HALAL & HARAM

Importance of Halal Income in Islam

16 Jul 2017 logo 0 comments

PROF. IRFAN SHAHID is a Shari’ah scholar and Islamic Finance expert. A frequent writer on socio-economic issues of Muslims, Prof. Shahid has written more than one hundred articles. The following article discusses the rulings of Shari’ah on Halal Income.

Islam puts great emphasis on business transaction, especially Halal and Haram. Allah (سبحانہ وتعالی) clearly has defined the parameter of Halal (legitimate) and Haram (illegitimate) in the Qur’ān. One should read the commandment of Allah regarding income before making his own judgement on the way of earning. Islam has made a scale to measure the legitimacy of income and profit on business.  Allah said in the Qur’ān:

“Do not devour one another’s property wrongfully, nor throw it before the judges to devour a portion of other’s property sinfully and knowingly.” (Qur’ān, 2:188)

“Do not devour another’s property wrongfully unless it is by trade based on mutual consent.” (Qur’ān, 4:29)

Nowadays people are concerned more about the career, dignity, status and profession. Parents are teaching similar values to their children. The coming generation of Muslims is unaware about Islamic muamilat (business dealings) due to this practice. Some people have synchronised Islam in Prayer only. It is noticed among the new generation of the migrated European society; some youths attend the prayer in the first row behind the Imam but when the prayer is finished they start selling opium, which is prohibited in Islam. It is felt that the following hadīth carries a lesson for the present generation of Muslims.

The Prophet (peace and blessings of Allah be to him) said: “A time will come upon the people when they will not care as to how he gets his money whether legally or illegally.” (Bukhari)

Today people are much concerned about halal foods, especially in the fast-food takeaways and corporate hotels. Halal and Haram are not limited to only fiscal things like pork, alcohol, interest and gambling. Halal and Haram are also in spiritual aspect of Shari’ah which is also based on operation and management.

A method of earning is halal, but due to some manipulation and adultery, it may turn into haram. For instance, a milkman daily sells milk which he gets from his cattle but one day he mixes some water or some chemical to increase the quantity of milk. This minute mixing makes his income haram. Shari’ah doesn’t allow earning income through this method. It is ظلم (oppression) in Islam. Ramadhan is a sacred month and dedicated to worship. Eating, drinking and having relationship with the wife is prohibited in the day but it is observed in many western countries during Ramadhan that some Muslims open their restaurants, inviting people to eat and drink. Moreover, they have written on the board that they are serving Halal food. Running such a business in the month of Ramadhan is Haram. Halal income is a spirit of the body; it induces the body to do charitable work. Haram income never lets him do righteous work; it provokes the consumer to commit sin and do distractive work.

Halal does not only refer to how our food is prepared and how our animal is slaughtered but also to how we earn our money. Once upon a time, my friend sent me a photo of canned food produced in China. It was pork but on the top of the container was written that (ضبح علی طریقۃ الاسلام) (it is slaughtered on the method of Islam). Imagine! How seriously people have taken this issue which is next (فرض) compulsory after (الصلوۃ) Prayer.

The Prophet (peace and blessings of Allah be to him) said: “Seeking of a halal earning is the (next) Fardh (duty) after the Fardh (Salah)”. (Baihaqi)

He also said: “The body which consumes illicit (Haram) earning is a proper fuel for hellfire.” (Bukhari)

The Prophet (peace and blessings of Allah be to him) said: “Leave what makes you doubt for things that do not make you doubt.” (Tirmidhi)

Earning Halal income is a part of worship. Allah has promised to reward for earning Halal Income.  Allah (سبحانہ وتعالی) does not accept the call (دعا) of a person who eats Haram income.

The concept of Halal and Haram is not limited to physical goods and services; it is also applicable to the method of earning and business operation.

The basic meaning of Halal is lawful.  Commodity and services permitted by Allah is Halal. In the Islamic terminology, Halal is referred to any physical goods and services allowed to use and take benefit from it. Most of the goods and services are Halal except a few declared Haram in the Qur’ān and forbidden in the Hadīth.

It is a very strange situation when people are having haram income and searching for halal foods. When the reality of Halal and Haram is explained to the people, they contrarily argue that they are paying zakah, so their income is Halal. They believe that they can earn some money through haram activities and Allah will forgive them when they spend some portion of the income on social welfare of people. Some people advise not to discuss Islam outside the masjid; they think market is a separate part of human life. Islam does not have any concern with market and method of earning while more than twenty-five per cent texts in the Holy Qur’ān and hadīth discuss the issues of Muamilaat (Business Dealings).

Some may ask not to mix worldly affairs with Islam. They feel Islam is limited to five times prayer in the masjid. It seems that they have imprisoned God in Masjid. People are more concerned on halal food than halal income. Islam covers the broader aspects of human life. Limiting Islam to physical halal and haram is a narrow thought. Islam is a complete system of life and solution to every human problem. Eating Haram Income may change the human behaviour. Allah does not accept the supplication of a person who eats income earned through haram activities. Prophet Muhammad (peace and blessings of Allah be to him) has given an example of a person who travelled far, becoming dishevelled and dusty and he raises his hands to the sky, saying, “O Lord! O Lord!” while his food is unlawful, his drink is unlawful, his clothing is unlawful, and he is nourished by the unlawful, so how can he be answered. (Sahih Muslim)

Moreover, Allah encourages people to eat Halal things and discourage eating Haram things. As Allah says:

“O you mankind! Eat of what is on earth, lawful and good; and do not follow the footsteps of the devil, for he is to you an avowed enemy.” (Qur’ān 2:168)

This Qur’ānic verse explicitly indicates that consumption of Haram food and income induces a lot of mischiefs in human behaviour. Thus, it is disallowed to eat unlawful food and income. Allah has created most of the things halal for human beings except a few that are clearly declared in the Qur’ān.

Allah has forbidden for you dead meat, and blood, and the flesh of swine, and that (any food and meat) which has been dedicated to other than Allah but if one is forced by necessity, without wilful disobedience, nor transgressing due limits; then is he guiltless. Allah is often Forgiving Most Merciful. (Qur’ān 2:173)

Allah has mentioned in the Qur’ān the features and attributes of the goods and services that are Haram.

