The Islamic Economic System

Interest-free Islamic economic system is partially followed and partially not followed in Muslim countries around the world. The only country, which has followed this system completely in every minute detail is Malaysia. So the application methods in this post are mostly those implemented in Malaysia following the Interest-free Islamic Economic system.

The main feature of 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 Allah and give up what remains of your demand for usury if ye are indeed believers. If ye do it not take notice of war from Allah and his Apostle: but if ye turn back ye shall have your capital sums; do not deal unjustly and ye shall not be dealt with unjustly.”

Qur’an condemn all evil deeds, but never has the Qur’an warned of a war against God Almighty and His Messenger except in the case of taking Interest and Usury.

There are several evils of the interest based economy, the reason why Islam has prohibited it.

For example, if a person takes a loan from a bank and says the cost price of a certain article is 10 dollars and he wants to a profit of one dollar. So the selling price would include the 10 dollars cost price one dollar profit and one dollar interest and the selling price would be 12 dollars. The selling price would go up because of interest and when the selling price goes up the demand comes down and when the demand comes down the supply comes down and as supply comes down production comes down causing labour problem and unemployment.

There is Social Injustice.

For example, if a person takes a loan from the bank and no matter if he earns a profit or goes in loss he has to pay that fixed amount of interest. Even if some natural calamity befalls his family, such as flooding or earthquake, the person still has to pay the loan with the interest and a delay would only increase the amount of interest. It is social injustice.

There is no social consideration.

Suppose, if two businessmen come to ask for a loan from a modern bank and one businessman wants to start a social or hospital while the other businessman wants to start an alcohol factory or a gambling den. But natural the businessman, who wants to start an alcohol factory or a gambling den would have better returns and the loan given to him would be more secure and he would give a higher rate of interest as compared to the business, who wants to open a school or hospital. Modern banks are only interested in getting better and higher returns. That’s why they finance gambling dens rather than schools or hospitals. That is why in the 80s thousands of gambling dens were financed by modern banks worldwide. For name sake only a few social projects are financed by modern banks and the majority of their loans are based on better interest.

Modern banks encourage people to store money and keep the money idle for small fixed return on it every year. In the end, power is concentrated in a few hands, the bankers.

In the same way there are several benefits of Islamic banking.

As there is no interest involved, there is profit and loss sharing. So if a person wants to sell his goods, it would only have the cost price and profit in the selling price and instead of 12 dollars, his selling price would be only 11 dollars. If the selling price comes down, the demand increases and if the demand increases the supply increases and as supply increases the production increases resulting in more labour for the people and higher employment. As a result encourages people to work and earn their living.

There is Social Justice in Islamic banking.

If a business takes a loan and goes in loss, the loss is shared by the bank and if he earns a profit, the profit is shared by the bank. If in case any natural calamities befalls him, the Islamic bank gives him more time to repay, unlike the modern bank, where the more time you take to pay the more interest you would have to pay. Many a times if the Islamic bank finds the situation very bad, they even let go off that loan.

There is Social Consideration in Islamic banking.

Islamic bank can not give a loan to any businessman, who is doing any activity, which is causing harm to the society. For example, if a businessman wants to start an alcohol factory and approaches an Islamic bank for a loan, the Islamic bank will not lend him a single penny, not even if he promises to give 100% profit to the Islamic bank. In Islamic banking there is social consideration and they encourage projects beneficial for the society, such as building schools, hospitals and nurseries. In short, the Islamic bank encourages the society to improve.

In the Islamic bank, you are not encouraged to keep your money idle. You are encouraged to invest your money and be a partner in the business and in the end, power is not concentrated in the hands of a few individuals. Because in the Islamic banking the profit and loss are shared by the business, the banker as well as the depositor. The power is equally shared among all the people.

The great philosopher, Aristotle has beautifully defined Interest as “An earning based on the use of money and not on labour, and all such earnings(interests) are against nature.”

Lets quickly analyze the objectives of the Islamic economic order before we analyze the theory and practical application of the Islamic economic system.

The Objectives of the Islamic Economic Order

1- Economic well-being

Islam encourages a person to enjoy the bounties of God Almighty, to work for his living and refrain from begging.

2- Universal Brotherhood and Justice

Qur’an says in Sura al-Hujurat Chapter 49 Verse 13, “O mankind! We created you from a single (pair) of a male and a female and made you into nations and tribes that ye may know each other (not that ye may despise each other). Verily the most honored of you in the sight of Allah is (he who is) the most righteous of you.”

