islamic banking-session 2
TRANSCRIPT
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Islamic BankingSession-2
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Comparative Study of Various
Economic Systems
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Islamic Economic System
The question of Economic Activity-Whether abasic problem or a necessary requirement?
Economic Activity-not a basic problem but may
be a necessary requirement. According to Quran-Seek benevolence of Allah
The connotation of Ad-Dunya-negative
connotation Apparent contradiction-but in essence have
same implications
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Islamic Economic System
The real Nature of Wealth and Property
According to Holy Quran "wealth" in all itspossible forms is a thing created by Allah, and is,
in principle His "property" Allah delegates right of property
"Give to them from the property of Allah which
He has bestowed upon you." (24:33) Al-Quran The reason is simple-Man can invest in labor
and rest is Almighty Allah
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Islamic Economic System
Man has the "right of property" over the thingshe exploits, but this right is not absolute orarbitrary or boundless, carries responsibility and
limitations "Seek the other world by means of what Allah
has bestowed upon you, and do not be negligentabout your share in this world. And do good asAllah has done good to you, and do not seek tospread disorder on the earth." (28:77) Al-Quran
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The Right of Property
A summarized version in Islam
All wealth received from Almighty Allah
Use in such a way that ultimate purpose is the
Other World
Wealth must be subject to the commandments
of Allah
Allah may command to use in a specified way Allah may forbid the use of wealth in a certain
way
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Materialistic and Islamic
Economic System-A Comparison
Point of
Difference
Materialistic System Islamic System
Livelihood A fundamentalProblem-Ultimate end
Necessary but nottrue purpose of life
Property Unconditional right-
CapitalismNo right-Socialism
Admits right but
not in absoluteterms
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Factors of Production
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Factors of Production
Capitalistic View
1) Capital-"the produced means of production" acommodity which has already undergone one processof human production, and is again being used as ameans of another process of production
2) Labour-Any exertion on the part of man
3) Land- ''natural resources'' Means of productionwithout having previously undergone any process of
human production).
4) Entrepreneur- Manipulates all the factors, utilizesand bears the risk of profit and loss
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Rewards for Factors of Production
Capitalistic View
1) Capital- Interest
2) Labour-Wages3) Land-Rent
4) Entrepreneur- Residue (Balance of Income)
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Rewards for Factors of Production
Socialist View
Capital and Land- Collective Property
instead of private ownership- No provisionfor rent or interest
EntrepreneurState not individual hence
no question of profit
Labour-Has right to wages
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Rewards for Factors of Production
Islamic View
Different from Both
Two kinds of People have right to wealth
A) Primary right-Direct contribution in factorsof production
B) Secondary right-who dont participate in
factors of production-Co-Sharers
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Islamic and Socialist views
Comparison
Concept of Private Property
Almighty Allah-Being the owner of all resources
Socialism- Concentration of resources at handsof state-in efficiencies and redundancies
The extreme situation- creates a number of evils
while cures a few
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Islamic and Capitalist views
Comparison
The entrepreneur, as a regular factor excluded-
three factors have been recognized, instead of
four
Existence of entrepreneur not denied but
merged with other three
Profit reward of capital instead of interest
Capital-"the produced means of production but
according to Islamic must be consumed such as
machinery cant be capital
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Islamic and Capitalist views
Comparison
Land- used in more general sense as asset
Labour- Broad definition as mental and physical
labor
The ways to invest capital
1) Private business-Profit and wages only one
person 2) Partnership-Joint sharing of profit and loss
3) Cooperation-(Modarba)- One person invests
and other manages-shares profits
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Money Lending Business
in Pre-Islamic Day
"In the pre-Islamic period, the tribe of Banu
Amr bin Auf used to take interest from the tribe
of Banu-al-Mughira, and the Banu-al-Mughira
used to pay this interest. When Islam came, thelater owed a considerable amount of money to
the former". And further on: ''The Banu-al-
Mughira used to pay interest to the BanuThaqif"
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Money Lending Business
Islamic Injunctions
Let it be understood that the position of every
Arab tribe was like that of a joint company,
carrying on trade with the joint Capital of its
individual members. So, when a tribe wouldborrow collectively from another tribe, it would
usually be for the purposes of trade. The Holy
Quran prohibited even this practice
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The objective of
Distribution of Wealth
a) The establishment of a practicable system
of economy
b) Enabling every one to get what isrightfully due to him
c) Eradicating the concentration of wealth