The Prohibition of Interest and its Effect on the Distribution of Wealth 
As the foregoing discussion has made clear, one of the basic differences between the Islāmic system and the Capitalist system with regard to the distribution of wealth is that Capitalism allows interest, while Islām forbids it. Now, it would be proper to have a cursory glance at another aspect of the problem too - what are the consequences that follow from the interdiction placed upon interest? .....
Managing Debts: An Islamic Way
By L. Yulyadi Arnakim
Concept of debt in Islam is sufficiently guided by Qur'an and Sunnah. Debt in Arabic term known as dayn which is rooted in the same root with diin i.e da ya na, which depict any right or wealth that is payable upon a person either to another person or his Lord based on commitment towards that person or his Lord (Sano, 2001). This covers two dimensions namely the right of one's fellow human beings .....
Risk Management in Islam - Takaful
Risk traditionally means possibility of meeting danger or suffering, harm or loss. Risk is an element of life in this world for being ignorant of the future. It is also factor of investing that one should take time to understand prior to selecting any specific investment instruments or any new adventures. Many Muslims misunderstand the concept of fate. For some Muslims believe that the future in the hand of God, where they are facing with fatalistic .....
Sources of Shari'ah Financial Planning
By L. Yulyadi Arnakim
Financial Planning in the conventional sense is an effort to render professional service to individuals, their families and their businesses, to provide impartial assistance in analyzing and organizing financial affairs in order to achieve financial and lifestyle goals. It would involve the process of determining life goals, gathering relevant financial information, examining current financial status and later proposing a strategy and plan to handle .....
Primary Concept of Islamic Financial Planning
By L. Yulyadi Arnakim
Financial planning is an effort to render professional service to individuals, their family and their business, to provide impartial assistance in analyzing and organizing financial affairs in order to achieve financial and lifestyle goals. It is basically dealing with a man who engages in some forms of personal budget in term of wealth creation, wealth accumulation, wealth protection, and wealth .....
Islamic Wills, Is There A Need For It?
By L. Yulyadi Arnakim
Will writing has been known in the conventional financial planning as bequeath or arrangement, by making will, to give wealth to some body when one dies. Nowadays, there are industries or companies that provide this kind of services. Will in Islam is known as wasiyyah. It is very significant means to provide a flexible instrument in estate planning in Islam. Wassiyyah basically means .....
Ijara (Islamic Leasing) in The Context of Islamic Finance
By Warren Edwardes
The prohibition of Riba has parallels in the usury laws in many Western countries or a ban on excessive interest. Profit and loss sharing deemed by many to be "pure" Islamic banking is similar to venture capital finance, non-recourse project finance or ordinary equity investment. The investor takes a share in the profits, if any, of the venture and is liable to lose his capital. It involves investing but not lending. Just as in tax management, .....
Hibah, A Gift of Love
By L. Yulyadi Arnakim
Hibah is one of means to distribute one's assets in Islamic financial planning. It may be used either in one's lifetime or in estate distribution of the deceased. It is very simple, yet influential tool in estate planning in the sense it may influence the portion of some heirs if one executes the hibah when one is about to die. Hibah basically means gift as when prophet Zakariya prayed to his Lord in order to be granted .....
Distribution of Estate in Islam
By L. Yulyadi Arnakim
Distribution of the wealth after the demise of its owner is frequently disputable. It sometimes splits the relationship between the relatives. Thus God as the creator of human being has revealed the guidance especially for Muslim to distribute the deceased's wealth. In Islam it is called faraid, the Islamic law of distribution of estate. Indeed it plays an important role in Islamic financial planning so that it eliminates the trade off among the heirs. In fact, many financial planners .....
Zakat: Cleansing Your Asset
By L. Yulyadi Arnakim
Cleansing one's assets is not yet known in the conventional financial planning. For the conventional concerns more with wealth creation, wealth accumulation, wealth protection, and wealth distribution. Wealth purification or cleansing assets is very fundamental concept in Islamic financial planning. In Islam, in fact, it has been acquired in various forms and occasion. Qur'an as primary source of Islamic way of life (shari'ah) states .....
An Islamic Concept of Wealth
By L. Yulyadi Arnakim
The natural relationship between the two dimensions is closely interrelated. For wealth is an outcome of interactions between mankind and their surroundings include all things in the heaven and in/on the earth such as flora, fauna and the like that can facilitate mankind to gain a convenient life in this world. In Arabic tradition, the first dimension of wealth was usually cattle for traditionally the Arab .....
Is It Necessary to Have Economics?
Conventional economics, which dominates modern economic thinking, has become a well-developed and sophisticated discipline after going through a long and rigorous process of development over more than a century. The development continues uninterrupted, as reflected in the publication of innumerable journals, books, and research reports throughout the world. Individuals, universities, research organizations, and governments are all participating actively .....
The Problem of Wages
So far we have been able to establish one basic distinction between Islām and Capitalism with regards to the distribution of wealth - and this distinction is related to the subject of interest. Now, there is another distinction between the two which one must bear in mind, and which concerns the relationship between the employer and the employee. This would necessitate a discussion of the problem of wages. ....
