Escolar Documentos
Profissional Documentos
Cultura Documentos
Prepared By:
Dr. H. M. Mosarof Hossain
Professor
Department of Finance
University of Dhaka
mosarof@du.ac.bd
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Islamic economics
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This applied to issues like property, money,
employment, taxes, along with everything else. The
central features of an Islamic economy are often
summarized as:
(1) the "behavioral norms and moral foundations"
derived from the Quran and Sunnah;
(2) collection of Zakat and other Islamic taxes,
(3) prohibition of interest (riba) charged on loans.
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In islamic economic system by Islamic activists
and revivalists are that the gap between the
rich and the poor will be reduced and
prosperity enhanced by such means as the
discouraging of the hoarding of wealth, taxing
wealth (through zakat) but not trade, exposing
lenders to risk through Profit sharing and
venture capital, discouraging of hoarding of
food for speculation, and other sinful activities
such as unlawful confiscation of land.
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Objectives of Islamic economics
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Objectives of Islamic economics
The main objective of islamic economy is to follow maqasid
al-shariah thats target is to promote the welfare of human
beings, which lies in safeguarding their religion, selves,
minds, progeny and wealth. Whatever ensures and
safeguards these five fundamentals serves public interest
and is desirable. Whatever hurts them is against public
interest and its removal is desirable. (Al-Ghazali). The
structural elements of maqasid in islamic economy are
explained below:
1. Religion: The vision of well-being
Needs and embellishment take such as effect on religion as
long as the worldview of shariah extends through ijtihad
to encompass are ideas, rules, measures and values to
match rising economic wants in the everlasting endeavour
to satisfy those.
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Objectives of Islamic economics
2. Self: The central goal
Self is human life which is the goal of well-being as implied by
the verse:It is He who created for you all of that which is on
earth. (Al-Quran, 2:29). Quran says: We have certainly honored
the children of Adam and carried them on the land and sea and
provided for them of the good things and preferred them well over
much of what we have created (Al-Quran: 17:70).
3. Mind: The human resource
Mind is the human resource that thinks, evaluates, plans,
manages and produces the goods (tayyibat) of well-being subject
to shariah. The first five verses to Muhammad (p.b.u.h.) are:read
in the name of your Lord who created, - created man from a
clinging substance. Read and your Lord is the most Generous,
Who taught man by pen. Taught man that which he knew not (Al-
Quran 96:1-5). 8
Objectives of Islamic economics
4. Progeny: Intergenerational continuity
Intergenerational responsibilities depend on family,
and social and government institutions in lobbying
peoples support. The guiding principle is the
Quranic verse: Let the one of means spend
according to his means: and the one whose
resources are restricted, let him spend according to
what Allah has given him. Allah puts no burden on
any person beyond what He has given him (Al-
Quran 65:7).
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Objectives of Islamic economics
5. Wealth: The material economic resource
Material economic resources must run abundantly in
the economy to activate human resources in the
pursuit of well-being and intergenerational continuity.
Wealth is the mean to achieve goals and targets of
human being. Shariah recognizes and fosters all
customary rights of private property under the
provision that wealth is a trust from Allah (s.w.t.) to test
how his servants deliver moral and social obligations
through the management of their wealth. Believe in
Allah and His messenger, and spend out of what He
has made you vicegerents(Al-Quran 57:7).
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Why Islamic economics?
The modern industrial environment has brought with it
unprecedented socioeconomic problems affecting
human well-being beyond the traditional shariah
scholarship, even though the core principles of islamic
economics originated in the works of early shariah
scholars who laid down the foundations of maqasid
and utility theory. Islamic economics is therefore, a
newly emerging discipline that takes the lead in
resolving newly arising economic issues from the
viewpoint of maqasid that has emerged to satisfy new
needs in relation to the mind, the productive human
resources.
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The Three Central Economic Problems
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Economics of Riba
i. Riba is any earning, income, profit or benefits being
earned, taken or received through wrong means, bad
intentions, shady practices or wicked participation.
Ii. It is not only treated as immoral, unjust filthy but
furthermore threat to socioeconomic life of the society.
iii. It leads to crimes of various nature, through cruelty,
humiliation, exploitation, self- importance,
discrimination, power, selfishness, greed and self-
esteem.
iv. It is as a combination of evil and sins and bad
practice to earn & gain.
v. It brings instability in the community life and the
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source for the increase of inflation.