From this we come to know the criteria that the criteria of judgement in the sight of God is not wealth, not sex, not color, not Caste, but it is “Taqwa” God consciousness, piety and righteousness.

Qur’an says in Sura an-Nisa Chapter 4 Verse 135, “O ye who believe! stand out firmly for justice as witnesses to Allah even as against yourselves or your parents or your kin and whether it be (against) rich or poor: for Allah can best protects all.”

According to this we have to stand for truth and justice be it against anybody even against our own selves and sacrifice your own interests.

3- Equitable Distribution of Wealth

Islam is against the philosophy that the wealth should be concentrated in a few hands. The difference between the rich and the poor should be reduced. Otherwise they would become enemies unto each other. For this, Islam has devised a system of “Zakat” that every Muslim, who has excess wealth exceeding the amount equal to or more than 85 grams of Gold. This amount is spent on the poor, orphans, needy and so on. If every individual in the world practices this system of “Zakat”, not a single person in the whole world would die of hunger. Islam teaches to find lawful employment for the unemployed and to pay him a good remuneration.

According to Islam if a person dies his wealth should be distributed among his heirs according to the guidelines laid down in Qur’an and Ahadith and it should not go to just one or two individuals in the society as it is done today.

4- Individual Freedom within the Context of Social Well-fare

According to Islam man is born free and nobody not even the state can abrogate his freedom nor subject his life to strict regimentation. Every individual is free as long as he does not harm the society because in Islam the larger welfare of the society takes precedence over the individual freedom.

Working and labour as well as the benefit in business are both important principles of Islam, but working and labour take precedence over the benefit in business. If you are doing business, a big loss can not be inflicted to relieve a small loss, nor can a big profit can be sacrificed for a small profit. In short, Islam believes in individual within the context of social welfare.

There are mainly four factors involved in production;

1- Land

In both the Modern and Islamic theories, you pay rent on the land.

2- Labor

You pay wages on the labour in both the Modern and Islamic theories.

3- Capital

In the Modern theory, you pay Interest on capital, while in the Islamic theory there is profit and loss sharing.

4- Organization

In the fourth factor of production, Organization, there is profit and loss sharing in both theories.

So the major difference in the four factors of production is the third factor of Capital. The Modern Theory says that a fixed interest should be charged on the capital, while the Islamic theory says that there is profit and loss sharing on capital. Because Islamic theory does not differentiate between the third factor Capital and the fourth factor Organization because the money lent by the bank does not belong to the bank itself, it belongs to the depositor. The depositors are the part of Organization and the money deposited in the bank (the capital) should be included in the Organization. In the Islamic theory Capital and Organization are clove together and there is profit and loss sharing on the capital.

When you have to do business, there are naturally two types of units. One is the surplus unit, who have excess of wealth, but do not know how to spend it. Second is the deficit unit, the people who do not have money, but have good ideas for business. The best examples of a surplus and deficit unit in the Islamic history is Lady Khadijah (may Allah be pleased with her) had excess of wealth, but lacked avenues to spend in and being a female she couldn’t travel abroad too much to deal in business transactions. The deficit unit, in terms of wealth, was Prophet Mohammed (peace be upon him). He had good ideas and access to business avenues, but did not have wealth. So Lady Khadijah (may Allah be pleased with her) gave wealth, which Prophet Mohammed (peace be upon him) invested in business avenues on her behalf and the profit was shared on a fixed pre-determined ration.

The System of Islamic Banking and Modern Banking

Lets analyze the options open for individual depositors to deposit their money in an Islamic bank.

Current Account

The money you deposit in an Islamic bank is utilized with your permission, but if the bank goes in loss, the loss is not shared by the depositor. If the bank goes in profit, neither is the profit shared by the depositor. The depositor is interested in only the safety of his money, not profit. The Islamic banks gives you a check book and a slip book with the functions as that of a modern bank.

Savings Account

Even here the depositor is mainly interested in the safety of his money. As the bank gets a profit from this money, the bank can gift a portion of that profit to the depositor, if the bank wants, but the depositor can not demand a fixed portion.

In Islamic banking, if a bank goes bankrupt then the depositors get their money first and then, the creditors. While in Modern Banking creditors get their money first and majority of the depositors lose their money. So even if you want your money safe, the Islamic banks are preferable and safer than Modern banks.

Investment Accounts

They are similar to the Fixed Accounts of Modern banks and are further divided into several types

Mudariba (Profit & Loss Sharing)

The depositor deposits a fixed amount of money in the bank for a fixed period of time, which maybe a multiple of three or a multiple of four. Here the surplus unit is the depositor and the deficit unit is the bank. The bank uses this money to do business with the businessmen and whatever profit the Islamic bank makes, it is divided on a pre-determined ratio, which can be negotiated. In the Islamic Banking of Malaysia, the ratio is 7 part to 3 part, meaning 70% goes to the depositor and 30% is kept by the bank. So there is sharing of profit, the greater the profit the greater the share of each.

