Assalama'laikum. Sy doakan pembaca blog sy sentiasa dalam redha Allah dalam menjalani kehidupan dan aktiviti seharian anda. Hari ini, setelah sekian lame tidak menilis ape-ape di blog ini, terasa girang untuk post article yg kedue sy mengenai falsafah ekonomi islam. "Post kali ini dalam bhs inggeris kenape eh??". ngade-ngade la "penulis blog ni". hahahaha. camni ceritenye, post ni adalah ringkasan dari article M. Umer Chapra yg bertajuk "Why Islam Prohibited Interest?" Kami, rakan sekelas diminta untuk buat ringkasan ttg article En. Umer in td sebagai tugasan dalam kelas. Jadi, untuk sharing ngn anda sume, atau untuk menambah kefahaman si penulis lagi, sy post ringkasan yg dibuat dr article M. Umer Chapra. Semoga bermanfaat dan mudah difahami. Tegurlah sekiranya terkhilaf ye.
Introduction
Islam
guarantees to secure the human needs by guiding its adherent in every aspect of
life. Maqasid Syariah serves as a concrete objective to promote benefit to
human being and prevent harm. The religion is a massage of peace and secure
life earth and hereafter from Allah.
Establish
of Justice: The central Goal of Islam
The
Quran and the Sunnah encourages muslim to be just and fair to others. Allah
s.w.t through his messenger has thought the believer the value of justice.
Allah saying in surah al-Hadid sentences 25 : “We have already sent Our messengers with clear evidences
and sent down with them the Scripture and the al-Mizan that the people may
maintain [their affairs] in justice. And We sent down iron, wherein is great
military might and benefits for the people, and so that Allah may make evident
those who support Him and His messengers unseen. Indeed, Allah is Powerful and Exalted
in Might”. In fact, Allah commands His prophet and all human to be just and
fair through this revelation.
Righteousness has been placed at the nearest
with justice because it cause oneself to be afraid of Allah’s wrath for not
being just to others. The person who has righteousness in heart will avoid
being oppressive. This verse might be the remainder to whom has taqwa in their
heart, Allah said, “And do not incline
toward those who do wrong, lest you be touched by the Fire, and you would not
have other than Allah any protectors; then you would not be helped” surah
al-Hud verses 113.
Brotherhood
and justice has a close relationship as it initiate love and affection thus
will produce a sense of justice in social interaction among people. Justice
relate to brotherhood in Islam through the moral value thought by prophet. From
Abu Hurairah narrated that Prophet said “Indeed,
I (Prophet shollallahu ‘alaihi was sallam) was sent to adorn noble moral
values”.
The
Implications of Justice
Trust
that Allah gave to human in managing and utilizing resources will be kept in
manner. Allah has conveyed this message in al-Quran, “Beautified
for men is the love of things they covet; women, children, much of gold and
silver (wealth), branded beautiful horses, cattle and well-tilled land. This is
the pleasure of the present world's life; but Allah has the excellent return
with Him” surah ali-Imran verse 14. People who have faith believe that trust
must be managed properly according to the direction of the ultimate owner. Thus
these people with act fairly in utilizing the wealth he posses.
Equitable
manner in distributing revenue in one country generates economic stability. In
our country, 13 May 1969 tragic event showed that the implication of
inequitable income distribution. When the poor and rich gap is getting bigger
more people will unsatisfied. Thus, socioeconomic must be based on the truly
unbiased principle in order to benefit society generally without discrimination.
Need
Fulfillment
Borrowing that
relatively based on interest has a bad implication as financial institutions
tend to promote spending lifestyle beyond needs. Such encouragement will burden
the shopaholics with accumulated interest debt then drag them into bankruptcy.
The notion is supported with the statistics sources from Department of
Insolvency (Mdi), there are 217,577 individual has been declared bankrupt
because of car loan and housing loan.
Another
point that relates to this topic is the discrimination in giving loan will affect
the economy as it provide loan only for the rich one thus it fails to fulfill
the needs of deficit unit hence the wealth circulate among wealthy people.
