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General Framework for Discussion of Islamic Finance

General Framework for Discussion of Islamic Finance

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It is a basic discussion about Islam and Finance, in relation with current financial crisis.
It is a basic discussion about Islam and Finance, in relation with current financial crisis.

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Published by: خير الأنام الحبشى on Oct 18, 2013
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11/13/2014

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General Framework forDiscussion of IslamicFinance
 By Dr Shaykh al Muhaddith Mu
ammad Akram Nadwi, Oxford.
Islamic finance over the last three decades or so has grown into ahuge industry. It is huge both in the sense that vast sums of money are handled by Islamic finance, and also in the sense that a greatmany scholars have been attracted to it, and they have helped toinvent or justify financial instruments which claim to make itlawful for Muslims to do things with their money very similar tothe things that non-Muslims do with theirs. Yet, if using the word'Islamic' before 'finance' is to mean anything at all, it should meanthe kind of finance that belongs in Islam, the kind that Muslimsacting specifically as Muslims engage in when they are producingand exchanging goods and services, and generally building up theirindividual and collective means of livelihood.Most ordinary Muslims are, I think rightly, suspicious and cautiousabout accepting the permissibility of many of these instruments. Itdoes not help matters that banks and investment companies run by and for non-Muslims are happy to use these same Islamic financialinstruments because it helps them to attract and keep Muslimcustomers.That sounds very similar to, for example, a supermarket stockinghalal meat in the hope of attracting the business of the Muslims inits neighborhood. It is indeed similar, but it is not the same. Thereare known and clear procedures that must be followed before meatis called halal, and perhaps it does not matter that, at the finalpoint of sale, the retailer is a non-Muslim – provided those
 
procedures have been correctly and fully observed. It is not at all soclear-cut with money. Money is something abstract and symbolicas well as real and concrete. It is not just a store and physical signof value; it is also a means of assigning and exchanging the valuesof different goods and services. Accordingly, it permeates allhuman relationships that are connected in any way to the exchangeof goods and services.That is why it matters very much to Muslims to know that themoney that is circulating among and around them is, from anIslamic point of view, sound and safe, and that the transactions being done with that money are also sound and safe. The scholarsengaged in developing, and justifying, Islamic financialinstruments are engaged in the effort to provide Muslims with theassurance that those instruments are sound and safe from anIslamic point of view.In order to judge whether and how far those scholars havesucceeded in achieving this goal, it is necessary to step back andask how we can know if a practice is sound from an Islamic pointof view. Before we can do that we need to take a further step back and ask whether and how far such a task is possible at all. In other words, before I get into a discussion of particular instruments andcontracts now being offered as Islamic finance, I want to establishas clear a framework as possible for this discussion. This is anecessary prelude to reaching a balanced judgment about theseinstruments and contracts based on a sufficient appreciation of theexternal necessities and the internal assumptions and arguments(some persuasive, some not) which have led Muslim scholars toseek out some sort of Islamic rationale for various modernfinancing techniques.The world as we find it has in it three distinct orders that overlapand interpenetrate. The largest order encompasses all creatures,living and non-living, human and non-human, Muslims and non-Muslims, all together. We can call it “the natural order”. It is
 
perceptible and intelligible to human beings; to some extent they can work out how it operates and, in some measure, influence andcontrol what happens around them. This order includes the boundaries of time and space, and what modernists in the Westcall the laws of nature, to which everyone and everything is subject,involuntarily. Within that natural order, there is “the religiousorder” of divine commands communicated to human beingsthrough God's prophets and messengers. This order is addressedspecifically to human will, and demands a conscious, consenting, voluntary obedience. Finally, there is “the Islamic order” of divineinstructions that bind specifically Muslims, commanding orcommending them, through the Book and the teachings of God'sMessenger to live in certain ways and to avoid certain other ways.Because these three orders exist together in the one same world, itis sometimes the case that the approval of a certain way of actingas Islamic, as conforming to the Book and Sunnah, does not at allcontradict its being approved by non-Muslims as “practical' or“useful” or “sensible” or “healthy” for the individual or for society.Non-Muslims just like Muslims get hungry and need food; get illand need medical attention; get attacked and need to fight; getcurious and need to explore and travel. Then, if Muslims findnotably effective ways of serving these needs, we cannot besurprised if non-Muslims adopt those ways. That is obvious. It isalso obvious that the converse applies: to serve their basic wantsand needs, Muslims can in principle adopt ways that are or werethe ways of non-Muslims. That is surely true. But it is also true tosay that, in some instances, no matter how “useful' or “efficient”certain means are for the achievement of certain ends, Muslims asMuslims will reject them as unIslamic. How do they decide whenthey may and when they may not adopt the ways of non-Muslims?This is not an easy question. For the time being, let us note that if  we are going to refuse certain financial instruments or transactionsas unIslamic, we cannot do so simply on the basis that they are of 

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