continuation.
2. Concept of success In Islam, success does not consist of acquisition of wealth but it is associated with moral values.
M.N. Siddiqi writes: Success lies in being virtuous. The more ones behavior is in accord with
moral standards and the higher the level of his goodness, the more successful he is.
Throughout his life, in each and every phase of existence, at every step, the Islamic individual is
endeavoring to act in harmony with moral values.8
Being on high moral grounds does not imply withdrawal from or negativism toward life
and the community. M.N. Siddiqi further writes: No level of material progress and economic
development is in itself antagonistic to moral and spiritual progress. As a matter of fact all such
progress, if it is properly achieved and maintained, is an aid to healthy morality and true
spirituality.9
Islam regards a certain standard of material provision and striving for it as indispensable.
It ordains society to guarantee such provision to each individual in all circumstances. It calls for a
balanced life. The way to Islamic spiritualism passes directly through the hustle and bustle of
practical life. It is not a separate life cut off from everything. It is a particular way of living.10
Economic pursuit is a virtue if it is balanced and intended for serving humanity.
Success is not confined in dimension to this world. Life consists of life before death and
life after death. The success or failure in the life hereafter will depend on how man fares on the
Day of Judgment in terms of fulfilling his responsibilities in this world. As Monzer Kahf points
out, this concept has twofold implications for consumer behavior.11 Firstly, a choice of action has
outcome in this life as well as in the hereafter. So, the utility derived from a choice is the total of
the present values of these two outcomes. Secondly, many alternative uses of our income have
positive utility in the Islamic framework, but may have zero or negative utility in the materialistic
framework. Examples of such uses are interest-free loans, giving to the poor and the needy,
spending for the welfare of future generations, improvement of community life that may not
directly benefit the individual, and promoting the good and forbidding the evil. Including such
alternatives that have benefit only in the hereafter expands the scope of alternative uses of our
incomes.
To achieve success, a Muslim has to expend some of his time in the remembrance of
God, he has to contribute some of his energies to the propagation of truth and goodness, and has
to spend of his time and effort for the improvement of the spiritual, moral and economic life of
the community.12 This implies that a Muslim cannot limit his time and energies to performing
those acts that will benefit him only in this life. One of his eyes should be focussed on this life,
the other to the next life. The criterion for judging whether he should engage in a certain act is if
it will benefit him in his life as well as in the next. He will do what is good or useful because
Allah will reward him: grant him peace and success in this life, as well as in the next. Prophet
Muhammad (peace be upon him) is reported to have said something which is relevant in this
respect: If one sees the end of the world coming while he has in his hand a little plant and he is
able to plant it in the ground, he should do it. Allah will reward him.13
Success for a Muslim implies success not only in this life, but also in the eternal life to
come. Success in both can be achieved via the same set of actions.
3. Concept of wealth and goods
Islam considers wealth and goods as bounties from the Creator bestowed on mankind. Prophet
Muhammad (peace be upon him) is reported to have said: Poverty is almost equivalent to
denying Islam.14 He taught Muslims to pray to be saved from incapability and laziness, fear and
avarice, poverty, disbelief and misbehavior.
Islam considers consumer goods as useful beneficial consumable materials whose
utilization renders the material, moral and spiritual betterment of the consumer. Goods that do not
have any goodness and do not help improve human beings are not goods nor can they be
considered as the property and assets of Muslims. Prohibited materials are not considered as
goods in Islam. In conventional economics, anything has economic utility if it can be exchanged
in the market; in Islam, goods must be morally useful as well as exchangeable in the market in
order to possess economic utility.
In referring to consumable goods, the Quran uses terms which attribute to them moral
and ethical values.15 Consumer goods are thus tied with values: they have to be good, pure and
wholesome. Goods that are bad, impure and unwholesome are not goods in Islam.
4. Consumption in Islam
Allahs bounties belong to all mankind. Even if some of the bounties may be under the possession
of a particular people, it does not mean they only will utilize the bounties. Those who may not
happen to have enough to meet their basic necessities deserve their share.
Consumption of good things is considered an act of virtue since that would constitute
obeying Allahs commandment.16
Overconsumption (via extravagance or profligacy) is condemned.17 Consumption above
the moderate level is condemned (a moderate level would be between miserliness and
extravagance).
Islam seeks to change the values and habits of people. It also provides the legislative
framework so that the values can be nurtured and sustained through the creation of an ideal
society.