Forbidden for you are carrion, blood and pork, and what has been dedicated to other than Allah, and animals which have been strangled, and animals which have been killed by a blow, and animals which have fallen to their death, and animals which have been gored, and animals which wild beasts have eaten except those you are able to slaughter properly– and animals which have been sacrificed on altars, and deciding things by means of divining arrows – that is deviance. Today those who disbelieve have despaired of overcoming your religion. So, do not be afraid of them but be afraid of Me. Today I have perfected your religion for you and completed My blessing upon you, and I am pleased with Islam as a religion for you. But if anyone is forced by hunger, not intending any wrongdoing, Allah is Ever-Forgiving, Most Merciful. (Qur’ān 5:3)

Prophet Muhammad (peace and blessings of Allah be to him) said, “O people Allah is pure and He accepts only what is pure.” (Muslim)

Allah said, “O Messenger, eat from good things and act righteously, for I know what you do.” (Qur’ān, 23:51) and He further said: “O you who believe, eat from good things We have provided for you.” (Qur’ān, 2:172)

Before the advent of Dajjal, dua (supplication) will not be accepted due to eating haram income. Dajjal will be enforced on people when they will not have any sense to distinguish between the legitimate and the illegitimate. Mushrooming fast food industry is a key source of tangible haram goods. People will make dua (supplication) to get rid of Dajjal, but the supplication will not be accepted due to the consumption of Haram. Most of the people will depend on haram foods.  It is noticed when a person feeds haram to his children; the latter also behave irrationally. Children are found involved in various haram activities, and they do not obey their parents. There are numerous negative impacts of Haram Income. Being a Muslim one should abstain from Haram Income, Haram Foods and Haram Business.

[shahid_irfan2002@yahoo.com]

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

SyedKazim
Syed Kazim

ENTREPRENEURSHIP

Entrepreneurship in Islam

8 Nov 2015 logo 0 comments

By SYED KAZIM

Entrepreneurship is the process of starting a business or another organisation. It is the indivisible process of an entrepreneur. It is the process of identifying opportunities in the market place, arranging the resources required to pursue these opportunities and investing the resources to exploit the opportunities for long term gains. The entrepreneur develops a business model, acquires the human and other required resources, and is fully responsible for its success or failure. An Entrepreneur is an economic agent who plays a vital role in the economic development of a country.

Islam is a complete way of life. There is no separation between business and religion in Islam. Islam has its own entrepreneurship culture and guiding principles based on the Qur’ān and Hadith to guide business operations. Entrepreneurship is a part of Islamic economics and businesses. Entrepreneurship is the pursuit of opportunity beyond resources controlled. Prophet Muhammad (peace and blessings of Allah be to him) and his companions are examples of this. Islam always invites all Muslims to be innovative and active entrepreneurs.

Islam encourages men to remain always in search of bounties of Allah. It accords business and entrepreneurship a place of high esteem. Entrepreneurship is a factor that can change the economic problems of a country. It also engages lots of people as an employee or self-employed person. It is also a way to gain a lawful livelihood.

Islamic practices dictate that all transactions, including those of entrepreneurs, should strive to meet religious goals. In the context of Islam, a Muslim’s business activities must be focused foremost on pleasing Allah, which includes conducting a business consistent with the moral and ethical standards of Islamic practices, fulfilling one’s religious obligations, and contributing to the overall Islamic goal of benefitting the society as a whole. From this perspective, in a truly Islamic entrepreneurial framework, religion and economic activities are inseparable, and, as a result, the set of economic behaviours are guided not simply by secular, legal, and ethical guidelines, but by religious guidelines as well. Fulfilling religious obligations is a major aspect of entrepreneurship in Islam, thus, the success is measured not only by financial success but also by the ethical aspects which according to Islam may provide the entrepreneur with rewards in the hereafter.  

Once, an unemployed companion asked the Prophet (peace and blessings of Allah be to him) for some charity. The Prophet enquired from him if he had any property. He replied that he had a blanket to cover his body and a cup to drink. The Prophet asked him to bring these things. When he brought them, the Prophet took them in his hand and auctioned them among the people. One of the present offered one dirham. The Prophet requested him to raise the bid; another man offered two dirhams and bought these things. The Prophet gave two dirhams to that man and advised him to purchase an axe with one dirham. When he bought the axe, the Prophet attached the handle to it with his own hands and, giving it over to that man, said, “Go to the jungle and cut wood and don’t see me before fifteen days.” After a fortnight, when he came back, the Prophet enquired how he was. He replied that he earned twelve dirhams during that period and he had purchased some cloth and grains. The Prophet remarked, “This is better than begging and disgracing yourself on the Day of Judgement.”

From this instance we have many lessons to learn. First, the Prophet (peace and blessings of Allah be to him) encouraged entrepreneurship, secondly, he used the available resources of the person to start the business and thirdly, he did not encourage the person to borrow money to start the business.

Prophet Muhammad (peace and blessings of Allah be to him) promoted partnership in many instances where one party would invest his time and energy and the other party would invest his resources. Once, Abu Hurairah reported, “Once the Ansar asked the Prophet to divide the date trees between the Muhajirin and themselves. The Prophet did not allow this but when the Ansar asked the Muhajirin to work in the gardens and share the produce with them, they readily accepted the offer” (and the Prophet was very pleased with this arrangement).

Islam gives certain principles to be adopted by people who become entrepreneurs. The following are the various principles:

i. Taqwa as a Framework: Successful Muslim entrepreneurs must have faith in Allah. Allah says in the Qur’ān, “O you who have believed, shall I guide you to a transaction that will save you from a painful punishment? [It is that] you believe in Allah and His Messenger and strive in the cause of Allah with your wealth and your lives. That is best for you, if you should know.” (Qur’ān 61:10-11) An entrepreneur must believe in Allah and strive in the search of wealth to improve him and do all of Allah and the teachings of the Prophet. The successful entrepreneur is when he has “taqwa” of Allah and greatness of “iman” through gaining lots of profit from the entrepreneurial activities.

