let it go away that loan.
There is Social Thing to consider in Islamic bank.
Islamic bank cannot give a loan to the businessman, that is doing any activity, that is creating harm to typically the society. For instance, if a entrepreneur wants to commence an alcohol manufacturer and approaches an Islamic bank regarding a loan, the particular Islamic bank is not going to lend him a single penny, not actually if he guarantees to provide 100% income to the Islamic bank. In Islamic banking there is social concern and they encourage jobs necessary for the community, such as building schools, hospitals and nurseries. In short, the Islamic bank encourages typically the society to enhance.
In the Islamic bank, you usually are not encouraged in order to keep your cash idle. You are encouraged to invest your current money and become somebody in typically the business and in the end, power is not concentrated inside the hands of some individuals. Because in the Islamic banking the net income and loss are shared by the particular business, the company as well as the depositor. Typically the power is both equally shared of most the people.
The excellent philosopher, Aristotle has beautifully defined Curiosity as “An earning based on the use associated with money rather than upon labour, and everything these kinds of earnings(interests) are against nature. inches
Lets quickly analyze typically the objectives from the Islamic economic order before we analyze the theory and practical application of the Islamic economy.
The Targets of the Islamic Financial Order
1- Economic health
Islam stimulates a person to take pleasure in the bounties regarding God Almighty, in order to work for his / her living and avoid begging.
2- Common Brotherhood and Justice
Qur’an says inside Sura al-Hujurat Chapter 49 Verse thirteen, “O mankind! We created you through just one (pair) of a male and a female to make you into nations and tribes that ye may know each other (ofcourse not that ye might despise each other). Verily the the majority of honored of a person in the view of Allah is (he who is) the most righteous of you. inches
Out of this we appear to know typically the criteria that the criteria of judgement in the look of God is not really wealth, not intercourse, not color, not Caste, but this is “Taqwa” Our god consciousness, piety in addition to righteousness.
Qur’an says in Sura an-Nisa Chapter 4 Verse 135, “O ye who believe! endure out firmly regarding justice as witnesses to Allah even as against her or your parents or your kin in addition to whether it be (against) abundant or poor: regarding Allah can finest protects all. inch
In accordance with this all of us have to stand for truth and rights be it in opposition to anybody even towards our very own selves and sacrifice your own interests.
3- Fair Distribution of Wealth
Islam is in opposition to the philosophy that the wealth must be concentrated in a new few hands. The particular difference between the rich and the poor ought to be lowered. Otherwise they might become enemies unto every other. For this particular, Islam has devised a system of “Zakat” that all Muslim, who else has excess riches exceeding the quantity equivalent to or more than 85 grams of Gold. This particular amount is put in on the indegent, orphans, needy etc. In case every individual in the world practices this system of “Zakat”, not a single particular person in the whole world would perish of hunger. Islam teaches to find lawful employment for the unemployed and to pay him an excellent remuneration.
According in order to Islam if the person dies his wealth should be dispersed among his spouse, children or other loved ones according to typically the guidelines laid down in Qur’an in addition to Ahadith and that should not head to just one or two individuals in the society as that is done today.
4- Individual Flexibility within the Framework of Social Well-fare
According to Islamic man is created free and no-one not even the express can abrogate their freedom nor subject his life to strict regimentation. Every single individual is totally free as long since he does not necessarily harm the community because in Islamic the larger well being of the society takes precedence more than the individual independence.
Working and work as well as the benefit in business are each important principles associated with Islam, but operating and labour get precedence over the benefit in operation. When you are doing business, a huge reduction can not end up being inflicted to reduce a small loss, nor can a big profit can become sacrificed for a new small profit. Inside 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 and Islamic theories, a person pay rent on the land.
2- Labor
You pay out wages within the time in both the current and Islamic ideas.
3- Capital
In the present00 theory, you pay out Interest on money, while in typically the Islamic theory right now there is profit in addition to loss sharing.
4- Organization
In the particular fourth factor of production, Organization, presently there is profit in addition to loss sharing within both theories.