Suppose, if there is a loss of a hundred dollars, then hundred would be deducted from the depositor’s money. So 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 and salary, but the loss ratio of the bank is less than that of the depositor, as even the profit of the bank is less than that of the depositor.

Project Financing in the Mudariba System

If a businessman approaches an Islamic bank with a project idea and asks for a loan for a fixed period, the Islamic bank analyzes the project, then the businessman and the Islamic bank negotiate the profit ratio. In Modern banking interest is negotiated, in Islamic banking profit ratio is negotiated.

Suppose, the businessman takes a loan of $5000 from an Islamic bank for six months and the pre-determined profit ratio is 60% to the bank and 40% to the businessman. If the businessman is working for his business, even his salary would be included in that $5000 and suppose the salary of the businessman is $200 per month.

Suppose, if the businessman earns a profit of $5000, the business would get (his 40%) $2000 from the profit and the businessman would get paid $200 salary per month from the $5000 loan, amounting $1200 for 6 months. So the businessman gets his profit as well as the salary for his labour, if he is working for his business.

But in case of loss, the bank bears the complete loss and in turn passes the loss to the depositors. But technically even the business also goes in loss because he is only paid for labour, not for his thinking and ideas.

In Mudariba System, the bank can not interfere in the management of the business. The business can not tell the businessman to build a 12 story building instead of a 10 story building. The bank can not tell the business to produce a certain article instead of another article. The bank can not interfere in the administration of the business.

Mushariqa System (Partnership)

In Mushariqa system or Partnership the Islamic bank can interfere in the management of the business. The bank can tell the business to build a 12 story building rather than a 10 story building. The bank can tell the businessman to make a certain product instead of another product. In Mushariqa system the businessman has part of the capital and the other part he takes from the bank. The profit is shared on a pre-determined ratio. Suppose, if the businessman and bank give 50-50% capital, they would get 50-50% profit. But in case of loss, loss is shared on pre-determined ration and the Islamic bank bears more loss. The Islamic bank may have to bear 60% loss, while the businessman would only bear 40% loss.

Mudhaba System

Suppose, you want to purchase a particular machinery from abroad costing $10000, in the Modern Bank you open a LC (Letter of Credit) or a TR (Trust Receipt/Sales Slip) and you deposit the money in the Modern bank and the Modern bank charges you a fixed amount of interest on the time it takes for the transaction. If you deposit the money in an Islamic bank and ask the bank to buy the machinery on your behalf, the Islamic bank would charge you a service charge/commission.

If you do not have money to buy the machinery, you can combine Mudhaba System with Mudariba System or if you have the money you can combine the Mudhaba System with the Mushariqa System and share the profit on selling that machinery with the bank on a pre-determined ratio.

Ijara (Leasing or Higher Purchasing)

Suppose, you don’t to buy a car, you want to rent it. The Islamic bank charges you a certain profit and rents you the car. The price of the car and the profit are divided by the life span of that car to calculate the per month rent. The Islamic bank provides you Ijara ending with sale and also buying back facility. If you don’t the car, the Islamic bank buys back the car, a facility which Modern banks do not provide.

Interest-free Loan

It is the loan the Islamic bank gives to the poor to do business without charging any Interest at all. There is nothing like Interest-free loan in Modern banking. In the Islamic system of banking in Malaysia 10% of profits are kept separately/ reserved for Interest-free loan for the poor. In Islamic terminology it is called “Karze Hasana” meaning “the good loan”.

Historical Mosques in Iran

The first attempts of Moslems’ armies to start conquering the Persian Empire was in 633 AD, as the Moslems took control of the area that is today called Iraq, which was the economical and political center of the whole empire. After less than 12 years, in 642, the Moslems took control of the whole Persian Empire.

The most significant historical mosques of Iran are quite plenty as the country witnessed several Islamic dynasties throughout its history. Such great monuments grab the attention of many travelers who tour Iran.

A great example of wonderful historical mosques in Iran is the Jameh Mosque of Isfahan. Constructed in the 8th century BC, the mosque is among the most ancient in the country and its distinctive architecture draw the attention of many tourists who travel to Iran.

Although the mosque was badly set on fire at the end of the 11th century, the mosque that travelers who tour Iran view today is the outcome of a long period of rebuilding and restorations.

