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issue in islamic finance

issue in islamic finance

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Published by Khairul Anuwar

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Published by: Khairul Anuwar on Aug 05, 2012
Copyright:Attribution Non-commercial


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Islamic Economics: Problems and Prospects
Introduction for Islamic Economics:
The Islamic economic system is built upon three principles:1.Ownership2.Disposal of ownership3.The distribution of wealth amongst the peopleIn order to facilitate the acquisition of goods and services Islam put forward rulesrelated to the manner of possessing wealth without any complications. Islam definedthe legal means of ownership, and it defined the contracts through which possessioncan take place. This left humanity free to develop the styles and means by which theyearn, as Islam did not interfere in the production of wealth. Islam defines the legalmeans of ownership and contracts in general guidelines that include legal principlesand rules, under which numerous issues belong and against which numerous rules aremeasured by qiyas (analogical deduction). Thus Islam allowed employment, detailedits rules and left the person to work as a manufacturer, technician, trader, investor etc.Employment was legislated in such a way that by qiyas it also includes representation.This is because the employee represents the employer of the company and is entitledto a salary. Gifts are legislated as a legal means of ownership and by qiyas this can beextended to include donations, grants, charity and rewards as means of ownership.Thus in Islam the means of ownership and the contracts are detailed by the Shari'ah ingeneral outlines and set in such a way as to include any contemporary incident. Islamconfined possession to particular means and as a result of this fact ownership came tobe defined by the Shari'ah as the possession of goods, services and wealth accordingto divine means as permitted by the Lawgiver.
The Shari‟ah has determined the means
of ownership by specific cases, which it made clear in a limited, rather thanunrestricted form. The Sha
ri‟ah has laid down these means in clear general guidelines.
These comprise of numerous sections, which are branches of these means and
clarifications of their rules. The Shari‟ah did not characterise the means by certain
general criteria, so no other general means can be included through qiyas. Islamallowed the work of an individual in return for a salary as this is considered, as a legalmeans of ownership and the core condition for this is that he would be compensatedfor the effort by being paid a salary for the work. Islam allows the cultivation of land,its farming as well as what is known as agriculture. It allowed the extracting of whatis in or on the earth, which means mining, exploration as well as construction. Underthis general guideline you also have hunting, brokerage as well as sharecropping.Each of these sections can be extrapolated further by qiyas. By looking at divine rules
from the Shari‟ah
that allow humans to possess property, it becomes apparent that themeans of possession in Islam are limited to five which are:
31. Work 2. Inheritance3. Obtaining wealth for the sake of life4. The State granting wealth to the citizens5. Wealth and commodities that individuals take without exchange (gifts, donationsand the like)
Are Islamic Financial Institutions a Success Story for Islamic Economics?
The creation, progress, and continued growth of numerous Islamic FinancialInstitutions is clearly the most important way in which the nascent discipline of Islamic Economics has influenced the real world. Nonetheless, the author shares withnumerous other researchers and practitioners the impression that these institutionsrepresent the impact of modernity on Islam, rather than conversely. That is, Islamicprinciples have been (and are in process of) being modified to accommodate modeminstitutions. The hope of pioneers in the area like Maulana Mawdoodi and hisfollowers, was to reshape the world, and in particular the theory and practice of economics, in accordance with Islamic views. To the extent that' Islamic FinancialInstitutions represent the reshaping of Islamic Laws in accordance with the demandsof modernity, these represent the failure rather than the success of IslamicEconomics. These views are controversial, and many Islamic Economists would bevehemently opposed to them. In the current note, I propose to bypass thiscontroversy by putting Islamic Financial institution out of the scope the discussion. Ipropose to discuss below only the developments in Islamic Economic Theory. .

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