The
easy availability borrowing funds contributes to an unproductive and wasteful
spending which would squeezes resources available. The practices of
conventional banking today which providing borrowing fund only for the rich
will result in the increasing idle resources. In my opinion, a government that
allocates to unproductive and waste spending better than in development
spending, such as education, will not fulfill the aspiration of people in the
country. Thus this will reduce deficit and minimize its borrowing so that one
country free from liabilities.
Optimum
Growth and Full Employment
Islamic
Economy optimizes growth by guiding people to save extra money which will
result in a positive effect on economic growth. Islam discourages extravagance
in consumption and bring to the thought that the concept of wasatiyyah which
means moderation in all aspect in our life. Because of this reason a well
developed country like Japan has discouraged borrowing and implemented tax on
credit for every purchase made by its citizens to lessen the amount of unpaid
debt.
People
that having surplus in wealth, are encouraged to invest in saving account which would help the
deficit parties by the implementation of the profit sharing-and-loss sharing
system or literally known as mudharabah. Today, financial institution has
provided saving account that entitle the institution to invest in potentially
profitable project. Obvious that this will boost economic growth and new
employment opportunities can be create.
Drastic
rise in consumption due to the easy availability of credit is one of the factors
of declining in economic stability. This is more worsening with the imposition
of interest-based credit purchase in conventional financial system which impact
in increasing inflationary pressures and debt-servicing burden.
In
order to solve the unemployment problem, government is responsible in
strengthening the training skills institution with cooperation between related
agency and industrial sector entrepreneur so that it would fulfill the
employer’s demand of the required skill for employee.
Islam
has a medium of stimulating investment from imposition on zakat savings payment
which utilize idle savings and discourage hoarding. Zakat would return wealth
the market financial flow after collected and distributed to the needed ones.
Investment
climate can be harmonize by the fair ratio between the financier and the
entrepreneur because the risks of business may be equitable distributed among
them.
Conscientious
work will improve the efficiency in developing growth. Islam in fact prevented
all sources of resort to unfair and dishonest practices by imposing Syariah law
hence it helps in promoting development by preventing oppressive action. The
prohibition of oppressive income conveyed through the revelation of Surah al-Baqarah
verse 278-279, “O you who have believed, fear Allah and give up what
remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a
war [against you] from Allah and His Messenger. But if you repent, you may have
your principal - [thus] you do no wrong, nor are you wronged.”
Equitable
Distribuiton
A
number of Islamic values and institutions are directed towards making
brotherhood,social equality and equitable distribution a reality in Muslim
societies through zakat and the inheritance system. The replacement of interest
based financial intermediation by the profit and loss sharing system should be
great of advantage.The established practice of banks in the conventional
banking system is to lend mainly to those individuals and firms who have the
necessary collateral to offer large internal savings to service the debt. Using credit the banking system tends to
reinforce the unequal distribution of capital. Hence, deposits come from a
broader cross section of the population, their benefit goes mainly to the rich
tends to accentuate the inequalities of income and wealth.Certain measures have
undoubtedly been adopted in a number of countries to redress the
situation.However, they amy tend to be relatively more successful in an
equity-based system where the banks would be motivated to give at least as much
attention to the profitability of the project as to the collateral, and thereby
enable small businesses also to compete.
Economic
Stability
Economic
activity has fluctuated throughout history for a number of reasons,some of
which, like natural phenomena, are difficult to remove.However, economic
instability seems to have become exacerbated over the the last two decades or
as a result of turbulence in the financial markets due to excessive volatility
in interest rates, exchange rates and commodity and stock prices. Such crises
tend to accentuate uncertainties,disrupt the smooth functioning of the
financial system, create financial fragility, and hurt economic performance.