The last were carried out at the end of the 20th century. The Jameh Mosque of Isfahan is included in the UNESCO world heritage since 2012.

Situated near the Naqesh Jihan Arena, the Imam mosque is another magnificent example of historical mosques of Isfahan, the city that welcomes many tourists who spend their vacations in Iran.

The Imam mosque was constructed in 1611 AD and it is featured with its wonderful architecture and decorations especially the four minarets and the domes of the mosque.

The most remarkable feature of the mosque from inside is how the voices and sounds are clearly transmitted from under the central dome towards every section of it. This fact amazes many visitors who spend their holidays in Iran.

If we move on touring the significant historical mosques of Isfahan our next stop would be at the Sheikh Lotfy Allah Mosque. Built in the 18th century, the mosque is among the most popular historical mosques of the city that is commonly explored by several travelers who book trips to Iran. The layout, design, decorations, and ornaments of the mosque is said to be among the most notable in the whole world.

If the travelers touring Iran are lucky, they would spend a couple of days in Shiraz that also hosts several historical mosques. There is for example the Nasir El Molk Mosque. Nicknamed as the pink mosque because of the usage of pink tiles in its interior design, the mosque was constructed in 1888.

The Nasir El Molk Mosque considered by many travelers who enjoy their holidays in Iran as one of the most magnificent Islamic establishments of the country. This is due to the charming colored windows, many-colored stone columns, and marble that coats that floor of the mosque. It is surly one of the most marvelous picturesque historical sites of the country.

Another marvelous example of historical mosques in Shiraz would be the Al Wakil Mosque. The structure was built in the middle of the 18th century and it is characterized by its magnificent colors and ornaments that are praised by many travelers who book travel packages in Iran.

Among the most interesting features of the Islamic layouts and architecture in Iran are certainly the colors they use in their decorations and ornaments. They simply amaze the eye and delight the soul due to their matchless magic that is hard to be found anywhere else in the world. If you are a fan of Islamic architecture and history, a tour to Iran is quite recommended for you!

Islam’s 5 Pillars Back To Basics

Islams 5 pillars are all ingrained in the minds of every Muslims. So much so that we tend to take them lightly to the point of neglecting them. Today let us revise Islams 5 pillars and rediscover what our hearts should naturally incline to. I say should, because unfortunately our hearts are so covered up in disease that we have developed a hardness of the heart and our hearts no longer inclined to the basic things that they were created for. They incline to our desires more than anything. When they should incline to worship of Allah, The irresistible. We were created for that purpose alone and with Islams 5 pillars, taught to us by our beloved prophet Muhammad (peace and blessings of Allah be upon him) we know exactly how. So let’s go over them so that they may be implemented.

1. Shahada (testimony Of Faith): The first thing a person says that brings them in the fold of Islam. It consists of the following statement ” I testify that there is no god (or deity worthy of worship) but Allah and I testify that Muhammad is his last and finally messenger.” When you say these words, while meaning and understanding them, you become a Muslim. A Muslim is a person that “Submits to God’s will”.

2. Salat (Performing 5 daily prayers): A Muslim must perform 5 daily prayers at their prescribed times (On time). While in pray the worshiper is in direct link with his Lord (Allah). The performance of the prayer is mention in the Qur’an, but the details of how it is to be performed was given to us by the prophet Muhammad ( May the blessings and peace from Allah be upon him) Some people think that we could combine all the prayers for the end of the day, but that is incorrect. They must be performed at a set time which is determined by the position of the sun.

3. Zakat (Paying of the Alms tax): The Arabic meaning of the word Zakat is “purification” or “growth”. Paying zakat to the needy serves the purpose of purifying our wealth and helping the poor. It has been set at 2.5% of the money set aside in a full year. Every Adult, free, and mentally sane and financially able Muslim, male or female, is obliged to pay his zakat every year.

4. Sawm (Fasting the month of Ramadan): Muslims have been advised that when the month of Ramadan arrives, they are to fast from sun up the sun down. Fasting means abstaining from food and water and from sexual intercourse during the prescribed hours mentioned. The reward for fasting is great and is only truly known by Allah. So we should not miss out that at all.

5. Hajj (Pilgrimage to Mecca, Saudi Arabia): It has also been prescribed by Allah, that we perform hajj at least once in our life time. On hajj, we are guests of Allah. A set number of rituals must be performed exactly in order for our pilgrimage to be accepted. If accepted, hajj completely washes you of all your sins and leaves you as sinless as a new-born baby.