[log in to unmask] wrote:
Mr. S Touray are you in constant contact with the author? If you do ,ask him what is his take on mortgage system in the USA. Also could such a property be used as a mosque.This question goes to all of you.
hous
-----Original Message-----
From: SUNTOU TOURAY
To: [log in to unmask]
Sent: Sun, 27 Jul 2008 1:34 am
Subject: AN INTRODUCTION TO ISLAMIC ECONOMICS
PHILOSOPHY AND PRACTICE OF ISLAMIC FINANCE by Shaikh A. Hamid Associate
Professor of Finance
Southern New Hampshire University
ISLAMIC ECONOMICS AND FINANCE
This article is for those who are uninitiated about Islamic economics and
finance. It contains the
Following sections:
I. INTRODUCTION
II. PHILOSOPHY OF ISLAMIC ECONOMICS
III. ISLAMIC FINANCE
IV. FINANCIAL PRODUCTS AND CONTRACTS
V. PROMISE AND PERFORMANCE
VI. PROBLEMS AND CHALLENGES
VII. CONCLUSION
VIII. APPENDIX
PHILOSOPHY AND PRACTICE OF
ISLAMIC ECONOMICS AND FINANCE
I. INTRODUCTION
To gain understanding of Islamic economics and finance, one has to firstly
understand what Islam
Connotes. In a very comprehensive sense, Islam is the way of life ordained by
the Creator for
Mankind through all of His Prophets (peace be upon them). This way of life
gained its finality
With the message of Prophet Muhammad (peace be upon him). A Muslim is one who
submits to
The Will of the Creator. Islam is rooted in belief in an unseen s
ystem.1
1. Belief in the unseen system
A Muslim believes in an unseen system that includes:
• Allah and His manifold attributes
• The Angels on whom He has entrusted various functions
• The Books He revealed
• Prophets or Messengers He sent
• The Day of Judgment
• Fate: Good and evil as ordained by Allah
• Eternal life after death
All of Man’s actions should be guided by the belief that he has been created
by Allah
Who will cause him to die and will resurrect him after death and hold him
accountable for all his
deeds -- done openly or secretly, individually or collectively. So it is a
belief in the Unseen. Life
does not end here. For a Muslim, life continues into the eternal Hereafter.
This belief influences
All spheres of a Muslim’s life – private, public, individual, collective,
family, social, economic, as
Well as the political sphere. Reward and punishment does not end in this life,
but the real reward
and the real punishment are in the eternal life to come.
2. Religion and economics
Michel Mayer, in “Instructions Morales et Religieuses, lére lesson,” defines
religion as “the set of
beliefs and precepts which must guide us in our conduct toward God, other
people and toward
Ourselves.” 2 Religion has also been termed as “a chart of conduct.”320These
and other definitions
of religion imply that it encompasses human behaviour in all its facets and
aspects.
As we know, economics is the study of human behavior in relation to how scarce
Resources should be allocated for producing goods and services and distributed
for consumption.
That is to say, economics deals with a subset of religion. Thus, religion will
have its say on how
Man deals with his economic activities.4 As one author puts it, “Every
religion has its own
‘Economic Ten Commandments’.”5
In the Holy Qur’an, Allah mentions about teachings of earlier Prophets -
teachings that
had to do with economic affairs of men; this underscores that economic
behavior is a concern of
religion.
A primary focus of religion is justice and equity. Through economic
exploitation injustice
and inequity can reign supreme. It is therefore logical that religion will
have economic
commandments to rein in the possibility of economic exploitation.
II. PHILOSOPHY OF ISLAMIC ECONOMICS
1. Islam and economics
(i) A verse in the Qur’an states:
“Woe to those who deal in fraud – those who, when they have to receive by
measure from men,
exact full measure, but when they have to give by measure or weight to men,
give less than due.
Do they not think that they will be called to account on a Mighty Day, a Day
when (all) mankind
w
ill stand before the Lord of the Worlds?”6
This and other related verses condemned economic behavior that prevailed
fourteen
centuries ago at the time of Prophet Muhammad (peace be upon him) and provide
a glimpse of
the economic system to be divinely ordained soon thereafter. Economic behavior
is tied to
accountability before the Almighty on the Day of Judgment.
(ii) Economic activities help man in fulfilling his responsibilities on
earth.7
• Piety is not a positive function of economic unproductivity.
• The more pious one is, the more productive he should be.
• The more economically productive he is, the better he should be, provided
life is kept
balanced.
One way of getting an appreciation of the Islamic concept of economics and
finance would be to
understand from the Islamic perspective the concepts of success, wealth and
goods, permissible
consumption, motives of production, objectives of production, the goals of the
firm, the right of
ownership, responsibility and freedom, cooperation versus competition,
government involvement
in the market. After presenting these concepts, we will outline the Islamic
economy’s ‘Rules of
the Game’. Thereafter, we will sketch out Islamic finance, highlight major
financial products and
contracts, briefly evaluate performance of financial institutions, and
highlight problems and
challenges before concluding.
To b
e continued from the concept of success to a Muslim.
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