The document discusses the development of Islamic finance and contrasts it with usury practices in Christian and Jewish traditions, emphasizing Islam's continued prohibition of usury. It outlines historical contributions from Muslim merchants that led to the establishment of sophisticated financial instruments and practices, such as modern cheques and futures contracts. Additionally, it promotes a new economic agenda focused on sustainable livelihoods and ethical financial practices, arguing for a reallocation of resources to enhance community wealth and well-being.

1. INTRODUCTIONTO ISLAMIC FINANCE
Developing story on why usury became innocent in
Christian-JewsWorld and how Muslims created
foundations for a sophisticated financial world
International Islamic Banking and Finance Certification Program
Joint Cooperation Between University Mohammed V Morocco
and Tazkia University College of Islamic Economics
Bogor, September 2014

2. The Ascent of MoneyThe Ascent of Money
This 4 hours
documentary film
won Emmy Award !
Our main source

3. History of Banking according to Shakespeare :History of Banking according to Shakespeare :
The Merchant ofVeniceThe Merchant ofVenice

4. The Seven Circle in Hell for UsurersThe Seven Circle in Hell for Usurers
In Florence's Duomo
(cathedral) there is a
fresco by Domenico di
Michelino that shows
the great Florentine
poet Dante Alighieri
holding his book the
poet Dante Alighieri
holding his book the
Divine Comedy. As Dante
imagined it in Canto
XVII of his masterpiece,
there was a special part
of the seventh circle
of Hell reserved for
usurers
We know that all Abrahamic religions prohibit usury, why it seems that
only Islam still hold the principle?

5. The Medici Family & The Medici BankThe Medici Family & The Medici Bank
The House of Medici was a banking family, political dynasty and later royal
house that first began to gather prominence under Cosimo de' Medici in
the Republic of Florence during the late 14th century.
The family owned the Medici Bank, the first and largest banking-institution
in Europe during the 15th century. Among their arts collection at the Medici
House are Michelangelo, Leonardo daVinci, and others prominent artists. The
Medici produced four Popes of the Catholic Church—Pope Leo X (1513–
1521), Pope ClementVII (1523–1534), Pope Pius IV (1559–1565), and Pope Leo
What happened if a family had usury-based bank and the family members
became Popes ?
1521), Pope ClementVII (1523–1534), Pope Pius IV (1559–1565), and Pope Leo
XI (1605s)
The Medici Bank was one of the most prosperous and most respected
institutions in Europe.There are some estimates that the Medici family were the
wealthiest family in Europe for a period of time. A notable contribution to the
profession of accounting was the improvement of the general ledger
system through the development of the double-entry bookkeeping system for
tracking credits and debits.

6. The Ultimate : Bank ofVaticanThe Ultimate : Bank ofVatican
The Institute for theWorks of Religion (Italian: Istituto per le
Opere di Religione – IOR), commonly known as theVatican
Bank, is a privately held institute[1] situated exclusively on the
sovereign territory of theVatican State and run by a Board of
Superintendence which reports to a Supervisory Commission of
Cardinals and the Pope.

7. Brief SummaryBrief Summary
 Islamic (also all Abrahamic religions) avoid
◦ Usury (or interest or riba)
◦ Cheat (the Quran has more ayat on cheating
scales than on usury) and its bigger conception :
despotic or dzalimdespotic or dzalim
◦ Gamble, speculation or gharar
 The 500 years development of interest-
based, speculative and cheating financial
world could be ends up some day. It is our
together efforts that matters.All of us,
regardless Muslim or not.

8. New Economic AgendaNew Economic Agenda
 The proper purpose of an economy is to secure just, sustainable,and joyful
livelihoods for all.
 GDP is a measure of the economic cost of producing a given level of human
well-being and happiness.
 A rational reallocation of real resources can reduce the human burden on
the Earth’s biosphere and simultaneously improve the health and happiness
of all.
 Markets allocate efficiently only within a framework of appropriate rules to
maintain competition,cost internalization,balanced trade, domestic
investment,and equality.
 A proper money system roots the power to create and allocate money in A proper money system roots the power to create and allocate money in
people and communities in order to facilitate the creation of livelihoods and
ecologically balanced community wealth.
 Money,which is easily created with a simple accounting entry, should never
be the deciding constraint in making public resource allocation decisions.
 Speculation,the inflation of financial bubbles, risk externalization,the
extraction of usury, and the use of creative accounting to create money
from nothing, unrelated to the creation of anything of real value,serve no
valid social purpose.
 Greed is not a virtue; sharing is not a sin.
 The only legitimate reason for government to issue a corporate charter
extending special privileges favoring a particular enterprise is to serve a
clearly defined public purpose.
 Public policy properly favors local investors and businesses dedicated to
creating community wealth over investors and businesses that come only to
extract it