ii. Halal Income: Added to the taqwa is the concept of “Halal” (which can be translated as accepted by the religion) which discourages Muslim entrepreneurs to sell alcohol and pork which are considered to be “Haram” (which can be translated as not accepted by the religion). Allah says in the Qur’ān, “And eat of what Allah has provided for you [which is] lawful and good. And fear Allah, in whom you are believers.” (Qur’ān 5:88) Islam has a key role to play in shaping the mode, and the level of entrepreneurial activity in a given society is gaining widespread acknowledgment and recognition. The link between religion and economic activity in the wider context was explored and demonstrated by the various studies.

iii. Kindness to Employees: When one becomes an entrepreneur, he tends to have many people working under him as well. Thus, Prophet Muhammad gave certain general guidelines for people, which would be more applicable and relevant for people who go on to become entrepreneurs. He said, “Allah is not merciful to him who is not merciful to people” (Bukhari and Muslim). The statement shows the importance of kindness with all types of people, either subordinates or superiors. The Prophet emphasised a lot on kindness. If a person deals with courtesy and kindness with his employees, he can get maximum output from them.

iv. Practising High Moral Values: The Qur’ān and the traditions of the Prophet Muhammad explicitly praise entrepreneurship and commend moral entrepreneurial activity such as the elimination of Interest. Allah says in the Qur’ān, “…But Allah has permitted trade and has forbidden interest.” (Qur’ān 2:275) Thus, Islam does not want people do indulge in any kind of business activity with the help of taking loan through interest.

v. Trustworthiness: The economic transaction of buying and selling for profit implies the existence of entrepreneur. Prophet Muhammad (peace and blessings of Allah be to him) said, “The truthful trustworthy merchant is with the Prophet as the true ones and the martyrs (on the Day of Resurrection).” (Tirmidhi) Thus, the Prophet motivated the people to be truthful in all their business transactions.

Furthermore, Prophet Muhammad and many of his close companions were trustworthy and successful entrepreneurs. He explicitly emphasised the importance of entrepreneurship and encouraged Muslims to actively participate in business and entrepreneurial activity.

vi. Payment Facility: The Prophet said, “Once a man died and was asked: “What did you use to say (or do) (in your life time)?” He replied, “I was a businessman and used to give time to the rich to repay his debt and (used to) deduct part of the debt of the poor.” So he was forgiven (his sins). Abu Masud said, “I heard the same (Hadith) from the Prophet.” (Bukhari) Thus, we learn from the hadith that during our business transaction we need to give more time for the people to pay back the money and also reduce the debt of the poor.  

vii. Caring for the Environment: In Islam, environment and animals are sacred and valuable. Allah says in the Qur’ān, “But seek, through that which Allah has given you, the home of the Hereafter; and (yet), do not forget your share of the world. And do good as Allah has done good to you. And desire not corruption in the land. Indeed, Allah does not like corrupters.” (Qur’ān 28:77) Thus, Islam wants people not to cause any damage to the environment but wants people to protect and safeguard all aspects of the environment.

Prophet Muhammad said, “There is no Muslim who plants a plant or a tree, except that whatever is eaten from it is a charity for him. Whatever is stolen from that is a charity for him. Whatever is eaten from it by an animal is a charity for him. Whatever a bird eats is a charity for him, no one suffers a loss except that it will be a charity for him till the Day of Judgement.” (Muslim) The hadith clearly reflects the importance of protecting environment.

viii. Caring for Animals: Prophet Muhammad (peace and blessings of Allah be to him) educated people to be kind with animals. He came upon an emaciated camel and said, “Fear Allah regarding these dumb animals. Ride them when they are in good condition and feed them when they are in good condition.” (Abu Dawood) Thus, one needs to take good care of the animals which they use for their business activities.

ix. Social Responsibility: Islam wants people to be socially responsible, thus it had made it obligatory for people to give charity and zakat, in which every businessman is obligated to give zakat on their merchandise and stock. Allah says in the Qur’ān, “Never will you attain the good [reward] until you spend from that which you love. And whatever you spend – indeed, Allah is Knowing of it.” (Qur’ān 3:92) In the verse the Qur’ān makes it clear that if a person has to attain good reward then he will have to spend his money in the way of Allah.

“The Prophet (peace and blessings of Allah be to him) used to command us to pay sadaqah from (the goods) we had for sale.” (Abu Dawood and Al-Baihaqi) It includes real estate that are held for commercial purposes, buildings, automobiles, light or heavy duty machinery and other things that are kept for sale. As for the zakat on properties that are for rent and not for sale, it is due only on its revenue that is held for one year, not the value of the property, because the property itself is not for sale. Similarly, private and service vehicles are exempted if they are for personal use. If an owner of service vehicles or taxis, for instance, collects revenues that have reached the nisab, then he has kept for a whole year, regardless if he kept that revenue for getting married, purchasing property, paying off debts or for any other purposes.

Commercial stock and commodities include whatever is prepared for bartering and trading for profit, be it real estate, live-stock, food stuff, machinery or the like. If such commodities have reached the nisab and have been kept for one year, they should be evaluated and a 2.5% of its value must be given out.

Zakat is a right that belongs to Allah. It should be given only to those who deserve it. The payee should not produce any personal benefit or ward an evil off him through giving it. A Muslim should give to the beneficiaries that are mentioned in the Qur’ān willingly and intending to please Allah alone in order to receive the reward for giving it. Thus, giving charity and zakat makes an entrepreneur socially responsible as he financially contributes to the betterment of people and the society around him.

The concept of fard kifayah (collective obligation) in Islam is based on the ability of society to meet its minimum and basic needs from a specified activity or meet national challenges and obligations. An appropriate share of the population should undertake entrepreneurial activities by their own choice and according to their own initiative as Entrepreneurship not only helps a person to be self-independent but also helps for effective functioning of the economy of countries.

Having Islamic principles could cause someone to be closely related to Allah and the people. This relationship is based on the concept of Taqwa which needs entrepreneurs to totally be recumbent to Allah and also have a good relationship with other people. The above discussed principles will act as a foundation for individual relationships between the entrepreneurs with both Allah and other people. The relationships between the entrepreneur and the concept of Taqwa will give them the ability and capability in developing their characteristics based on the Islamic needs which are derived from the Qur’ān and the Sunnah. The principles given by Islam are an important asset to obtain high achievements in the field of entrepreneurship.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

ISLAMIC FINANCE

‘Islamic Finance is NOT a Muslim-only Affair’

2 May 2010 logo 0 comments

Manfred Dirrheimer

“There is nothing more powerful in the world than an idea whose time has come. Islamic finance is not a Muslim-only affair. It shows qualities which are beneficial to all kinds of customers. For all the Shari’ah-compliant products we sell in countries such as Malaysia, some 70 per cent of our clients are non-Muslim,” Arab News quoted Manfred Dirrheimer, chairman of the Executive Board, FWU AG, a German financial services company which has pioneered a number of Takaful products.

