Islamic Economics

Contrary to conventional economics, Islamic economics and finance must observe the teachings of the Shari'ah whose basic teachings cannot be violated at any point in time. These basic teachings constitute the core elements of the faith that are best described as maqasid al-shari'ah or the objectives of the Shari'ah. Hence, Islamic economics is guided by the objectives of the Shari'ah whose main goal is to promote maslahah, or public interest, and prevent harm (mafsadah). For example, while protecting each and every individual in the society and allowing private ownership, Islam also wants to ensure that this is not done at the expense of society. For further details see: ISRA, Islamic Financial System: Principles and Operations.

Development


Foundations and Principles (EP)


قرار رقم 171 (9/18) بشأن حقوق الارتفاق وتطبيقاته المعاصرة في الأملاك المشتركة

Issues and Challenges

Exchange, which entails the process of give-and-take in the transfer of goods and services with others, has played a vital role in the history of mankind. It is in fact, as old as man himself. The reason for its importance is rather simple: self-sufficiency as a way of life is not really practical. Accordingly, the most important functions of money are to serve as a unit of account and a medium of exchange. However, depending on what is being used as money, it could also serve as a store of value and a standard of deferred payment. For further details see: ISRA, Islamic Financial System; Principles and Operations.

RESOLUTION No. 75/6/8: CURRENCY ISSUES
RESOLUTION No. 33 (8/4): HIRE-PURCHASE CONTRACTS, MURABAHA FOR THE ORDERER OF PURCHASE, FLUCTUATION IN CURRENCY RATES
RESOLUTION No. 42 (4/5): CURRENCY RATES FLUCTUATION
RESOLUTION No. 63/1/7: FINANCIAL MARKETS
Riba Al-Fadl: Gold For Gold
RESOLUTION No. 21 (9-3): SHARI'A RULES GOVERNING PAPER MONEY AND FLUCTUATIONS IN CURRENCY RATES

In theory, the Islamic financial system is inclined towards equity-based fi nancial instruments that are related to the real economy. In reality, however, the Islamic finance industry is dominated by debt-based financial instruments that, more often than not, mirror
conventional ones. For further details see: ISRA, Islamic Financial System; Principles and Operations.

Efficiency: one of the main functions of a financial system is allocating financial resources (society’s savings, past and present) to productive uses. Bank loans go to the most creditworthy people; creditworthiness being measured in terms of money and marketable assets owned by the loan-seeking person or firm that can serve as collateral. Those with the best collateral are not necessarily the people with the most productive projects, productivity being measured in terms of expected profits. Debt finance fails to allocate financial resources efficiently; efficiency defined in terms of expected value-productivity. Stability: in circumstances where possible changes in tastes, technologies and international relations make a firm’s revenue receipts uncertain both in amounts and time of accrual, it is obliged to commit to payments of given amounts at given dates. The result is frequent bankruptcies, destruction of social capital and redistribution of assets in favour of financiers. The resulting instability has a contagion effect in the global economy as plants are closed and workers are thrown out of work. For further details see: ISRA, Islamic Financial System; Principles and Operations.

Is Allowed to Finance and Trade in Key Money?

Islamic Financial System ©

 

 


I-FIKR Sponsors