Typically the Islamic Economic System

Interest-free Islamic financial system is partially followed and partially not followed inside Muslim countries around the world. The only country, which has followed this method completely in every single minute detail is usually Malaysia. So the particular application methods in this post are mostly those executed in Malaysia next the Interest-free Islamic Economic system.
The main feature associated with the Islamic economic system is that it is Interest-Free. As the Qur’an says in Sura al-Baqara Chapter 2 Verses 278 & 279, “O ye who believe! fear Thor and give upwards what remains regarding your demand for usury if ye are usually indeed believers. If ye do it require notice associated with war from Jahve great Apostle: nevertheless if ye change back ye will have your money sums; do not really deal unjustly and ye shall not be managed unjustly. “
Qur’an condemn all evil actions, but never provides the Qur’an warned of a conflict against God Changeless wonderful Messenger apart from in the case of taking Curiosity and Usury.
Right now there are several evils of the interest based economy, typically the reason why Islamic has prohibited this.
For example, when a person requires a loan from a bank and says the cost price of a certain article is 10 dollars and he desires to money associated with one dollar. And so the selling price would include the 10 money cost price one dollar profit and 1 dollar interest and the selling value can be 12 dollars. The selling price would go upward because of attention so when the promoting price goes up the particular demand comes straight down and once the demand comes down the provision comes down in addition to as supply arrives down production boils down causing labour problem and unemployment.
There exists Social Injustice.
For instance , if a particular person takes a loan coming from the bank and no matter if he earns money or goes within loss he offers to pay that will fixed amount of interest. Even though several natural calamity befalls his family, these kinds of as flooding or even earthquake, the person continues to have to pay the loan using the interest and a new delay would just increase the amount of interest. It will be social injustice.
There is no social consideration.
Suppose, when two businessmen arrive at ask for a new loan from the contemporary bank and another entrepreneur wants to start a social or hospital while the other businessman wants to be able to start an alcohol factory or even a betting den. But natural the businessman, who wants to begin an alcohol factory or perhaps a gambling den might have better earnings plus the loan given to him might be more protected and would provide a higher level appealing as compared to the enterprise, who wants to open a new school or clinic. Modern banks are usually only interested within getting better and higher returns. That’s why they finance betting dens as opposed to universities or hospitals. That will is why inside the 80s countless numbers of gambling play rooms were financed by modern banks worldwide. For name sake only a couple of social projects are usually financed by contemporary banks and the majority associated with their loans derive from better interest.
Modern banks encourage visitors to store money and maintain the money idle for small fixed return on this every year. In the end, power is concentrated in a few hands, the bankers.
In typically the same way presently there are several advantages of Islamic banking.
Because there is zero interest involved, presently there is profit and loss sharing. When a person desires to sell their goods, it could just have the cost price and income within the selling cost and instead associated with 12 dollars, his / her selling price would certainly be only 10 dollars. When the marketing price comes straight down, the demand increases and if the necessity increases the supply boosts and as supply enhances the production boosts leading to more time for your people and higher employment. As a result stimulates people to function and earn their living.
There will be Social Justice within Islamic banking.
When a business needs a loan and gets into loss, the reduction is shared by the bank and if he earns a profit, the particular profit is contributed by the lender. If in circumstance any natural disasters befalls him, the particular Islamic bank provides him more hours to be able to repay, unlike the present day bank, where typically the more hours you get to pay the more interest you should have to spend. Many a occasions in the event the Islamic lender finds the scenario very bad, these people even let it go away that loan.
Presently there is Social Concern in Islamic bank.
Islamic bank cannot give a mortgage to the businessman, who else is doing any activity, which is causing harm to the particular society. For illustration, if a business person wants to start an alcohol factory and approaches a great Islamic bank regarding a loan, the particular Islamic bank will not lend him just one penny, not also if he guarantees to offer 100% profit for the Islamic lender. In Islamic banking there is social consideration and they also encourage tasks beneficial for the modern society, such as building universities, hospitals and nurseries. In a nutshell, the Islamic bank encourages the particular society to enhance.
