Asas Falsafah Ekonomi Islam

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.