Arbbun: Risk Management and Option [1][2]
The need for risk management is an every day business. The success and failure of every business is largely affected by the ability to manage the risks associated with it and to minimize them as much as possible. A wide range of instruments have been designed in the conventional system of finance to address the issue. The need for risk management in Islamic finance is not an exception. However, due to its own structure and objectives, ......
Islamic Economics and Banking on Riba
By Tariq Talib Al-Anjari
Riba is seen as an unjustified earning where a person could receive a monetary advantage in a business transaction without giving a just counter value. Riba was also seen as a misallocation of resources, erratic growth, and economic instability in light of the contemporary crisis. Riba literally means increase, addition, expansion or growth. It is however, not every increase or growth, which has been prohibited by Islam. Riba technically refers to the premium ......
Derivative Instruments and Islamic Finance
The ever-increasing application and innovation of the methodologies associated with derivative instruments have revolutionized the global financial industry over the past two decades. Simultaneously, document standardization in transacting derivative based transactions has reached the point of uniform application in conventional markets and products, thus removing an immense amount of uncertainty and risk .....
The Dinar: Indispensibility of Hard Money to the Islamic Monetary Regime
By Imad-ad-Dean Ahmad
Several years ago I made a presentation before Muslim economists meeting at the World Bank at which I presented arguments for what I considered to be the correct Islamic position on a number of fundamental economic issues. Referring to my call for a return to the gold standard, one of the economists asked me why I was for ijtihād on every issue except that one. He didn't understand that ijtihad means to struggle ....
Islamic Economics and Banking [1][2]
By Tariq Talib Al-Anjari
Why did Islam prohibit interest? What is the logic behind that? What types of interest has Islam prohibited? These are certainly the questions that face a lot of both Muslim and non-Muslim economists. When Islam was introduced 1400 years ago, one of the main issues discussed, was Riba or interest. How interest made people manipulate poor people, and how interest made the rich richer and the poor poorer. It also made people work less .....
The Economic Revelance of The Sharia Maxims [1][2][3][4][5]
Al-Qawaid al-Fiqhiyah by Hasanuzzaman
"Islamic economics is the knowledge and the application of the injunctions and the rules of the Sharia in regard to acquisition and disposal of the available resources for providing satisfaction to the individuals in order to enable them to perform their obligations to Allah' and the society". In this definition the word injunctions signifies the prescriptive and the prohibitive injunctions of the Qur'an and the Sunna. The rules of the Sharia used in the definition signify the set of .....
Islamic Financial System [1][2][3]
By Ravil Hairetdinov
Islamic finance is an old concept but a very young discipline in the academic sense. It lacks the required extent and level of theories and models needed for expansion and implementation of the framework provided by Islam. In these circumstances, unawareness and confusion exist as to the form of the Islamic financial system and instruments. he main difference between the present economic system and the Islamic economic system .....
Hedging with The Gold Dinar
By Dr. Ahamed Kameel Mydin Meera
The 1997 East Asian currency crisis made apparent how vulnerable currencies can be. The speculative attacks on the Ringgit, for example, would have devastated the economy if not for the quick and bold counteractions taken by the government, particularly in checking the offshore Ringgit transactions. The need for firms to manage their foreign exchange risk also become apparent. Many individuals, firms and business found themselves helpless ......
Instruments of Islamic Banking and Finance
It is to the credit of Islamic banks around the world that they have, despite their recent entry in the field, devised many creative financial products based on the risk-sharing, profit-sharing principles of Islamic banking. For day-to-day banking activities these instruments are not only practicable but have also proven to be profitable for the Bank's stakeholders and the beneficiaries. Broadly speaking, the areas in which Islamic banks are most active are in trade and commodity finance, property, and leasing.....
Towards An Interest Free Islamic Economic System
Written By: Waqar Masood Khan
Reviews By: Baualem Bend Jilali
This book is based on the author's doctoral thesis submitted to Boston University. For review purposes the book can be divided into three parts. The first part comprises two chapters: the introduction and a chapter on the prohibition of Riba and the rationale behind this prohibition as asserted by various Muslim jurists. He briefly describes the Islamic alternatives to Riba with some emphasis on the Mudarabah type of financial contract. This part serves as a background to later analysis in the book. The second part of the book constitutes .....
Investments: The Need for Purify Returns
By Dr. Saiful Azhar Rosly
Purification process usually involves the application of Shariah principles in determining the permissibility of share trading. It deals with the valuation of stocks along Shariah guidelines. In this way, it does not concern determining the market values of stocks. However it does not mean that the Shariah is negligence of performance parameters. The purification process is only the beginning of Shariah compliance. Equally important is the wealth creation aspects of stock investment....
Islamic Money Against The Euro and Dollar
On January 1, 1999, Europe celebrated its momentous event of a single currency for its eleven participating members that have qualified to join the European Monetary Union according to its Convergence Criteria. Following this, it is likely that Britain, Sweden, Denmark and Greece that have either opted out or were not qualified according to the Convergence Criteria at this time, will join by the year 2002. By the year 2002 a single currency called the Euro will become the commercial medium of market exchange .....