Dirrheimer was speaking at the Amanie-Falaika Islamic Finance Symposium held at the Jumeirah Emirates Towers in Dubai last week and attended by dignitaries such as Ahmad Hizzad Baharuddin, Director Islamic Banking & Takaful, Bank Negara Malaysia; Farhan Al-Bastaki, Executive Director Islamic Finance, Dubai International Financial Centre (DIFC); and Nor Azamin Salleh, CEO, Asian Islamic Investment Management (AIIMAN).

According to the Saudi Arabia’s leading English daily, Dirrheimer predicted that several Islamic financial products might become “mainstream” but warned that Shari’ah compatibility and integrity of these products must always be ensured. However, he rued the fact that the product innovation process in the Islamic finance industry is much slower than in the conventional industry and warned that any “industry without innovation is dead.”

The symposium exuded cautious optimism of an industry which is showing a faster rate of recovery than its conventional counterpart from the twin effects of the credit crunch and the global financial crisis that has affected the world for the last two years, albeit in a market, Dubai, that was perhaps one of the worst hit in both the conventional and Islamic space especially relating to real estate assets.

This was further manifested by the recent and imminent launch of a spate of Islamic equity and investment funds including the Amana Developing World Fund by Saturna Capital in the US; the HwangDBS AIIMAN A20 China Access Fund; Comgest Shari’ah Emerging Markets and the Comgest Shari’ah Europe Funds for Saudi investors; Crescent Investments Shari’ah-compliant Australian Equity Fund; LM Australian Alif Fund; BBGI Islamic Share Energy Fund in Switzerland; the Oasis Crescent Global Income Fund to be launched by Oasis Asset Management of South Africa; and the Yurie Shari’ah Compliant Korea Index Investment (Equity) Trust.

Perhaps the increasing confidence of the Islamic investment sector was underlined by the revelation by Khazanah Nasional Berhad, the investment arm of the Malaysian Ministry of Finance and effectively the country’s major sovereign wealth fund (SWF), that Shari’ah-compliant investment is its mainstream activity, whereas its conventional investments comprises its alternative investment portfolio. This makes Khazanah the first and only SWF in the world whose focus is largely Shari’ah-compliant investments.

As far as SWFs in the Muslim world are concerned, it is usually the other way round, with most such SWFs do not even have Islamic investments on their radar. If only a small proportion, say 30 per cent, of these SWF funds migrate to Islamic investment opportunities, then the sector would receive a serious boost in terms of market size, which is currently estimated at between $1 trillion to $1.2 trillion.

It was inevitable that the Shari’ah governance process in Islamic finance should surface given recent developments in the High Court in London and also recent resolutions issued by various bodies including the one on Tawarruq by the Islamic Fiqh Academy in Makkah.

Prominent Saudi Shari’ah scholar Mohamed Elgari reiterated the importance of developing a scientific methodology for the Shari’ah governance process in the industry. He added that the process of internal compliance in Islamic Finance is extremely important to see how it is practised by various institutions.

He rued the fact that the IDB-sponsored idea of developing a Shari’ah rating system which would evaluate the internal processes in institutions and for products “from innovation to litigation” did not take off. The purpose was not to decide what is halal or haram.

Elgari rejected any notion that derivatives are not possible in Islamic finance. “We should not look at derivatives like anything else in life in black and white terms. In moderation, they could be useful, especially to reduce risk on a Shari’ah basis. In principle, derivatives are possible in Islamic finance. There is a need for Muslims to manage risks and take a level of risk they want. This is Takaful,” he added.

Daud Bakar, the well-known Malaysian Islamic scholar and entrepreneur and managing director of Amanie Islamic Finance Consultancy & Education LLC, stressed that the Islamic finance industry was allowing Muslims to rediscover their identity and Shari’ah advisories were the custodians of the Shari’ah governance process within the prescribed legal limitations.

He agreed that hedging (Tahawwut) is allowed under the Shari’ah although the industry wants “hedgers not speculators.” Shari’ah-compliant hedging, he added, is not going to the market to arbitrage one against the other, but as part of good risk management, which is important to protect the interests of investors and institutions.

Earlier, Farhan Al-Bastaki of the DIFC urged the Islamic funds industry to listen more to what the clients and end users of these funds need and want; to be more rigorous in assuring that investment fund products are truly Shari’ah-compliant; to ensure that they are Shari’ah-based products as opposed to merely “Islamising” conventional products; to promote greater consistency of Shari’ah-compliant funds documentation a lack of which will leave clients and the market in general in a state of confusion and uncertainty regarding how ethical their investment funds really are; and to educate clients on how Shari’ah funds really are fundamentally different products from conventional funds, while making sure that their own staff are properly trained in Shari’ah finance to adequately explain the benefits of Shari’ah funds to both Muslim and non-Muslim investors, who too should be considered as potential clients of such funds.

“By promoting the unification of funds documentation, we can provide a great deal of confidence in the market. Shari’ah scholars must focus on what’s good for the industry, by which I mean they should focus more on the various areas of agreement among them, rather than their points of philosophical difference,” Arab News quoted him saying.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

COVER STORY

Global Economic Crisis: Islam an Alternative

14 Dec 2008 logo 0 comments

By OUR STAFF REPORTER

The Study Circle, Jamaat-e-Islami Hind, Delhi and Haryana zone, organised a meeting on Global Economic Crisis: Islam an Alternative in the Capital on November 30. Presided over by Professor M. Rafat of Jamia Millia Islamia, the meeting discussed the causes of ongoing global economic meltdown and presented Islamic economic system as its viable solution.