9. How Muslims Change Financial WorldHow Muslims Change Financial World
 Transaction instrument : the modern cheques comes from the
Arabic saqq, a written vow to pay for goods when they were
delivered, to avoid money having to be transported across
dangerous terrain. In the 9th century, a Muslim businessman could
cash a cheque in China drawn on his bank in Baghdad
 Financial assets : shares is a direct trans literati on syirkah with
almost100% same meaningalmost100% same meaning
 Complex financial assets such as futures and options developed by
Muslims as a tool to avoid speculation
 The development of a sophisticated financial world should be build
in a very reliable and trusted society as agency problems and its
specific disease : moral-hazard should be minimized. Muhammad
saw before became a prophet was a very trusted merchant.The
term hazard itself comes from Arabic alzahr mean dice or gambler
to express a person whom very unreliable

10. HowHow RasulRasul saw. Develop Salamsaw. Develop Salam
 From Anas bin Malik ra,
 ‫ن‬‫أ‬‫ﻮل‬‫ﺳ‬‫ر‬ِ ‫ا‬‫ﺻﻠﻰ‬‫ﷲ‬‫ﻋﻠﯿﮫ‬‫و‬‫ﺳﻠﻢ‬‫ﻰ‬‫ﮭ‬‫ﻧ‬‫ﻦ‬‫ﻋ‬ِ‫ﻊ‬‫ﯿ‬‫ﺑ‬
ِ‫ة‬‫ﺮ‬‫ﻤ‬‫اﻟﺜ‬‫ﻰ‬‫ﺘ‬‫ﺣ‬‫ِﻰ‬‫ھ‬‫ﺰ‬‫ﺗ‬‫ﻮا‬‫ﺎﻟ‬‫ﻗ‬‫ﺎ‬‫ﻣ‬‫و‬‫ِﻰ‬‫ھ‬‫ﺰ‬‫ﺗ‬‫ﺎل‬‫ﻗ‬
‫ﺮ‬‫ﻤ‬‫ﺤ‬‫ﺗ‬.‫ﺎل‬‫ﻘ‬‫ﻓ‬‫ا‬‫ذ‬ِ‫إ‬‫ﻊ‬‫ﻨ‬‫ﻣ‬‫ا‬‫ة‬‫ﺮ‬‫ﻤ‬‫اﻟﺜ‬‫ﻢ‬ِ‫ﺒ‬‫ﻓ‬
‫ِﻞ‬‫ﺤ‬‫ﺘ‬‫ﺴ‬‫ﺗ‬‫ﺎل‬‫ﻣ‬‫؟‬‫ِﯿﻚ‬‫ﺧ‬‫أ‬.‫ﻣﺘﻔﻖ‬‫ﻋﻠﯿﮫ‬
 ”Rasulullah saw forbids fruit selling until its mature“
And then Rasul said “If Allah decide that harvesting is
 ”Rasulullah saw forbids fruit selling until its mature“
And then Rasul said “If Allah decide that harvesting is
not going to happen, on what cause you can take your
brother’s money ? (Bukhari no. 2198 dan Muslim no.
1555).
 Hence, bonded sale on agricultural products is
forbidden because it has a gharar. Instead, the sale
should specify quantity and quality of future delivery
on current agreed price (what we call “Salam”)

11. Finally :Finally : Salam as FuturesSalam as Futures
The farmer is helpless before the risks of weather and insects, but he can at least escape
the uncertainty of what his selling price will be. He can do that by selling his crop when he
plants it, promising future delivery to the buyer at a prearranged price. He may miss out
on some profit if prices rise, but the futures contract will protect him from catastrophe if
prices fall. He has passed along the risk of lower prices to someone else.
That someone else is often a food processor who faces the opposite risk-he will gain if
the prices of his inputs fall while the crop is still in the ground, but he will be in trouble if
prices rise and boost the cost of his raw materials. By taking on the famler's contract, the
processor lets the famler assume the risk that agricultural prices might rise.Thisprocessor lets the famler assume the risk that agricultural prices might rise.This
transaction, involving supposedly risky contracts for both parties, actually lowers total risk
in the economy.
In the twelfth century, sellers at medieval trade fairs signed contracs, called lettres de
faire, promising future delivery of the items they sold. In the 1600s, Japanese feudal lords
sold their rice for future delivery in a market called dto-ai-mal under contracts that
protected them from bad weather or warfare. For many years, in markets such as metals,
foreign exchange, agricultural products, and, more recently, stocks and bonds, the use of
contracts for future delivery has been a common means of protection against the risks of
volatile prices. Futures contracts for commodities like wheat and copper have been
trading on the Chicago Board of Trade since 1865. And it considered as a foundation to
the development of American agribusiness.
Bernstern (1998) on History of Risk

12. Islamic Financial Industry in Indonesia

15. Investopedia

16. Investopedia

17. Damodaran , Stern Business School