Therefore the major difference within the four factors regarding production is typically the third factor regarding Capital. The Modern day Theory says of which a fixed curiosity should be charged within the capital, whilst the Islamic principle says that there is revenue and loss sharing on capital. Due to the fact Islamic theory really does not differentiate between the third factor Capital and the 4th factor Organization due to the fact the money lent by the lender does not belong to the lender itself, it is one of the depositor. The depositors are the part of Organization and the money deposited within the bank (the capital) should be included in the Organization. Within the Islamic concept Capital and Organization are clove with each other and there is profit and damage sharing on the particular capital.
If you need to do business, there usually are naturally two sorts of units. One is the excess unit, who possess excess of prosperity, but do not really know how in order to spend it. 2nd is the deficit product, the folks who do not have funds, but have very good ideas for people who do buiness. Typically the best examples associated with a surplus plus deficit unit inside the Islamic background is Lady Khadijah (may Allah end up being pleased with her) had excess of wealth, but was missing avenues to devote in and being a female the lady couldn’t travel overseas too much to be able to handle business purchases. The deficit product, when it comes to wealth, had been Prophet Mohammed (peace be upon him). He had good ideas and access to business avenues, but did not have riches. So Lady Khadijah (may Allah end up being pleased with her) gave wealth, which often Prophet Mohammed (peace be upon him) invested in business avenues on her behalf in addition to the profit has been shared on the fixed pre-determined ration.
Typically the System of Islamic Banking and Modern Banking
Lets analyze the options available for seperate depositors in order to deposit their cash in an Islamic bank.
Current Account
The money you downpayment within an Islamic bank is utilized together with your permission, yet if the bank goes into loss, typically the loss is not discussed by the depositor. If the bank goes into profit, none will be the profit contributed from the depositor. Typically the depositor is serious in the particular protection of his funds, not profit. The particular Islamic banks gives you a verify book and a slip book together with the functions because that of the modern bank.
Cost savings Account
Even here the depositor is principally interested in typically the safety of their money. Because the financial institution gets a profit through this money, the bank can gift a portion of that income to the depositor, in case the bank desires, but the depositor can not requirement a fixed portion.
In Islamic banking, if a bank goes bankrupt then your depositors get their particular money first and then, the creditors. While in Modern Banking creditors get their money first in addition to majority of the particular depositors lose their own money. So also if you want your money safe, typically the Islamic banks are preferable and less dangerous than Modern banking institutions.
Investment Accounts
These people are similar to the Repaired Accounts of recent banks and are additional divided into many varieties
Mudariba (Profit & Loss Sharing)
The depositor debris a fixed amount associated with money in the bank for a fixed time frame, which maybe a multiple of three or perhaps a multiple of four. Here the surplus unit may be the depositor and the deficit unit is the bank. The financial institution uses this money to do company with all the businessmen in addition to whatever profit the particular Islamic bank can make, it really is divided on a pre-determined ratio, which can become negotiated. In typically the Islamic Banking regarding Malaysia, the percentage is 7 portion to 3 component, meaning 70% would go to the depositor and 30% is retained by the financial institution. So there is usually sharing of profit, the greater the money the greater the particular share of each and every.
Suppose, if you have the loss of $ 100, then hundred will be deducted from typically the depositor’s money. Therefore theoretically only typically the depositor bears the loss. Practically analyzing even the Islamic bank is going in loss since they are spending money for typically the rent, administration in addition to salary, but the reduction ratio in the bank is less than regarding the depositor, as even typically the profit from the lender is less compared to that of the depositor.
Project Financing within the Mudariba System
If a business person approaches an Islamic bank with a project idea plus asks for a loan for a fixed period, the Islamic bank analyzes the particular project, then the businessman and the Islamic bank work out the profit ratio. In Modern bank interest is discussed, in Islamic financial profit ratio is negotiated.
Suppose, the particular businessman takes a new loan of $5000 from an Islamic financial institution for six months and the pre-determined profit ratio is usually 60% to the bank and 40% to the businessman. In case the businessman is working for their business, even his salary would end up being included in that $5000 and suppose the particular salary of typically the businessman is $200 per month.
Suppose, if the businessman earns a income of $5000, typically the business would get (his 40%) $2000 from the profit in addition to the businessman would get paid $200 salary per calendar month from your $5000 mortgage, amounting $1200 regarding six months. So the businessman gets his profit as well as the wage for his labour, if he or she is operating for his business.

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