Pointing out the causes of the present global economic crisis, in his power-point presentation, Dr. Waquar Anwar, Cost Accountant, described the symptoms like food crisis, volatility in oil prices, sub-prime crisis and recollected the ultimate collapse of the system. He assigned the meltdown to the failure of laissez faire capitalism caused by de-regularisation, low saving, excessive credit and failure of debt servicing, highlighting that these things are ingrained in the free market capitalist system. World economies got affected. Developing economies like India could also not escape the ill effects like high outflow of Foreign Institutional Investors’ funds, nose-dropping Sensex, depreciation of currency, unemployment and IT services export reduction.  He also presented the underlying principles of the capitalist economy and compared them with those of the Islamic system.

Dr. Javed Ahmad Khan of Jamia Millia Islamia dwelt in detail upon the overview of Islamic banking and finance. He said that major development has been done in the fields of Islamic Economics and Islamic Finance during the last 15 years. Although these developments can be traced to last 30 years, there were theoretical discussions from earlier periods, then some practices and research activities started. At one stage it was said that it is all faith-based commitments related to denouncing the prevalent system having no academic worth.

The scenario changed and the world started noticing it seriously and research work started in western universities too. Post-1990 world market opened. Market in the Arab world also opened up and the oil wealth proved an impetus for development in this field. Scholars of different religions worked in western universities and appreciated the functioning of Islamic banking and finance.

It is agreed that there are many weaknesses in the Islamic banking. But these are teething and human problems. Developments are done only in this manner and initial weaknesses are controlled with the passage of time. There are human problems also. The ill and wrong practices of some people in the name of Islamic banking are not ruled out. There are many good points scored. Investment in the name and mode of Islamic finance are now acceptable in several countries including Indonesia, Malaysia, Japan, China, England, USA, etc.

Dr. Javed added that the system is passing the test of time and becoming acceptable. Muslims are not bold enough and others are also not hesitant in application of their funds in line with the Islamic principles. India is very cautious. The Government is studying and has not allowed the system yet. These are positive developments. The conventional banking is also taking stock of the developments. New terms like ethical banking and green financing are in use. These are also positive developments and the underlying concepts are similar to that of the Islamic banking.

Dr. Javed described the causes of the present global economic recession.  The recent crisis in America has occurred on account of crisis of confidence. Money as such has not vanished. But the investors and consumers have lost confidence in the market. That is why the governments of the developed and developing countries are injecting funds in the market. The moment confidence is recovered the crisis will be over. Such depression is a routine economic phenomenon. That happens after every eight to ten years.

Thus the crisis of confidence occurred in the USA. However one point should be understood. America has the strength of its treasury bills despite huge deficits. Their expenditure is much more than their income. All other countries keep their surpluses and export earning in the USA. All foreign reserves are kept in the USA. USA has become the banker of other countries. These funds are kept because of the super power status of the USA and security in that country. Everyone else has confidence in the US treasury. The irony is that despite condemning, most of the countries keep their funds therein. The USA is like banks whose strength is the petty funds deposited by the public.

The world of Islamic bank is very small compared to the size of the world economy. But this development is very hopeful. This is because the development is on the right path. There are many problems, no doubt. These Islamic banks are private ventures and till date they are devoid of any system support. Even in Saudi Arabia the Central Bank has not granted the Islamic banks the status that is granted to conventional commercial banks. The strength of the Islamic banking is that the growth is based on real economics avoiding speculation and other wrong practices.

In his presidential address, Prof. M. Rafat referred to a question raised in the open house session regarding the difference between Capitalist, Socialist and Islamic systems. One difference is of philosophy, the worldview and the concept about man. If we consider from that angle both capitalism and socialism have the same concept about man – that man is basically selfish and he strives for his own personal gains.  Further, they consider the world to be meaningless because only material forces are interplaying. But there is one difference between the two. Capitalism is only an economic system whereas communism is a total system dealing with all walks of life. So the communists have a philosophy of history whereas the proponents of capitalism have no such concept. 

Islam’s worldview is based on the concept of tawheed, oneness of God, and the man’s khilafat (vicegerency). The concept of khilafat of man means that man will control his selfishness if he wants to be a good, according to the teachings of Islam. Islam considers man to be basically free, and a desirable behaviour has been ordained for him. This question of desirable behaviour does not arise in communism because it basically takes man not-to-be-free. For capitalism the selfishness of man is acceptable. Islam provides this choice for man to choose between desirable and undesirable behaviours. However, Islam recommends man to opt for good deeds.

Another difference between these systems is on the practical frame as to the economic behaviour of man relating to private enterprise and private ownership. The question of production is of paramount importance. The communist approach is that means of production should be in the control of the state. Although they could not practise this system completely, they stick to this concept. Islam does not bind us on this regard as to give total control on means of production to the state or give state’s control on some of the means or keep everything beyond state control. Capitalism insists that all means of production should be in private hands. Islam insists on another area. It is incumbent on the state to establish justice and equity in all walks of life, including economic life of man. If the state has to take control of some of the means of production for its function of establishing justice, then it can do so.

We have the example of Khilafat-e-Rashida in support of this approach that state took control of more means of production when it was so needed and did not intervene when there was no such need. Islam provides right to private property. On the conceptual frame Allah is the owner of all things and on practical basis man has been assigned ownership of resources with the proviso of accountability for the manner in which he utilises the resources.

Islam is the complete system of life. It concerns everything from faith, character and society to state. As for the alternative economic system, it amounts to the concept of state. It is true that we will try to make man good individuals and improve the society. But the question is the concept of state that can solve the crisis. The economists accept that in the capitalist system the ups and downs (crests and troughs) in trade cycle are bound to happen. The cycle as such is recurring in nature. One cannot say with certainty the timing of this recession in trade cycle but it is certain that a capitalist system will periodically face this problem of depression.

The depression may be understood as the phenomenon where a significant portion of the society which is engaged in economic activity is incapacitated. The purchaser does not remain in a position to purchase; the small businessman is not in a position to do business, and the like. Only few people remain in a position to continue to engage in the economic activities. Until and unless the majority is in a position to engage in economic activity these few persons are able to go on because their existence is dependent on the engagement, rather exploitation, of the majority. But when the majority is incapacitated the few having resources also cannot function smoothly in an economy. This is the stage of economic depression. In other words all means of production is concentrated at few places and the economic activity is hampered. This crisis is overcome by relaxing the resources, empowering people and encouraging them to come out and engage in usual economic activity.

