Interest free economy promulgated by the qur’an


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this ppt focuses on the interest free economy as promulgated by the quran. islamic banking is one of the fastest growing finace sector

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Interest free economy promulgated by the qur’an

  1. 1. Interest Free Economy Promulgated by THE QUR’AN<br />Presented by:<br />Mohammad Aamir Khan<br />2K10IB13<br />
  2. 2. RIBA<br />RIBA IS MENTIONED 8 TIMES IN THE QURAN<br />RIBA means :an addition to, an increase, over and above the original size.<br />In other words: interest<br />Interest: amount paid for amount lent<br />The practice of lending money is known as usury or interest<br />According to islam: unlawful addition<br />Any act of interest is prohibited in islam<br />
  3. 3. What does the QUR’AN say about riba(interest)<br />SurahBaqrah chapter 2 verse 278<br />O you who believe! Fear ALLAH, and give up what remains of your demand for usury, if you are indeed believers<br />Allah says in the QUR’AN that HE has allowed trade but prohibited USURY.(RIBA)<br />
  4. 4. Types of Riba<br />RIBA NASIYA: Loan for bussiness on which interest is charged <br />RIBA FADAL: Exchange of a superior good in return of larger quantity of inferior goods.<br />BOTH TYPES OF RIBA IS STRICTLY PROHIBITED<br />
  5. 5. System of Zakat<br />Compulsory on all muslims who are sahib-e-maal<br />2.5 % per year<br />Should be given to the poor ,needy , debtor, traveller , feesabeelillah (in the way of allah)<br />
  6. 6. Objective of Zakat<br />To prevent the wealth from circulating among the rich and wealthy<br />The serious issue of hunger and poverty would be in control if everybody in the whole world starts giving out zakat<br />
  7. 7. Modern banking interest <br />Increases the cost of living<br />if Firm takes a loan and goes under loss, it has to pay the debts + interest<br />A bank will prefer giving loan to an alcohol producer rather giving it to a social cause<br />
  8. 8. 1980’s<br />1980’s saw the world become a gambling den<br />All financed by banks<br />Huge and consistent returns<br />Power is concentrated in the hands of few people<br />
  9. 9. Principles of islamic banking<br />Tawheed<br />Divine origin of nourishment <br />Khilafa<br />Taskiyaa<br />Accountablity<br />
  10. 10. Islamic banking<br />No interest<br />Profit and loss sharing<br />Reduce the cost of living<br />Social justice<br />Social consideration (loan wont be given to an activity against society)<br />If the debtor is unable to repay, they let go<br />
  11. 11. Factors of production<br />Land - rent<br />Labour - wages<br />Capital - interest<br />Organisation (entrepreneur) -profit/loss<br />
  12. 12. ISLAMIC FACTORS OF PRODUCTION<br />Land - rent<br />Labour - wages<br />Capital - profit/loss<br />Organisation (entrepreneur) -profit/loss<br />Islam does not differentiate between the entrepreneur and capital<br />
  13. 13. Types of business unit<br />Surplus unit<br />Deficit unit<br />Best example of the two units coming together in islamic history is of<br />Our beloved Prophet Muhammad(s.a.w)<br />And his wife Khadija(r.z.a)<br />Shared their profit in predetermined ratio <br />
  14. 14. How do islamic banks work<br />Options available <br /> current A/c (Amanat)<br />( no interest)<br />With the depositor’s permission, the bank can utilize the money<br />No profit and no loss will be shared between the depositor and the bank<br />As the primary motive of an account is safety of the money<br />
  15. 15. Savings a/c<br />Safety<br />The bank invests your money in businesses <br />In return bank may give u share of the profit<br />The shariya allows it(sadqa)<br />
  16. 16. Investment account(mudariba)<br />Profit and loss sharing<br />Fix period<br />The depositor (sahibe-maal) (surplus)<br />The bank (sahibe-amal) (deficit)<br />The ratio of profit is 7:3<br />The depositor gets 70 %<br />The depositor bears the loss<br />
  17. 17. Project financing<br />Mudariba<br />All loss is burdened by bank<br />Profit is shared <br />The bank has no authority over the management<br />
  18. 18. Project financing<br />Musharika(partnership)<br />Profit is shared on capital ratio<br />More loss is burdened by the bank<br />The bank has a control over the management of the firm<br />
  19. 19. Project finanacing<br />Murhaba<br />The bank buys an asset on behalf of the firm<br />And charges service charge over it(negociable)<br />It can be combined with mudariba(full finanace) or musharika(partnership)<br />
  20. 20. Project financing<br />Al ijra( hire purchase)<br />Machinery is bought by the bank and lent on life span basis<br />
  21. 21. KARZ-E-HASAN<br />10% of bank’s profit is reserved of karz-e-hasan<br />Lent only to the poor and needy for bussiness<br />The bank cannot ask for any profit<br />The business man can give some profit if he wants<br />
  22. 22. Quran is not just a book<br />It’s the word of GOD almighty<br />Islam is not just a religion <br />It is the way of life<br />