Interest free economy promulgated by the qur’an
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Transcript of Interest free economy promulgated by the qur’an
Interest Free Economy Promulgated by THE QUR’AN
Presented by:Mohammad Aamir Khan2K10IB13
RIBA
• RIBA IS MENTIONED 8 TIMES IN THE QURAN• RIBA means :an addition to, an increase, over and
above the original size.• In other words: interest• Interest: amount paid for amount lent• The practice of lending money is known as usury
or interest• According to islam: unlawful addition• Any act of interest is prohibited in islam
What does the QUR’AN say about riba(interest)
• Surah Baqrah chapter 2 verse 278• O you who believe! Fear ALLAH, and give up
what remains of your demand for usury, if you are indeed believers
• Allah says in the QUR’AN that HE has allowed trade but prohibited USURY.(RIBA)
Types of Riba
• RIBA NASIYA: Loan for bussiness on which interest is charged
• RIBA FADAL: Exchange of a superior good in return of larger quantity of inferior goods.
• BOTH TYPES OF RIBA IS STRICTLY PROHIBITED
System of Zakat• Compulsory on all muslims who are sahib-e-
maal• 2.5 % per year• Should be given to the poor ,needy , debtor,
traveller , feesabeelillah (in the way of allah)
Objective of Zakat
• To prevent the wealth from circulating among the rich and wealthy
• The serious issue of hunger and poverty would be in control if everybody in the whole world starts giving out zakat
Modern banking interest • Increases the cost of living• if Firm takes a loan and goes under loss, it has
to pay the debts + interest• A bank will prefer giving loan to an alcohol
producer rather giving it to a social cause
1980’s
• 1980’s saw the world become a gambling den• All financed by banks• Huge and consistent returns• Power is concentrated in the hands of few
people
• Principles of islamic banking• Tawheed• Divine origin of nourishment • Khilafa• Taskiyaa• Accountablity
Islamic banking
• No interest• Profit and loss sharing• Reduce the cost of living• Social justice• Social consideration (loan wont be given to an
activity against society)• If the debtor is unable to repay, they let go
Factors of production• Land - rent• Labour - wages• Capital - interest• Organisation (entrepreneur) -profit/loss
ISLAMIC FACTORS OF PRODUCTION
• Land - rent• Labour - wages• Capital - profit/loss• Organisation (entrepreneur) -profit/loss• Islam does not differentiate between the
entrepreneur and capital
Types of business unit
• Surplus unit• Deficit unit• Best example of the two units coming
together in islamic history is of• Our beloved Prophet Muhammad(s.a.w)• And his wife Khadija(r.z.a)• Shared their profit in predetermined ratio
How do islamic banks workOptions available • current A/c (Amanat)• ( no interest)• With the depositor’s permission, the bank can
utilize the money• No profit and no loss will be shared between
the depositor and the bank• As the primary motive of an account is safety
of the money
Savings a/c• Safety• The bank invests your money in businesses • In return bank may give u share of the profit• The shariya allows it(sadqa)
Investment account(mudariba)• Profit and loss sharing• Fix period• The depositor (sahibe-maal) (surplus)• The bank (sahibe-amal) (deficit)• The ratio of profit is 7:3• The depositor gets 70 %• The depositor bears the loss
Project financing• Mudariba • All loss is burdened by bank• Profit is shared • The bank has no authority over the
management
Project financing• Musharika(partnership)• Profit is shared on capital ratio• More loss is burdened by the bank• The bank has a control over the management
of the firm
Project finanacing• Murhaba• The bank buys an asset on behalf of the firm• And charges service charge over it(negociable)• It can be combined with mudariba(full
finanace) or musharika(partnership)
Project financing
• Al ijra( hire purchase)• Machinery is bought by the bank and lent on
life span basis
KARZ-E-HASAN• 10% of bank’s profit is reserved of karz-e-
hasan• Lent only to the poor and needy for bussiness• The bank cannot ask for any profit• The business man can give some profit if he
wants
• Quran is not just a book• It’s the word of GOD almighty• Islam is not just a religion • It is the way of life