Economics of Riba
vi. It is immoral, unethical, unjustified commercial, economical,
trading, business, political, social, cultural and traditional
practices and activities to gain benefit at individual, collective or
institutional level. People who indulge in riba shall be raised like
those who have been driven to madness by the touch of devil.
That is because they say that riba-based transaction is just like
trading, while Allah has permitted trade and prohibited riba.
Hence those who have received the warning from Allah and
have stop accordingly, may have what has already passed, their
case being entrust to Allah but those who revert to riba-based
dealings, shall be the inhabitants of the hell-fire and abide
therein forever. (You must know that) Allah deprives riba from all
blessings and blesses charity; He loves not any ungrateful
sinners.
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Economics of Riba
In Holy Quran (2:278-79), Allah says, O you believers! Fear
Allah and give up riba that remains outstanding if you are true
believers. Watch out, If you do not obey this directive, then Allah
declares war against you from Himself and from His Prophet.
But, if you give up your outstanding riba, then you can claim
your principals. Neither should you cause harm with riba to
others, nor should others harm you. Prophet Muhammad (May
Peace Be Upon Him) said at the last Pilgrimage, all riba of
jahilliya is null and void. In this respect, the first riba I (May
Peace Be Upon Him) withdraw that the borrowers owe to my
uncle Abbas; it is cancelled completely. (Muslim) The Prophet
(May Peace Be Upon Him) cursed all those who take riba, who
give riba, who write a riba contract and the two witnesses to a
riba contract. He (May Peace Be Upon Him) further said: "They
are all alike (in fault). 16
Economics of Riba
vii.Riba must be eliminated from the financial transactions.
Nothing is more horrific as compared to riba that Islam has
prohibited. Nothing is more dreadful than riba, is remains in
widespread threatening socio economic activities in both theory
and practice.
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Economics of Financial System
Financial system is a complex set of financial institutions and
markets that bring together lenders and borrowers consisting of
banks, insurance companies, mutual funds and other finance
companies. The main objective of this system is to mobilise
large amounts of relatively small savings and pool them
together to channel them for productive investments in the
economy directly through markets or indirectly through financial
intermediaries. Financial institutions also develop instruments,
techniques and products that meet the needs of both lenders
and borrowers. Central banks also carry out monetary policies
through financial institutions for supporting economic growth of
the country by producing goods and services and creating
employment.
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The structure of Islamic Financial System
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Islamic Financial Markets
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Islamic Financial Institutions
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Role of Islamic Financial Institutions
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Distinct features of Islamic Financial
Institutions
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Distinct features of Islamic Financial
Institutions
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Islamic Financial Instruments
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Differences between Islamic and conventional banking
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Differences between Islamic and conventional money
markets
5. Lending money and getting it back with compounding
interest is the fundamental function of the conventional banks,
whereas participation in partnership business is the
fundamental function of the Islamic banks. So we have to
understand our customer's business very well.
6. It can charge additional money (penalty and compounded
interest) in case of defaulters, whereas the Islamic banks have
no provision to charge any extra money from the defaulters.
Only small amount of compensation and these proceeds is
given to charity. Rebates are given for early settlement at the
Bank's discretion.
7. Very often it results in the bank's own interest becoming
prominent. It makes no effort to ensure growth with equity,
whereas it gives due importance to the public interest. Its
ultimate aim is to ensure growth with equity.
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Differences between Islamic and conventional money
markets
8. For interest-based commercial banks, borrowing from the
money market is relatively easier, whereas for the Islamic
banks, it must be based on a Shariah approved underlying
transaction.
9. Since income from the advances is fixed, it gives little
importance to developing expertise in project appraisal and
evaluations, whereas since it shares profit and loss, the
Islamic banks pay greater attention to developing project
appraisal and evaluations.
10. The conventional banks give greater emphasis on credit-
worthiness of the clients, whereas the Islamic banks, on the
other hand, give greater emphasis on the viability of the
projects.
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Differences between Islamic and conventional money
markets
11. The status of a conventional bank, in relation to its clients,
is that of creditor and debtors, whereas the status of Islamic
bank in relation to its clients is that of partners, investors and
trader, buyer and seller.
12. A conventional bank has to guarantee all its deposits,
whereas islamic bank can only guarantee deposits for deposit
account, which is based on the principle of al-wadiah, thus the
depositors are guaranteed repayment of their funds, however if
the account is based on the mudarabah concept, client have to
share in a loss position.
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