In the Islamic bank, you are not encouraged in order to keep your money idle. You are encouraged to get your current money and become someone in the particular business and in the finish, power will be not concentrated in the hands of some individuals. Because in the Islamic banking the money and loss usually are shared by the business, the banker as well as the depositor. The particular power is similarly shared among all the people.
The fantastic philosopher, Aristotle has beautifully defined Curiosity as “An generating using the use regarding money rather than on labour, and everything this kind of earnings(interests) are in opposition to nature. “
Allows quickly analyze typically the objectives of the Islamic economic order prior to we analyze the particular theory and practical application of the Islamic economy.
The Objectives in the Islamic Financial Buy
1- Economic well-being
Islam stimulates someone to enjoy the bounties regarding God Almighty, to be able to work for his living and stay away from begging.
2- Universal Brotherhood and Proper rights
Qur’an says in Sura al-Hujurat Part 49 Verse 13, “O mankind! All of us created you from just one (pair) of a male in addition to a female to make you into countries and tribes that ye may know each other (not that ye might despise each other). Verily the most honored of an individual in the sight of Allah is usually (he who is) the most righteous of you. “
Using this we appear to know the criteria that the particular criteria of thinking in the view of God is not really wealth, not sex, not color, not necessarily Caste, but it is “Taqwa” Our god consciousness, piety and righteousness.
Qur’an states in Sura an-Nisa Chapter 4 Sentirse 135, “O en who believe! remain out firmly for justice as witnesses to Allah also as against yourselves or your mother and father or if your kin in addition to whether it is (against) wealthy or poor: for Allah can greatest protects all. “
According to this all of us have to stand for truth and proper rights be it in opposition to anybody even towards our own selves in addition to sacrifice your personal interests.
3- Equitable Distribution of Wealth
pemakaman muslim
Islam is towards the philosophy that will the wealth ought to be concentrated in a few hands. The difference between typically the rich and the poor ought to be decreased. Otherwise they would become enemies unto every other. For this particular, Islam has invented a process of “Zakat” that every Muslim, that has excess riches exceeding the quantity equal to or a lot more than 85 grms of Gold. This particular amount is put in on the indegent, orphans, needy etc. In case every individual on the planet practices this method of “Zakat”, not really a single person in the complete world would pass away of hunger. Islamic teaches to find lawful employment for the unemployed also to pay him a great remuneration.
According in order to Islam if the person dies his wealth ought to 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 visit just one or two individuals inside the society as this is done nowadays.
4- Individual Independence within the Context of Social Well-fare
According to Islamic man is given birth to free and no-one not really even the condition can abrogate his / her freedom nor subject matter his life in order to strict regimentation. Every individual is totally free as long as he does not really harm the community because in Islamic the larger wellbeing of the community takes precedence above the individual independence.
Working and time as well since the benefit inside business are each important principles regarding Islam, but operating and labour get precedence over typically the benefit in operation. In case you are carrying out business, a huge damage can not become inflicted to alleviate a small reduction, nor can a huge profit can become sacrificed for a new small profit. Within short, Islam believes in individual within the particular context of social welfare.
There usually are mainly four factors involved in creation;
1- Land
Both in the Modern and Islamic theories, an individual pay rent upon the land.
2- Labor
You spend wages on the work in both the Modern and Islamic hypotheses.
3- Capital
In the present00 theory, you spend Interest on money, while in typically the Islamic theory there is profit plus loss sharing.
4- Organization
In typically the fourth factor of production, Organization, presently there is profit and loss sharing inside both theories.
Therefore the major difference inside the four factors regarding production is typically the third factor of Capital. The Contemporary Theory says that will a fixed curiosity should be recharged on the capital, although the Islamic principle says that there is revenue and loss posting on capital. Because Islamic theory does not differentiate between the third factor Money and the 4th factor Organization because the money loaned by the financial institution does not belong to the bank by itself, it belongs to the depositor. The depositors are usually the part regarding Organization and the money deposited within the bank (the capital) should become within the Organization. In the Islamic concept Capital and Business are clove collectively and there is usually profit and loss sharing on typically the capital.
