Writeup: bit.ly/AZBGIFI - Slides explain that genuine Islamic Financial Institutions are built on the Islamic spirit of generosity, cooperation, social responsibility, seeking to maximize the rewards on the day of Judgement. These are very different from Capitalist institutions built on the opposite spirit of greed, competition, individualism and hedonism.
2. What are Institutions?
Institutions are the embodiment of collective goals of a
society.
What does that mean?
If a society has a common goal, it must create some concrete
means of achieving this goal.
This is done via institutions.
If institutions to achieve collective goals are not created, then
common goals remain unrealized dreams.
3. Goals of a Capitalist Society:
Money!
Max Weber: The spirit of capitalism is pursuit of wealth, as an
end in itself, to the point of being absolutely irrational.
That is, wealth is not earned to be used for enjoyment or
other purpose – making this pursuit meaningless!
Banks are the institutions which make it possible for people
to accumulate money.
Corporations are institutions which make collective
accumulation of wealth possible.
4. The Great Transformation of Europe
see: http://bit.ly/AZGTET
Sixteenth Century Europe was governed by Biblical
values: “Love of Money is the root of all evil”
Eighteen Century Europe was governed by the opposite
values: “Lack of Money is the root of all evil”
How did this dramatic transition take place?
Many details are provided in Tawney: Religion and the
Rise of Capitalism. See: http://bit.ly/tawney1
5. Institutions correspond to SPIRIT:
16th Century: Merchant of Venice: Moneylenders were
Jews. Christians did not do moneylending.
Religious Shocks, Declining Influence of Christianity –
Henry VIII dissolves monasteries. Cromwell’s Revolution.
Restoration. Massive Landgrab by Aristocracy.
Declining influence of Religion, rising spirit of secular
society. Pursuit of wealth becomes permissible or
desirable.
1695: Bank of England setup.
Banks embody spirit of accumulation of wealth, in
capitalist societies.
6. Spirit of an Islamic Society: Generosity
Spend on others, what is in excess of your needs.
Prophet SAW’s advice to those who acquired wealth in
Khyber: Set up a WAQF. This will preserve capital and
earnings will earn rewards of the Akhira until day of
Judgment.
Instead of earning wealth of this world, target the
earnings of the Akhira.
7. How this spirit translates to
body
One third of land in Ottoman
Empire was devoted to WAQF.
Education, Health, Orphans,
Widows, all social welfare
provided for by Waqf.
Farz-e-Kifaya: A society has
collective responsibility to take
care of all needs of members.
WAQF was the institution
created to achieve this
collective goal.
Worked successfully for more
than a thousand years, prior to
colonization by the West.
8. Central Question: What
to do with excess money
– beyond your needs?
Capitalism: Use it to make more money! (why?):
Institutional Embodiment: BANKS
Islam: Use it to provide for people who have less
than what they need.
Institutional Embodiment: WAQF
For a detailed discussion of the dramatic
contrast between capitalist and Islamic
Economy, see: http://bit.ly/AZgift
9. What would GENUINE
Islamic Institutions be?
Deposits and Savings: Dar-ul-Amanah – meant to
keep money safe. If depositor permits, money could
be used to selectively provide Qarz-e-Hasna to
deserving entrepreneurs. Microfinance like Akhuwat.
Investment Bank: Money placed for investment,
subject to risks of business enterprise.
Return on money is justified by placement in
productive enterprise, beneficial to society, and the
risk involved.
NO Rentier class – people who make money without
productive contribution to society.
10. Some Key Take-Aways
• Loans are ONLY for social purpose, NEVER for business
purpose.
• Money advanced for business MUST participate in business
risk.
• We must separate Deposit Banks from Investment Banks.
• Investment Banks must participate in Business as partners,
and share risks.
• Deposit Banks can be used for social purposes, with
agreement of depositor.
• Special purpose service banks can be created, different from
conventional banks: transport, Hajj, Housing, etc.
11. Related Materials:
Detailed writeup of this brief
video: http://bit.ly/AZBGIFI
Writeup contains links to:
• Full length Academic Article,
• 4000-word summary,
• Turkish translation,
• Urdu and English full-length
videos on the paper.
12. A New Vision for Islamic Banks
http://bit.ly/AZibf
Main business of banks is creation of credit. This is only possible and
permissible with government support and consent.
Therefore, banks must be motivated by public service, not be private
profits.
Specialized types of loans to serve the public interest are discussed.
Training Loans to provide job-skills, to be repaid by share of wages.
Income-producing Asset Loans and Social Support.
Life-Loans: All needs of children, until they become productive members
of society.
13. Islamic Macroeconomics
An Islamic Monetary Policy: http://bit.ly/AZRiba1
Money is a public resource, which must be created in the public
interest. Some aspects of how this can be done, to create an Islamic
Monetary system.
Transitioning to An Islamic Economy: https://fb.watch/hfPVFk6jVH/
Constructing an Islamic Economy involves a lot more than just a zero-
interest rate. The steps required to enable a zero inflation and zero
interest economy are outlined in talk above.
14. Islamic Economics:
Polar Opposite of Capitalist Economics
Ebook: Currently available on
Amazon for $4.99
It will be offered FREE for a short,
promotional period.
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