The Notion of Public Goods, Sustainable Development and Islam [1][2]
By Saliem Fakir
It is indeed a pleasure to be able to present some thoughts on the notion of public goods. The importance of this to international politics and economy cannot be underestimated. Its relevance to current debates in the World Summit for Sustainable Development, and its consistency with Islamic philosophy and ethics concerning the use of public goods for the achievement of broader social objectives has come at an opportune time.....
Permissible Financing Method
By Mahmoud Amin El-Gamal
Most types of trade (buying and selling) are permitted in Islam, where prohibition is the notable exception. Yusuf 'Ali (1991) translated the meaning of [2:275] thus: Those who devour usury (riba) will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: 'trade is like usury', but Allah hath permitted trade and forbidden usury. Thus, "Allah has permitted trade" (bay') is the general rule, with Riba sales .....
Permissible Investment Vehicles
By Mahmoud Amin El-Gamal
The previous chapter dealt with permissible vehicles that would allow Muslims to acquire capital to finance purchases of equipment, homes, automobiles, etc. We now turn to the other side of the coin: what permissible investment vehicles are available for Muslims? Of course, there are many direct investment vehicles. A Muslim can invest directly in any legitimate business, possibly earning some profits. However, it is useful to focus on relatively passive investment vehicles such as equities, mutual funds, etc., as well as "fixed-income" alternatives .....
The Prohibition of Riba (Usury)
By Moulana Imran Hosein
Riba is usury. Usury is commonly understood as the lending of money at illegally high rates of interest. But riba, or usury, in Islam is the lending of money on interest, regardless of the rate of interest! When money is lent on interest, then money by itself, independent of any labor or effort, or the assumption of any risk, increases over time. The increase is realized through the exploitation of labor, goods or property since Allah, the Most High, has unambiguously declared that nothing can be had without effort .....
Public Borrowing In Early Islamic History
By Muhammad Nejatullah Siddiqi
Public borrowing has assumed great importance in recent years as indicated by the phenomenal rise in the volume of domestic as well as external debt This is especially true of the Muslim countries most of which belong to the group of poor developing countries of the world. There is a growing literature on the "solution" to the crisis supposedly faced by the world financial system because of these debts; some of which is now considered to be unrepayable. There have been attempts to look at the causes of this phenomenon of permanent indebtedness .....
Dealing With Riba is One of The Major Sin
By Imam Mohamed Baianonie
Dealing with riba is forbidden not only in the Islamic (sharia'h) laws, but also in the previous divine legislation. Allah (S.W.T.) says about the Jews in surat An-Nisa', (Verses 160 & 161), what can be translated as, "For the wrong -doing of the Jews, We made unlawful to them certain good foods which had been lawful to them, and for their hindering many from Allah's Way. And their taking of riba (usury/interest) though they were forbidden from taking it and their devouring of men's substance wrongfully." From the transgression, .....
Role of Fiscal Policy in Controlling Inflation in Islamic Framework
By Muhammad Nejatullah Siddiqi
A focus on inflation presumes inflation is high. The situation in the developed countries has, however, changed recently, provoking some to proclaim the death of inflation. The situation in the developing countries remains worrisome but, excepting a few countries, no longer alarming. So what is the need for discussing the role of fiscal policy in controlling inflation, in Islamic framework? Two reasons to do so. Firstly, to reassure ourselves, and those who .....
The Role of The Stock Exchange in an Islamic Economic
It has been assumed that dealings only during the prescribed trading periods at prices lower than or equal to the MSP will eliminate speculation and bring about stability in the stock market. It has been presumed that there will be no black market and that, in the event that underlying economic conditions tend to raise share prices above the MSP, no black market will develop because docile Muslim sellers will not undertake any transactions in the black market for personal gains even at times when there is no national emergency, .....
Forward Sales and Manufacturing Contracts: Salam and Istisna
It is one of the basic conditions for the validity of sale in Shariah that the commodity intended to be sold must be in the physical or constructive possession of the seller. This condition has three implications: First, the commodity must be existing; a commodity that does not exist at the time of sale cannot be sold. Second, the seller should have acquired the ownership of that commodity. If the commodity exists .....
On Speculation and Gambling
According to Zaman (1986), "Muslims are encouraged to seek economic bounties which God has made available to them." From the above it is evident that Muslims are increasingly interested in investing in halal securities traded in stock markets all around the world in order to earn the economic benefits. However, one needs to predict the future value of a stock prior to making any decision either .....
Contract for Selling Unseen
Bai Al Ma'dum is literally the non-existent. Technically it denotes the object, which is not seen nor sensorially perceived, by either party to the contract or where the object of the contract is present but hidden from view. DR Zaki Badawi, shariah consultant to Islamic Banker, gives the range of opinion within Muslim law specifying the contractual requirements for the sale unseen goods. ....
