islam's solution to the global financial crisis

Islam’s Solution to the Global

Financial Crisis Ashraf Mohamedy

Managing Director

Idafa Investments Pvt. Ltd.

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Our Progress in Modern Times

Kevin Carter

CAPITALISM IS BASED ON

• Private Ownership of the means of production, distribution & exchange

• Profit motive being the prime stimutus for all efforts

• Production and what to produce being decided on Price mechanism

• Unrestricted economic freedom• Free Market• Interest

The richest 225 people own more wealth than the poorest 2.5 Billion …..

The richest 3 people have wealth equal to GDP of 47 poorest countries of the world . . . .

If the richest 225 people gave a wealth tax of 4% . . . . .

(Findings of United Nations Development Prog, Human Development Report 1998 on the theme of

Poverty Alleviation)

SOCIALISM IS BASED ON

• State / Govt. ownership of means of production

• State / Govt. interference on all enterprise• No ownership of property by the Citizen

(everything belongs to the state)• Centrally planned economy• Totalitarian state under dictatorship• No freedom of Expression

WHAT IS THE SOLUTION?

• Man made systems are bound to fail• Communism had brought misery and was

discarded• Capitalism continues to oppress people

and is being opposed world wide• In the absence of a new MAN MADE

system, there is confusion globally

WHAT IS THE SOLUTION?

• The Solution lies in following the ‘way of

life’ offered to us by GOD himself!

• HOW?

Features of the Islamic Economic System

1.Allah is the Sustainer (29:62)

2.Allah is the Absolute owner; man trustee (6:165)

3.Everything created for Service & Use of mankind (2:29)

4. Ibadat & Muamlaat

5. Concept of Halal & Haram (2:168, 2:188, 5:3, 5:90)

6. System of Zakat & Sadaqah (2:43, 2:219, 2:274)

7. Prohibition of Interest

8. All activities based on Justice & Equity

Meaning of Riba

Definition of Interest- Money paid for the use of money

Definition of Usury- Exhorbitant amount of Interest

Meaning of Riba (Arabic)- Increase, Addition or Growth

BIBLE ON INTEREST

Exodus 22:25

If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall not charge him interest.

Leviticus 25:35-37

If one of your brethren becomes poor, and falls into poverty among you, then you shall help him ………. Take no interest or usury from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit

Manu Smruti Prohibits Interest

Slaying cows, sacrificing for those who are unworthy to sacrifice, adultery, selling oneself, casting off one's teacher, mother, father, or son, giving up the (daily) study of the Veda, and neglecting the (sacred domestic) fire . . . . .. . Defiling a damsel, INTEREST, breaking a vow, selling a tank, a garden, one's wife, or child

Living as a Vratya, casting off a relative, teaching (the Veda) for wages, learning (the Veda) from a paid teacher, and selling goods which one ought not to sell

Chapter 11: Shloka 60 – 63

AL- QURAN

Those who consume interest cannot stand [on Judgement Day] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.

Surah baqarah 2:275

AL- QURAN

Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.

Surah Baqarah 2:276

O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful.

Surah Aly-Imran 3:130

AL- QURAN

And [for] their taking of usury while they had been forbidden from it, and their consuming of the people's wealth unjustly. And we have prepared for the disbelievers among them a painful punishment.

Surah Nisa 4:161

Hadith on Interest

Sahih Al-Bukhari Hadith 7.829

Narrated by Abu Juhaifa The Prophet forbade the use of the price of blood and the price of a dog, the one who takes (eats) usury the one who gives usury, the woman who practises tattooing and the woman who gets herself tattooed.

Hadith on Interest

Al-Tirmidhi Hadith 2826 Narrated byAbuHurayrah Allah's Messenger (peace be upon him) said, "Usury has seventy parts, the least important being that a man should marry his mother." Ibn Majah and Bayhaqi, transmitted it in Shu'ab al-Iman..

Hadith on Interest

Sunan of Abu-Dawood Hadith 3327 Narrated byAbdullah ibn Mas'ud The Apostle of Allah (peace be upon him) cursed the one who accepted usury, the one who paid it, the witness to it, and the one who recorded it.

Hadith on Interest

Sahih Al-Bukhari Hadith 7.259

Narrated byAbu Juhaifa The Prophet cursed the lady who practices tattooing and the one who gets herself tattooed, and one who eats (takes) Riba' (usury) and the one who gives it. And he prohibited taking the price of a dog, and the money earned by prostitution, and cursed the makers of pictures

Types of Riba

Riba Al – Nasi’ah- Interest on loans - Also known as Riba Al- Qur’an

Riba Al – Fadl- Exchange of good quality, with poor quality

of the same thing- Other forms of malpractices

Arguments Galore

• Is interest same as riba?• Banks are institutions of development• Interest is the cost of development• Banks should be commended for the public

service they do• The interest of today is different from the days of

Jahilliya• WHAT IS THE REAL STORY?

War from Allah

“O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers. If ye do it not, Take notice

of war from Allah and His Messenger. (Quran 2:278-279)

Effects of Interest on Society

Interest Contributes 96% to Inflation

Effects of Interest on Society

• Inflation• Lack of demand• Lower production• Job cuts• Unemployment• Social Unrest, Chaos

& Anarchy

Effects of Interest on Society

Farmers Suicide

OLUSEGUN OBASANJO, Former President of Nigeria

Nigeria borrowed $5 billion from Western creditors in 1978. Since then, we have paid back $16 billion. It may also surprise you to know that we still owe $31 billion! This is largely due to compound interest and interest rate fluctuation.

Benjamin Disraeli

Governments do not govern, but merely control the machinery of government, being themselves controlled by the hidden hand.

The governments of the present day have to deal not merely with other governments, with emperors, kings and ministers, but also with the secret societies which have everywhere their unscrupulous agents, and can at the last moment upset all the governments’ plans.

Thomas Jefferson, 3rd President of the USA

“If the American people ever allow the banks to control the issuance of their currency, first by inflation then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the

banks and restored to Congress and the people to whom it belongs. I sincerely believe that banking institutions are more dangerous than standing armies.“

Lord Josiah Stamp, Former Director, Bank of England

The modern Banking system manufactures money out of nothing. The process is perhaps the most outstanding piece of sleight of hand that was ever invented…If you want to be slaves to the bankers, and pay the costs of your own slavery, then let the Banks create money

Jesse Jackson, US Civil Rights Leader

They no longer use bullets and ropes, they

use the World Bank and IMF

Interest Free Banking isEquity Based

• Mudaraba (Fund Manager)• Musharaka (Venture Capital)• Ijara (Leasing)• Murabaha (Cost Plus)• Diminishing Musharaqa (Reducing Balance JV)

Some Successful Interest Free Banks

Questions?Get them addressed

Ashraf MohamedyIdafa Investments Pvt. Ltd.

Office: +91 22 23472118;

Email: ashraf@idafa.com;

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