PHILOSOPHY & PRINCIPLE OF ISLAMIC BANKING (ISB 546)THE ISLAMIC GOLD DINAR

Presented by: EKA PUSMAWATI BT ABD WASIR HUZAIMAH BT JAIMIN SOFIAH BT ARIP SMELTA AK JUDI WAN RASHIDAH BT WAN HASSAN

History of Gold DinarMuslims used gold and silver by

weight and the dinar and dirhams that they used were made by the Persians

These coins differ from the original ones in that an Arabic inscription is found in the obverse margins, normally reading "in the Name of Allah“

Gold and silver coins remained official currency until the fall of the Khalifah

Modern History the Islamic Dinar system being proposed in this

modern era is basically an electronic payment system that is gold backed

As a consequence of currency crisis in Asia, in first of 1997, then Prime Minister of Malaysia Mahathir Bin Mohamad proposed introduction of Islamic Gold dinar as currency for international trade in the Muslim world

. It was supposed to suppress the too overly traded American dollar and ensure that dollar’s instability does not affect international trade because Islamic gold dinar was to be tied to price of gold and thus provide stable value of the currency

Introduction of Gold Dinar

Gold dinar known as an Islamic currency and which is to protect its sovereignty and to promote a just monetary system, a nation my have to redefine money and eliminate interest rates from the economy

• Claimed by a Muslim scholar, Ibn Khaldun that God created the two precious metals, silver and gold to serve as a measure of all commodities

• Gold had played an important role for many centuries in a way or another until the end of Bretton Wood’s system

Differences between Current Monetary System & Dinar

SystemCurrent Money SystemPaper money quantity can be increased

at will any time since there will always be demands from the public to increase the quantity of money which would cause inflation

Dinar systemFixed exchange rates resulted the

absence of exchange rate instability

Why Gold Dinar?Problems in the current

monetary systemMoney Creations: The Magic of

fiat money and fractional reserve banking

Islamic Banks, Money Creation and the Law of One Price

Socio Economic Effects of Money Creation

Implication of the Islamic Gold Dinar System

Stable MoneyExcellent Medium of ExchangeMinimize Speculation, Manipulation

and ArbitrageDinar Promotes a Just Monetary

SystemSome Special Problem ReduceDinar Diversifies Risk and Promotes

TradeBusiness Cycle Effect Minimized

How Dinar can help in Economic Crisis?

Gold does not inflate in value as it is a commodity and thus has an intrinsic value

If gold coin were used, then counterfeiting would also be checked

If all these exchange rates are eliminated by means of a single currency like the dinar, then speculation, arbitrage and manipulation will be very much removed if not eliminated

Future Prospect and Challenges

Many people are aware of the shortcomings of the present system and advancement in IT technology such as the emergence of e- dinar, Gold Money and so on

Does not required substantial new regulations

Gold has high prospect as a single global currency

The challengesInstitutional setbackUS have emerged as sole superpower

in the world today after the cold war’s where US dollar play the roles as international currency

Possible attempts to fail the systemThe success of this system depends

on a gradual increase in the number of people using gold as money

Opinion from Islamic Jurisprudence about Islamic Gold Dinar

 Price of stock market can give the dramatically effect as the Dollar continue to drop

Gold Dinar wants to threat U. S Dollar because some of those economies have not fully recovered

Former Prime Minister Mahathir Mohamed said that Arab Saudi should sell oil for gold not the dollar in order to avoid being short changed by a decline in U. S economy

Conclusion Islamic Gold Dinar and the Dirhams or the

silver coins should been applied in Malaysia in order to overcome the most if not all the shortcoming and the negative effects of the present day fiat money interest- based system

The gold dinar and the silver dirhams called for the re- establishment of shariah base trading

The movement of Islamic Gold Dinar and the Silver Dirhams had been stable compared to paper money and had been proved by using the Gold Dinar and Silver Dirhams as money is not a step backwards into the medieval years

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