Islamic economy
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The economic system of Islam is regulated by the Quran and forbids activities like interest accumulation and speculation. Its main features include prohibiting riba (usury), not producing forbidden goods, allowing private ownership allocated accordingly, and requiring government approval. The goal is to achieve Al Falah. Advantages include banks not charging interest on loans but instead profit-sharing, and forbidding unfair practices. Disadvantages include not benefiting from falling interest rates and potential incoherence from interpretations leading to fraud and non-payment issues hindering growth.
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Objectives, Philosophy and Principles of Islamic Banking
BANKING AND FINANCIAL MARKETS- Week 1 (22 October 2022).pptx
BANKING AND FINANCIAL MARKETS- Week 1 (22 October 2022).pptx
Islamic economy
- 2. ISLAMIC ECONOMY The economic system of Islam is regulated to be compatible with the Quran. This basically means, that the certain activities are forbidden, such as accumulation of interest, speculation, etc.
- 3. MAIN FEATURES • Riba is prohibited • Forbidden goods are not produced • The role of government is to achieve the goals of Islamic society • Private ownership is allowed such that it is allocated and utilized accordingly • All decisions should earn the approval of Allah • The prime objective is to achieve Al Falah
- 4. ADVANTAGES • Banks are not charging interest on loan -loan are regarded as an exchange of assets , rather than the lending of money . When a loan is taken out to purchase and asset , the bank will make the purchase , then sell the asset to the individual at a marked up price . • It leaves the borrower fee from changes in interest rate . If money has been used to invest in a business , the bank will not charge interest , but receive a percentage of the profit . If the business fails , the bank shares the risk .
- 5. • The Quran forbids the earning of profits through unfair trading or practices which are damaging or harmful to society .
- 6. DISADVANTAGES • Do not get the benefit of falling rates . According to some critics of the system , it is riddled with incoherence introduced by different interpretations of the Quran . Banking relies on an honour system , which often encourages fraud and non-payment . This can hinder the growth and stability of the economy .
- 7. NURSHAFIQAH BT HUSSIN SITI SYAHIRAH ABDUL AZIZ NUR SYAHIRAH