Referring back to the topic of discussion, Dr. M. Rafat said Islam solves the problem at the place where it arises. It gives state vast powers to intervene in the economy where it is so required for the purpose of establishment of justice. In this regard Islam provides the guideline, the norm (which may be understood as the desirable behaviour for the state) as ordained in the Qur’an with regard to resources that “in order that it may not (merely) circuit between the wealthy among you.” (59:7) The Islamic approach is to circulate the resources whereas the capitalist approach is to concentrate them. Crisis comes when that concentration reaches its highest level. Islam works towards circulation of wealth and in that case the crisis like recession will not happen. No consumers, businessmen and others, big or small, will become powerless.

So the alternative is that the state will be duty bound to fulfil certain goals and objects. The primary goal of the state will be to establish justice and fair-play. For that the state will make policies to see to it that resources are circulating properly in the economy. The state will see that the abilities of every person get proper opportunities for their economic activity. Further, the state will act to make everyone adhere to the limits of halal and haram fixed by Islam, either they be individuals or groups. Islam provides a clear concept of desirable, credited, discredited, undesirable and banned activities.

The capitalist system is based on a big myth that man should be free to pursue his economic activities and such freedom of man and free market will ensure equilibrium and fulfilment of every person’s needs. But this is not the correct position. Men are not equal. The haves and the have-nots both are not in the same position to compete freely. Islam brings that freedom, makes everyone equal in the eyes of the law and then leaves them free to pursue according to their respective abilities. We should recall what the first Rightly Guided Caliph Abu Bakr said in his maiden speech after taking charge of the caliphate that it was his duty to give the weakest among them his dues, and take back the wrongly amassed resources from the mightiest among them and give it back to the weakest.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

DrWaquarAnwar
Dr. Waquar Anwar

Secretary Board of Islamic Publications and Finance Advisor, Markaz JIH, New Delhi, India

ON ECONOMICS

EFFORTS TO USHER IN JUSTICE AND EQUITY IN ECONOMICS

29 Sep 2013 logo 0 comments

By DR. WAQUAR ANWAR

Economics, instead of serving the humanity, has become a tool to inflict pain thereon. Search for an alternative economics that can usher in justice and equity is on. Radiance Viewsweekly (referred to as Radiance hereafter), with its firm belief that economics based on the principles of Islam is the required panacea that can address the yearning of man for a just economic system, has been presenting and substantiating its viewpoint from day one. Almost all volumes of Radiance carry a number of articles and reports on related subjects; so much so that this material may be enough for at least one doctorate thesis, if not more. However, with the constraint of space and time available we will, in the following paragraphs, pass through some major articles of interest under three periods: first twenty years; till the last century; in the new millennium.

 

DURING THE FIRST TWENTY YEARS

During the very first years of its publication Radiance, in February 1964, carried an article “Interest-Free Economy: Panacea of Class-Conflict” by Irshad Ahmed. It argued that Islam provided the institution of Baitul Maal, the first of its kind in the world, and the institution of zakat, the most effective method of eradication of poverty from society. The Islamic economic system is neither communistic nor capitalistic but has all the good features of the two, creating a healthy and balanced human society. It further discussed the features of Interest-free banks, central banks, international trade and Mudarabah.

An article, “Economics towards Utilitarianism”, rich in content by Prof. Khursheed Ahmed was published in Aril 1964. It lamented the mad rush to amass material, in order to acquire more influence. Modern Science of Wealth, called economics, in its beginning chapters taught its readers the utilitarian aspect of possession. This selfish race led to groups, unions, federations, associations, blocs, monopolies, pacts and contracts designed to suit their respective ends, which in its turns resulted in class-wars. The acquisitive and materialistic society visibly cultivates a tendency among people to become rich over-night even by tainted means. Men must realise the moral values, social norms and rights of their brethren.

Within the next two years (January 1966) the magazine published an objective study entitled “Review of Five Year Plans; Projects for Progress, Plenty and Prosperity”. It reviewed the first three Five-Year plans and analysed India’s economic growth and concluded that it was impressive. While foreign assistance played a role, 80 per cent of development requirements were indigenously provided.

Next year (January 1967) Dr. Amir Hasan Siddiqi wrote on “The Stipendiary System of Hazrat Umar”. This was the first instance in human history that the government took the responsibility of feeding and clothing entire population of the state. Hazrat Umar systematised the system of wazaif (regular grants by the state to individuals based on specific criteria).

Radiance took special interest to report about the status of Indian economy. Nathulal Saksena presented a study of a bad face of Indian economy by describing “A Tale of Two Devaluations”.  This was an in-depth study of devaluation of a currency.

“Lotteries – A Curse for the Society” by Shams Peerzada published in August 1969, talked about the ills of gambling in all form. Prohibition of gaming in Islam was specially mentioned.

In addition to such articles on the theory of Islamic economics, hazards of conventional unethical practices and status of India’s economic development, Radiance continuously reported about the development of the theory and practices of Interest-Free Banking which was in its infancy as its experts were developing its theoretical base and practices based thereon had started.

 

TILL THE END OF THE LAST CENTURY

Islamic banking developed fast during these two decades. Radiance too played its role and devoted enough space for related discussions and reporting. Some such discussions are described hereunder.

A report of a three-day seminar on Islamic banking in Bangladesh was published and the contents of major submissions there were highlighted in May 1985.

A very interesting informative article by Huge Montefiore, Bishop of Birmingham on the Christian point of view on interest, was published in February 1986. The Islamic point of view was presented by S.M. Imamuddin. The article of the Bishop discusses the history of prohibition of interest and the change of attitude towards it over the years in the Christian fraternity. The advantage of Islamic banking was highlighted in the same issue of the magazine in a box which, inter alia, said, “The organisational framework of interest-free banking in this country is weak and unregulated. This poses a great danger to the security of the savings of lakhs of people who patronise this sector.”  It urged the Reserve Bank of India to regulate existing interest-free organisations. The truth of the note of caution, rather warning, was proved by later events.

Radiance those days was publishing the column “Between the Lines” by the veteran journalist Kuldip Nayar. In his column published in October 1988 titled “So Pop goes Pepsi” he commented on a rumour that Rajiv Gandhi, the then Prime Minister, was bent on facilitating Pepsi Cola project in India. It said, “When the Janata Party threw out Coca–Cola, the action was motivated by one principle: not to continue foreign collaboration in production of consumer goods. The country was never the loser for ousting Coca-Cola because the aerated water industry in India rose to the occasion and met consumer demands successfully. Why then bring Pepsi Cola?” Much water has flown beneath the Ganges and Yamuna since then but the relevance and the veracity of these lines surpass time like any universal truth.

