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Islamic Finance By Dr. Humaira Awais Shahid

Islamic Finance By Dr. Humaira Awais Shahid

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Islamic Finance

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10/21/2013

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2013
Dr.HumairaAwaisShahid
MUAMALAAT
THEALTERNATIVETOTHERIBASYSTEMEXISTS
(BasedontheresearchworkoftheScholarShaykhUmarVadillo)
AnEvidenceofthattoeradicateRibaisPOSSIBLEandthealternativehasALWAYSexisted.
 
Muamalaat
1|
P a g e
1
 
Preamble
1.1
 
AllahsaysintheQur’an:“Allahhaspermittedtradeandforbiddenriba”.IntradingthereisthecuretoRiba.SeenasasystemtradeisMuamalaat.1.2
 
WecontendthatanyattempttoeradicateRibamustfocusonwhatis
thealternativetoRiba
,thatistosay,understandingwhatishalalmustprecedeunderstandingwhatisharam.Thisisbecausewecannoteliminatewhatisforbiddenwithoutprovidinganalternativefromwithinwhatispermitted.1.3
 
Wecontendthat
Ribaisasystem
,notjustmerelyacontract.ThisisbecauseRibahasdevelopedandevolvedoverthecenturiesintoacomplexsystemthataffectsallaspectsoftheeconomyandthereforeitiscrucialtounderstandRibainthecontextofthoseinstrumentsandinstitutionsthatmakeRibapossiblesuchasbanks,credit/papermoney,centralbanks,financialmarketsandotherfinancialinstitutionsandinstruments.1.4
 
WecontendthatitisimpossibletoeradicateRibawithoutconsideringhowcredit/papermoneyandbankshastransformedRiba.Thisisbecausetheintroductionofcredit/papermoneyallowedbankstolendmoneyinexcessofwhattheypossessthroughtheprincipleoffractionalreservebanking.TheeffectofthisextracreationofcreditistotransferpartoftheburdenofRibatoathirdparty(otherthanthelenderandtheborrower)unawareofitsinvolvement.Thatthirdpartyisthecommunityofpaper/creditmoneyuserswhoareunfairlytaxedwiththelossofvalueofthepapermoneytheypossess.Thatlossofvalueisrelatedtotheincreaseofcredit/papermoneyincirculationwhicheveryactoflendingcreates.Thereforethis
“transformedRiba”
hasnowthreeparties:
 
Thelenderwhichbenefitsfromlendingcreditmoneyinexcessofwhattheyhave.
 
Theborrowerwhichbenefitsfromareductionontheburdenofrepaymentduetothelossofvalueofthemoneyhehastorepay.
 
Thecommunityofusersofpaper/creditmoneywhichsufferstheunfairburdenoflosingpartofthevalueofthemoneytheypossess.1.5
 
WecontendthatitisimpossibletoeradicateRibawithoutconsideringhowcentralbankshavetransformedmoneyfrombeingafreelychosencommoditytoalegallycompulsivecredit/papermoneyor
fiatmoney
.
 
Muamalaat
2|
P a g e
1.6
 
WecontendthatthemodelofwhatishalalexistsanditcanbeimplementedwithintheframeoftheIslamicLawandtheConstitutionofPakistan.Thismodelisthesocio-economicmodelofallIslamicsocietiesfromthebeginningofIslamuntilthefalloftheKhalifate.Thismodelissurprisinglymoreorlesscommontoallpre-capitalistsocieties(includingsomenon-Islamicsocieties)anditwasperfectedduringthetimeoftheMessengerofAllah,salallahualaihiwasalam,inthecityofMadinaal-Munawara.ThismodelofMadinaisknowninthefiqhas
the‘amaloftheahlal-Madina
,andinitslegalformisknownasMuamalaat.1.7
 
WecontendthatMuamalaatistherightalternativetothequestionofhowtoeraditateRiba.TheproofofthisisthatthepresentpetitionchallengesGovernmentsavingbanks,negotiableinstruments,cooperativesocieties,insurancecompanies,StatebankofPakistan,moneylendersandbankingcompanies.AlltheseinstitutionswillnotbeabletooperatewithoutRiba–astheyhavethemselvesstated.ThereforethequestionoferadicatingRibaistransformedintohowtocreateanalternativeallthoseinstitutionsthatlivewithRiba.IfRibaisseenasasystemthequestionisthereforehowtotransformthesystemofRibawith
thesystemofMuamalaat
.1.8
 
MuamalaatisthesystemofhumaninteractionsinIslam.Itencompassesalleconomic,politicalandsocialinteractions.IthasbeenpracticedfromthebeginningofIslamuntilthefallofCaliphate.Itisasysteminasmuchthatnotonlyinvolvescontractualmattersbutalso
institutionsandinstruments
thatsupportandpromulgatewhatishalalsuchasGolddinar,silverdirham,Wadi’ahs(safekeepinginstitutions),Suqs(openmarkets),Caravans(opentradinginstitutions),Guilds(Openproductioninstitutions),Waqf(welfareinstitutions),BaiSalam(agriculturaltradingsystem),Baitulmaaletc.1.9
 
WecontendthattheintroductionofthegoldDinarandsilverDirham,knownasShariahcurrency,isfundamentaltothematterofintroducingMuamalaatandthereforetheeradicationofRiba.1.10
 
Wecontendthatintroductionof
goldDinarandsilverDirham
mustbedone
graduallyandprogressively
withinareasonableframeoftimeinwhichsocietyasawholecaninitiateaprocessoftransformationfromRibatoMuamalaat.1.11
 
WecontendthatatthesametimetheShariahcurrencyisintroducedother
elementsofMuamalaat
shouldbeintroducedsimultaneously.Themostimportantoftheseotherelementsistheintroductionofthe
Suqs
orPublicMarkets.MarketsorsuqsinMuamalaatarepublicinstitutionsandcannotbeprivatized,justlikethemosquescannotbeprivatized.Thepublicmarketisaninstitutionthatbelongstohumanhistory.WefinditamongtheancientRomans,theancientGreeks,inoldMesopotamia,etc.Thepublicmarketmustbeaccessibletoallandtherecannotbetaxesorfeesimposedtoitsusers;justliketherearenotaxesorfeestothosewhowishtoprayinamosque.

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