Well here it is, Islams 5 pillars…

Make sure to implement them in your daily lives. Of course the explanation above was a brief one.

The Battle Of The Sexes

Love is a natural feeling of course. We all know this quite well. We love are mother, our father, our friends. But what about the opposite sex? How are we to go about that? Here is the basic yet complete info need to know what Islam says on love.

1. Love before marriage.

The feeling of love for someone of the opposite sex can be provoked by many things. They can be quite sudden and very intense. Some can feel very strong feelings of attraction to an individual after the first glance and knows they want to live the rest of their lives with this person. Although people tend to complicate this process, it is quite simple and should be treated as such.

The mere feeling of love before marriage is not forbidden in Islam. It is acting upon those feelings that are forbidden. Islam encourages people to immediately consider marriage and take the necessary steps to establish compatibility by discussing views on the future, the upbringing of children, financial planning, family planning, values and such. It is also very important to make sure to involve the parents in this process. Specifically the father of the bride should be involved in the process of screening the groom and checking his true intentions. All this can be done efficiently in a very short time.

Contrary to popular and recent beliefs, dating is a very new concept. All passed cultures and religions viewed love and love relations before marriage as something frowned upon. The concept of “dating” consists of a try before you buy option, which has only newly been made available to today’s love market. It dates back less than 50-60 years. A great number of people have been heart by this. Those people mostly consist of women and children.

2. Mixing of the sexes in Islam.

Islam strongly advises men and women to keep to themselves. This doesn’t mean that men and women can never speak to one another. This simple sets clear and known boundaries to avoid falling into undesired situations. If one has no choice but to engage in conversation with the opposite sex, one should lower their gaze (avoid excessive eye contact), avoid touching and keep the conversation short and to the point. The contact mentioned above doesn’t apply to married people of course. This is easier then one thinks. Men love hanging out with the guys and women love hanging out with other women. This is natural!

3. Love after marriage.

A marriage once completed makes permissible all the things that were impermissible before. This is when true and deep feelings should develop. Love after marriage also follows guidelines set by God. These guidelines if followed are meant to insure peace, tranquility and fairness to all parties of the marriage. It makes clear the responsibilities of both parties, in order to avoid conflict and cover all aspects of the relationship. Nothing has been left out. Everything has been addressed in a clear manner. Unfortunately, most people nowadays follow cultural guidelines that have been set by men which are imperfect and flawed and often gender biased. The following verse explains what love and marriage should be in Islam.

“And among His Signs is this that He created for you spouses from amongst yourselves, that you may dwell in tranquility with them, and He has put love and mercy between your (hearts): verily in that are Signs for those who reflect.” (Quran 30:21)

4. Falling out of love – Islam’s view on divorce.

This topic is very simple. Divorce in Islam is very much disliked but not forbidden. One should make sure to choose a mate carefully in order to avoid this at all cost. If disputes occur within a marriage the two parties should try their best to reconcile. And if they cannot, their families should try their best to do so for them. Divorce should be a last resort approach to a difficult situation.

Contrary to popular belief, both men and women can ask for divorce, but the manners in which they go about differ. The differences have been set by God who is the All-Wise. Set rules have also been set about divorce in a very extensive matter. In the Quran, God sets these rules in a chapter called “Divorce or At-talaq).

In conclusion, marriage is not a matter to be taken lightly and nor should relationships between men and women. It is important to put much thought into who one wants to marry. And then, once married, treat each other with kindness and mercy.

The Media Bias in Covering Islam Contributes to Islamophobia

The media as a whole is a powerful entity. It has the power to change, influence, and produce, in both good and bad ways. When it comes to producing an “image” of Islam, the media is not doing such a nice job. It’s an obvious truth that news channels are out to make a profit first and foremost, but with the amount of power they have to influence comes the responsibility to do good and tell truth, not misinform and put fear in the hearts of viewers.

When Islam is shown on the news, it is usually a violent act, and it is shown again and again and again in order to emphasize the fact that the violence happened to be connected to Islam. Now there are violent people in Islam, but it’s also a truth that most Muslims are good, normal people. Another truth is that there is violence in Christianity, and especially Judaism, but those are not shown over and over again.

In order for the issue of Islamophobia to be solved, which is a long-term battle, anyone who has any sense of reality must use the media to provide correct, sensible, and true information and facts in order to show the real story of Global Islam.

Remember that profit is the main goal of news channels, and they will use controversial and misinformed topics to pull in viewers, who in turn receive this fictional fear and misconception of topics, such as Islam.

Your job as humans is to fight for truth, coexistence, and peace, by fighting against racism, discrimination, and Islamophobia.