Radiance has the distinction of publishing first hand writings of some of the most prominent theoreticians and practitioners of Islamic Banking. First and foremost mention is necessary about several articles by Dr. M.N. Siddiqi which later were published in his books on the subject or are now available on his websites. In his article entitled ‘Nature and Content of Islamic Economics’, he delineates the distinction of Islamic economics.  

Another legendary author on the subject was Sheikh Mahmud Ahmad, whose article was carried in two issues of the magazine in May 1997. The title of the write-up was ‘Economic Justice in Islam’ in which he said that social justice is justice in all of the relationships occurring in a society on mutual gain. This is a distributive justice as it leads to an arrangement of distribution of these gains among participants in view of their respective efforts, opportunity cost and contribution. Sheikh Mahmud Ahmad is known for his Time Multiple Counter Loan (TMCL) Theory. This has been studied by Nawazish Ali Zaidi in the article ‘Abolition of Riba and Mahmud Model’ published in July 1990. Nawazish Ali Zaidi’s another article ‘Economic Implication of Riba’ was published in October 1990 which is a serious study of the real rate of interest in different countries and its relationship with supply of money, interest and budgetary deficits.

Mention needs to be referred to here about several writings of Dr. F.R. Faridi. As the writings on Islamic economics and related subjects in English by the author could not be published in many books, the files of Radiance may be a source of knowing what this worthwhile expert on the theory of Islamic economics wrote on the subject. One article, ‘Relevance of Islamic Economics to Indian Situation’ was published in 1988. Another write-up, ‘Salient Features of Islamic Economics’ was published in October 1999. Yet another article, ‘Islamic Economics Addresses Mundane Issues’ was published in April 2000. Further a report of a seminar on ‘Islamic Economics Teachings in Madrasahs’ organised by The Indian Association for Islamic Economics (IAFIE) was published in January 1996. It was conducted in Jamiatul Falah and it recommended the Jamia to include the discipline in its curriculum at least for the benefit of its teachers and senior students. If this required curtailment of any relatively less important subject, that should be done.

Experiments of Banks without Interest by Umer Chapra published in October 1993, described virtues of Mushrakah (sharing finance, entrepreneurship and management) and Mudarabah (agreement between two or more persons whereby one or more of them provide finance while the other provides entrepreneurship) as means of finance. It goes ahead in describing other trade based modes of finance like Ijarah (leasing), Murabahah (sale against a specified profit margin), Salam (advance payment against future delivery of fungible goods), and Ijarah wa Iqtina (hire purchase). It described the success of these concepts that far and delineated difficulties in the path of Islamic banks. The author said that some of the difficulties were of teething nature which would be overcome with passage of time.

Other difficulties emanated from lack of understanding in the nature of Islamic banks by their depositors and clients. There was absence of an Islamic financial market coupled with the failure of such banks to access to lender of the last resort. That compelled the Islamic Banks to keep a larger liquidity than conventional banks. He opined that the Islamic Banks were like embryos struggling to survive in an inhospitable environment without a proper support system.

‘Islamic Banking in the Indian Context’ by M.H. Khatkhatay published in October 1997 reviewed the functioning of Islamic Financial Institutions including Muslim Fund type of institutions. It described Baitun-Nasr of Bombay (now Mumbai) which operated as a cooperative credit society. The author lamented that Muslim Fund types of institutions mostly failed to take cognizance of changes in government regulations. It was suggested that a 100 per cent equity based leasing company format could be explored. It concluded with hope that the day will dawn when establishment of full-fledged Islamic Banks operating on post facto determined rates of return may become a reality.’

Dr. Rahmatullah, a teacher of economics, wrote on the ‘Problems of Interest Free Banking in India’ published in 1992. He opined that the conceptual lacunae and vision of the promoters and managers of existing Islamic institutions greatly hampered the growth of interest free societies. They thought and acted as a charitable organisation and did not think about more productive use of money. [A box in the magazine informed that there were 159 Islamic Financial Institutions in India those days. It also gave state-wise break-up of such institutions.]

‘Islamic Banking in the Indian Context’ by K. Rahman Khan, the then chairman of Al-Ameen Educational Society of Bangalore, published in May 1995 asserted that Islamic Economic Theory gives equal importance to both human activity and money unlike the present economic theories which give weightage to the latter at the cost of the former. He appealed to the Ulema to project the prohibition of Riba as a concept of well-being of the society instead of just confining to a haram (forbidden) and halal (permitted) concept. He further appealed to the intelligentsia not to approach this system with a closed mind and consider it on its merits without attaching any religiosity to the system.

Dr. Javed Jameel, a prolific writer, wrote under the title ‘Economic Fundamentals on the Rise’ (February 1998) and described the fundamental questions raised in economics which are both correct at times and are given weightage more than what they should be given. He talked about the need for correct places of different fundamentals of economics. In another article published the same month under the title ‘Islamic Banking: The Myth Explodes’ he praised the performance of Islamic banking in Bangladesh. If this idea of banking without any speculative and unfair earning can succeed in the poorest of poor country like Bangladesh, it has the potential to face successfully all weathers and pastures!

Sabahuddin Azmi described the Islamic approach of fiscal policy (April, 1996) recommending that it should be guided by the principles of Shari’ah and be based on Ijma (consensus) and Shura (consultation). It described the Islamic principles relating to Expenditure and Revenue, Social Security, delineating the elements of such a Fiscal Policy saying that zakat, voluntary contribution, other taxes and public borrowing are its sources of revenue. On expenditure side, the article said, the state should be oriented toward removal of poverty, helping the needy, bringing about social justice and checking inequality and income imbalance. The article referred to the works of Mawardi (450 CE), Abu Yala (458 CE) and Ibne Taimiyah (728 CE).

M. Hanif Lakdawala  in the article ‘Globalisation: A Threat to India’s Sovereignty’ (May 1998) warned that the uncalled and unqualified tilt of our government towards whole-sale capitalism in the name of globalisation has had fatal consequence. He further exposed the fascist agenda of Bharatiya Janata Party in the name of Swadeshi movement. It would be farce to take it as an anti-imperialist agenda.