There are a number of internal and external factors that cause volatility in the
financial markets. One of these is the excessive build-up of public and private
debt as a result of relatively easy access to credit,particularly short-term
credit, in an interest-based systemof financial intermediation,where the lender
tends to rely more on the crutches of collateral than on the strength of the
project. The tax s ystem has also indirectly promoted the the use of debt
rather than equity by subjecting dividend payments to taxation while allowing
interest payments to be treated as a tax deductible expense. The evolution in
information and communications technology has led to rapid transfers of funds
from country to country on the slightest rumour. This leads to a hih degree of
volatility in interest rates which has in turn injected a great deal of
uncertainty into the investment market and driven borrowers and lenders alike
from the long-end of the debt market to the short-end. The rapid growth in bank
credit to the private sector fuelled by inflows from abroad created speculative
heat in the equity and property markets and generated a mood of ‘irrational
exuberance’which pushedup asset prices. The large foreign exchange inflows from
abroad enabled the central banks to peg exchange rates. This helped provide the
assurance that foreign banks needed to lend and attracted further inflows of
funds from abroad in foreign currencies to finance the boom in the assets
markets. Had there been a risk-sharing, the banks would have been under a
constraint to scrutinize the projects more carefully, and would not have
yielded even to political pressures if they considered the projects to be too
risky.
There was a reverse flow of funds as soon as there was a
shock. Shock may result from a number of factors, including natural calamities,
and unanticipated shifts in terms of trade, interest rates or export prices,
and lead to decline in confidence in the country’s ability to honour its
liabilities. There was a domestic banking crisis,which had its repercussions on
foreign banks because of the inability of domestic banks to meet their external
obligations. Government have only two options in such circumstances. The first
is to bail out the domestic banks at great cost the tax-payer, and the second
is allow the banking system to fail and the economy to suffer a near breakdown.
As a result governments and central banks may be forced to adopt monetary and
fiscal policies that sacrifice the realization of their goal. Even industrial,
and not just developing, countries can face such crises if there is a heavy
reliance on short-term credit or in flow of funds. The heavy reliance on
short-term borrowing has also injected a substantial degree of instability into
the international foreign exchange markets.
The
large volume also has other adverse effects. It has been one of the major
factors contributing to the continued high real rates of interest which have
tended to discourage productive investment. This impedes the efficient
operation of these markets, injects excessive instability into them, and
creates pressures in favour of exchange controls, particularly on capital
transfes. The effort by central banks to overcome this instability through
small changes in interest rates or the intervention of a few hundred million
dollars a day has generally proved to be ineffective. However, critics of the
tax have argued that the imposition of such a tax would be impractical. If it
is not desirable to rely heavily on short-term borrowing to finance large
current account deficits normally incurred in the initial phase of economic
development, then the more desirable thing would be to rely on long-term
borrowing on equity financing. Of these two, equity financing is preferable because
it would introduce greater health into the economy through a more careful
scrutiny of projects.
The IMF has also thrown its weight in favour of equity
financing by arguing that : ‘ Foreign direct investment, in contrast to
debt-creating inflows, is often regarded as providing a safer and more stable
way to finance development because it refers to ownership and control of plant,
equipment, and infrastructure and therefore funds the growth-creating capacity
of an economy, whereas short-term foreign borrowing is more likely to be used
to finance consumption. Furthermore, in the event of a crisis, while investors
can divest themselves of domestic securities and banks can refuse to roll over
loans, owners of physical capital cannot find buyers so easily. There is no
doubt that in good times an increased dividend would be expected, but it is
precisely in such times that the burden of higher dividend can be borne. A
number of Muslim as well as non-Muslim economists have hence argued that the
shift to an equity-oriented financial system may help substantially reduce instability
in the financial markets. This leads to discrepancy between assets and
liabilities, and ultimately to a banking
crisis if there is a loss of confidence in banking system. In the profit and
loss system, the loss on the assets
sides gets promptly absorbed by the liabilities side. This should help minimize
the risk of bank failures and enhance the stability of the banking system. A
further argument is that interest rate volatility defeats all efforts to create
stability in exchange rates. Because of the volatility in interest rates, funds
move from country to country to take advantage of the interest rates
differential. An equity-based economy may tend to remove the daily establishing
influence of fluctuating interest rates.