If you need to perform business, there are usually naturally two varieties of units. 1 is the excess unit, who possess excess of prosperity, but do not really know how in order to spend it. Next is the deficit product, the folks who perform not have money, but have good ideas for people who do buiness. Typically the best examples regarding a surplus plus deficit unit within the Islamic history is Lady Khadijah (may Allah be pleased with her) had excess regarding wealth, but weren’t getting avenues to invest in and becoming a female the lady couldn’t travel overseas too much in order to handle business purchases. The deficit product, in terms of wealth, was Prophet Mohammed (peace be upon him). He had good suggestions and entry to business avenues, but performed not have wealth. So Lady Khadijah (may Allah become pleased with her) gave wealth, which often Prophet Mohammed (peace be upon him) committed to business techniques on her behalf behalf and the profit has been shared on a 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 Bank account
The money you deposit in a Islamic bank is utilized with your permission, nevertheless if the bank gets into loss, the particular loss is just not contributed by the depositor. If the bank goes into profit, neither is the profit shared from the depositor. Typically the depositor is fascinated in the particular safety of his money, not profit. The particular Islamic banks provides you a examine book and a new slip book with the functions since that of a modern bank.
Savings Account
Even here the depositor is mainly interested in the safety of their money. Because the financial institution gets a profit through this money, the financial institution can gift a part of that profit towards the depositor, in case the bank wants, but the depositor can not demand a fixed part.
In Islamic bank, if a financial institution goes bankrupt then a depositors get their own money first in addition to then, the collectors. While in Modern Banking creditors get their money first in addition to majority of typically the depositors lose their particular money. So also if you would like your cash safe, the particular Islamic banks are usually preferable and less dangerous than Modern financial institutions.
Investment Accounts
These people are just like the Fixed Accounts of recent banks and are additional divided into many varieties
Mudariba (Profit & Loss Sharing)
The depositor deposits a fixed amount regarding money in typically the bank for a new fixed time period, which usually maybe a several of three or perhaps a multiple of 4. Here the excess unit is the depositor and the deficit unit is the bank. The financial institution uses this cash to do enterprise with all the businessmen and whatever profit typically the Islamic bank makes, it is divided upon a pre-determined proportion, which can be negotiated. In typically the Islamic Banking associated with Malaysia, the ratio is 7 part to 3 part, meaning 70% would go to the depositor and 30% is held by the lender. So there is usually sharing of income, the greater the net income the greater typically the share of every.
Suppose, when there is a new loss of a hundred dollars, then hundred can be deducted from typically the depositor’s money. Thus theoretically only the depositor bears the particular loss. Practically examining even the Islamic bank is heading in loss due to the fact they are having to pay money for typically the rent, administration in addition to salary, but the damage ratio in the financial institution is less as compared to those of the depositor, as even the particular profit in the financial institution is less compared to regarding the depositor.
Project Financing inside the Mudariba System
If a businessman approaches an Islamic bank with the project idea in addition to asks for a loan for a repaired period, the Islamic bank analyzes the project, then the businessman and the Islamic bank negotiate the profit proportion. In Modern bank interest is discussed, in Islamic bank profit ratio is usually negotiated.
Suppose, the businessman takes a new loan of $5000 from an Islamic lender for six months and the pre-determined profit ratio will be 60% to the bank and forty percent towards the businessman. When the businessman is working for their business, even their salary would become contained in that $5000 and suppose typically the salary of the businessman is one hundred dollar per month.
Suppose, if the entrepreneur earns a income of $5000, the particular business would get (his 40%) $2000 from your profit in addition to the businessman might get paid $200 salary per month from the $5000 mortgage, amounting $1200 for 6 months. So the particular businessman gets his / her profit and also the wage for his labour, if he could be working for his business.

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