Other articles that may be noted include ‘Principles of Islamic Banking and Finance’ by Syed Khalid Husain (December 1998) and ‘Study of Islamic Banking in Some Muslim Countries’ by Muhammad Arif (October 2000).

 

IN THE NEW MILLENNIUM

Most of the issues of Radiance in the 21st century carried articles or reports relating on economics in general and/or Islamic economics. This writer serialised articles in the magazine, which were later published in two books by Markazi Maktaba Islami Publishers under the titles Economics in Islam and Business Transactions in Islam. In addition, this scribe also wrote about budgets and other economic events and contributed a column ‘Balance Sheet’ for some time.

Jamaat-e-Islami Hind organised an international seminar on ‘Islamic Banking; Justice and Equity’ on 18-19 February 2006. Radiance published Special Issues and Focus Issues on related subjects both before and after the event and kept the discussions alive.

Several articles were made available by Dr. M.N. Siddiqi including ‘Meaning and Incidence of Riba’ (August, 2004), ‘The Evolution of Islamic Finance’ (April, 2006), ‘Future of Islamic Finance’ (October, 2007), ‘Man must Learn to Live in Moderation’ (April, 2009), and ‘Risk Management in an Islamic Framework’ (April, 2009).

An interview of Dr. Umer Chapra on the future of Islamic banking and how it can become a viable alternative was published in March 2006.

Suhail Zubairi of Dubai Islamic Bank was writing a weekly column in a Dubai newspaper. Radiance published regularly those writings and later compiled his writings which were published by Markazi Maktaba Islami Publishers under the title ‘Islamic Finance.’

H. Abdur Raqeeb has been very kind to Radiance. He provided the magazine with news and comments relating to Islamic banking in India on regular basis. He is a man of action and has not much time left for writing articles. However, some of his articles which Radiance could get hold of and publish include ‘Space and Scope for Islamic Banking’ (November 2009), ‘Islamic Finance: An Ethical Alternative to Conventional Finance’ (September 2010), and ‘Islamic Banking Has a Bright Future in India’ (February 2011). An article published in August 2011 ‘Kerala to Lead, Be Role Model in Islamic Finance’ by Ali Jasim, an associate of H. Abdur Raqeeb, was also based on the inputs from Abdur Raqeeb.

Another authority on the subject with similar sounding name but with slight variation in spelling Abdur Raquib, Deputy Executive President, Islamic Bank Bangladesh Limited, Bangladesh, contributed a write-up entitled ‘The Philosophy of Islamic Insurance’ which was published in January 2001. That was a very useful contribution as Islamic Insurance (takaful) has not been discussed much by other writers.

Shariq Nisar in his article ‘Islamic Finance: Western Misgivings’ said that some of the apprehensions may be genuine. The challenge is to evolve a fool proof system and blemish free function of Islamic financial institutions.

Radiance was successful in attracting a prolific writer on the subject Syed Zahid Ahmad to contribute and some of his articles published are ‘Islamic Finance to Reduce Fiscal Deficit’ (July 2009, published in two parts), ‘Interest Inflation and Money Value’ (November 2009), ‘Challenges to Central Banking in the Context of Financial Crisis’ (February 2010), ‘Legal Provisions for Interest-free Banking in India’ (May 2010), and ‘Participatory Banking for Equality before Law’ (February 2013).        

An article jointly written by Syed Zahid Ahmad and K.A. Najmi entitled ‘Islamic Banking Windows in India’ was published in October 2009.

K.A. Najmi also contributed one exclusive write-up ‘Islamic Finance under Indian Legal System’ (May 2010).

Kashif Hasan Khan, a research scholar, wrote few articles including ‘Why Islamic Banking and Finance’ (February 2010), ‘Risk Management: The Challenge Islamic Banking Continues to Grapple with’ (October 2010), ‘Impediments to Islamic Banking’ (November 2010), and ‘Muslim Women and Islamic Finance’ (May 2011).

‘Globalisation vis-s-vis Cultural Diversity’ by Abdulaziz Othman Altawairji published in March 2002 argued that globalisation as imposed by world superpower is counterproductive as it should coexist within the framework of cultural diversities. Only then globalisation can ensure human prosperity and world peace.

Besides, articles by other authors are mentioned as under:

•             Islamic Banks in India by M.Y. Khan (February 2001)

•             Interest-free Banking: a beginning of Alternative Economy by Dr. Abuzar Kamaluddin (August 2004)

•             WTO: The Scourge of Farmers’ Misery by Syed Sultan Mohiddin (October 2009)

•             Let Uncles of Islamic Banking Concentrate on Basics by Mansoor Durrani (November 2009)

•             Challenges for Islamic Banking in India by Dr. Rahmatullah (January 2010)

•             Islamic Response to Globalisation by Dr. Syed Khalid Iqubal Haider (September 2010)

•             BSE Launches Islamic Index: Paves Way to Islamic Finance in India by Ayub Khan (February 2011)

•             Is It the End of the American Century by Yamin Zakaria (August 2011)

•             Islamic Banking Vs. Usury by Muhammad Sirajuddin & Sayyed Saheer (January 2013)

Another related field where Radiance served the community exclusively is development of Interest-Free microfinance under Cooperative Sector. Several write-ups and reports aimed at this particular object. Mention may be made of the report by M.S. Khan ‘Al-Khair Cooperative Credit Society: a Working Model of Interest-free Microfinance.’ Further Radiance, in association with Sahulat Microfinance, has formed a Forum for Group Discussions on Economic Issues (FGDEI) whose monthly meetings are being reported regularly. Major areas of discussions under in the Forum comprise Interest-free Microfinance.

Legal developments and court cases on the subject are being covered exclusively in the magazine, including the write-ups of this scribe ‘Landmark SC Judgment on Cooperatives’ (November 2011) and ‘Review of Kerala High Court Judgment.’ Last but not the least, mention may be made of the interview this scribe conducted with Arshad Ajmal and was published in March 2009. That interview went a long way in generating interest on the subject and introduced Mr. Ajmal as a resource person on the subject.

[waquaranwar@yahoo.com]

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Also See