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Eng islamic economics islamic banking and maqasid syariah (2)
Quran Sunnah Ijma’ & Ijtihad
Islamic Financial System
Islamic Banking System
CHART 1 – Form of Islamic Bank and Islamic Banking and Financial System as
determined by Islamic Economics
World literally owned by
Man holds wealth on Trust
Allah swt and accountable
for it in the Hereafter
Deposits are wealth they
hold on Trust for Allah swt.
God is One and all else are
All humans are equal and
the best in the eyes of God
is one with the highest
The best Islamic Bank is not
the most profitable one but
one which exemplify highest
Belief in the Day of
Time horizon of Man
extends to the Hereafter.
What he does in the world
consequences in Hereafter
Long term planning extends
to the Hereafter
CHART 2 – Implication of Pillars of Economics on Islamic Banks
Principle of Ownership
Ownership by Man
confined to life, on death
wealth distributed as
specified by Allah swt.
Principle of Balance
Moderation in all aspects
Consumption is not an
end in itself
Principle of Justice
Justice in all aspects of
Justice expected to be
observed in all aspects of
CHART 4 – Implication of Principles of Islamic Economics on Islamic Banks
Ownership by Man confined to life, on death wealth
distributed as specified by Allah swt
Objective of Far’aid is to deconcentrate wealth
Islamic Banking cannot have activities that leads to
concentration of wealth
Example, debt financing with bias towards
people/companies with high collateral and equity
Moderation precludes profit maximisation as the primary objective.
Moderation in all aspects including Consumption.
Consumption is not an end in itself
Including: 1) Justice in relationship between Bank and Customer.
2) Justice in the allocation of risks between Bank and Customer.
3) Justice in the clauses of legal agreements between Banks and Customer
Justice expected to be observed in all aspects of
Prohibition by Law of Riba
No dual system. Islamic
Banking operates as a Sole
Single System in a Sole
Single Islamic Financial
Qirad Driven Economy
No lending in the economy.
All will operate on Profit
Islamic Banks take
deposits on Mudharabah
and extends financing on
Guarantee of Debt by the
Guarantee of consumption
loans taken by Ummah
Is there debt financing in
an Islamic Economy?
Will government guarantee
all of debts owned by
Ummah to banks?
CHART 5 – Implications of Three Principal Parameters of Islamic Economics on
minimum standard of
living by the State
CHART 6 – Implications of another Parameter of Islamic Economics – Guarantee
of Minimum Standard of Living by the State.
Responsibility of Islamic Banks in guaranteeing minimum standard of living
Therefore, Profit maximization
must be replaced
How? Not compatible with profit
Al Ghazali & Al Shatibi
Islam sets Goal for
Establishment of Justice
Education of Mankind
Prevention of Evil and
Maintenance of Balance
in Human Nature. Islah
Achievement of Maslahah.
CHART 7 – What is Human Welfare Formula?
Achievement of Maslahah. Human
Religion Life Property Intellect Lineage
Protection of wealth and Prohibition
of destruction of wealth
Required to take extra good care of
Prohibition of transgression against
property of others
Cannot operate in fiat money system
Equitable distribution of wealth Financing allocated equitably to all
big and small enterprises
Good circulation of wealth Abandon debt financing focus on
Wealth should benefit owner and
Financing to activities that maximizes
benefits to society
Encourage spending on needy Extend microfinance
Implication of Syariah objectives on Property to Islamic Bank