How Islamic Union Will Affect the Economic Development

Contemporary world politics make it necessary for nations to integrate into international unions in the interest of their own national security and economy. In these international unions, which are usually based upon geographic location, such factors as natural resources, trading blocs, and even cultural values play an important role. Many neighboring countries combine their resources under the auspices of such organizations, create defensive alliances, and cooperate on a wide array of issues. The goal of such unions is to preserve peace, control the arms race, resolve disputes through diplomacy, promote socioeconomic development, and protect fundamental human rights and democracy. At the present time, NATO, the OSCE, the EU, NAFTA, OPEC, ASEAN, the G-8, the D-8, and APEC are the foremost international political, military, and economic unions.

These institutions are subject to organizational reforms because of new members or a widening of scope. All of these organizations, formed in the aftermath of the Second World War, have contributed to creating stability and order in the world and have played a major role in global socioeconomic development. Member nations protect their economic and military interests, and also acquire a stronger regional and international position. Even the developed world perceives the necessity of such partnerships. The creation of free trade zones, regional trade agreements, abolished customs controls, and even a common currency (as in the EU) safeguard the future of member states. Defensive pacts enable member states to reduce military expenditures and to divert those resources to cultural and educational fields.

A similar organization will provide considerable benefits to Muslim nations. For those that are desperate for technological as well as economic development, the foremost step toward stability is the creation of a central organization or, in other words, a unified Islamic world under the auspices of the Islamic Union.

Economic Development and Increasing Prosperity

Economic cooperation is necessary on two counts: stability and development. Muslim nations must bring stability and solidity to their economies. Developing industries and making the required investments is vital, as is the need for a comprehensive development plan and the simultaneous development of education, economy, culture, science, and technology. While various sectors are developed technologically, the labor force's educational levels and standards must be raised accordingly. Society must be motivated to become more productive, and the resulting economic cooperation will play a major role in eradicating poverty, illiteracy, the unjust distribution of wealth, and other socioeconomic problems rampant in Muslim countries. This partnership can be formed only by the creation of free trade zones, customs unions, and common economic areas.

Most Muslim countries have geostrategic importance as well as rich natural resources (e.g., natural gas and crude oil). These resources and strategic opportunities, however, are not being used effectively. In the Islamic world, 86% of the population's living standards fall below $2,000, 76% under $1,000, and 67% under $500 per year. When the Islamic world's total resources are considered,(1) this is quite a paradox: Roughly half of the petrol consumed in the West is exported from the Islamic world, as is 40% of the world's agricultural production.(2) Many economists and strategists freely admit that the world economy depends upon the Islamic world's oil and gas exports, in particular those of the Persian Gulf.(3)

The Persian Gulf holds two-thirds of the planet's discovered crude oil reserves. Data obtained from research concludes that Saudi Arabia alone holds 25.4% of the world's oil reserves, or 262 billion barrels. A further 11% is found in Iraq, 9.6 % in the UAE, 9.2 % in Kuwait, 8.6 % in Iran, 13% in other OPEC member states. The rest is distributed across the remainder of the world.(4) Research commissioned by the U.S. Department of Energy shows that between 2000 and 2020, oil exports from the area will increase by 125%.(5) This means that the world will continue to meet most of its energy needs by imports from the Gulf region. Moreover, the Middle East has 40% of the global natural gas reserves; 35 % of these reserves are in the Gulf region.(6) Algeria, Libya, and other North African countries have 3.7 % of the world's reserves.

The Caucasus and Central Asia are also rich in oil, natural gas, and other natural resources. For instance, Kazakhstan has between 10-17.6 billion barrels of proven oil reserves, and its natural gas reserves are estimated at between 53 and 83 trillion cubic feet. Turkmenistan hasbetween 98 and 155 trillion cubic feet of natural gas reserves, making it the fourth largest producer.(7) Some other Muslim countries have valuable mineral resources. For instance, Uzbekistan and Kyrgyzstan are two of the world's leading gold producers. Turkey has one of the world's richest boron reserves, only recently discovered to be very important, and Tajikistan has the world's largest aluminum producing facilities.

These advantages will become more important in the twenty-first century, which some have already christened the "energy century." Energy is an essential element of modern society in terms of the military, industry, urbanization, and transport. Given that economic activity and manufacturing depend primarily upon energy, nations will do their best to achieve control over these energy resources. The Islamic world is not using its resources effectively, for many of its members lack the infrastructure and technology to increase the production and use their natural resources to develop their industries. Therefore, the resources' contributions to the country's economy are limited to export earnings. These countries do not have the means to process their own crude oil, use it in their industrial complexes, or to develop their industries. Worse still, some Muslim nations do not even have the necessary means to explore and research their natural resources or to discover and extract them. Explorations undertaken by foreign companies reveal that other Muslim nations have oil and gas reserves, but they cannot benefit from their resources.

Naturally, the ineffective use of natural resources is not the Islamic world's only economic problem. However, solving this problem can begin the process of solving many other problems. The economies of Muslim nations contain differences in structure and functioning. Some nations' economies depend upon mineral resources, such as the members of OPEC, while other nations' depend upon agriculture. These differences are also reflected, to some extent, in their social structures, such as the widely varying degrees of rural and urban populations. Developing complementary relationships and helping each other in their respective areas of expertise can turn these differences into a source of riches. All of this will be possible with the Islamic Union.

Joint ventures and project partnerships will be an important step in the right direction, for they will enable countries to benefit from one another's experiences and the income earned from investment projects will benefit all of the participating countries. Such mutual financial support is compatible with Islamic morality, for helping the needy and having a sense of social responsibility are important characteristics that Muslims strive to acquire. Many verses in the Qur’an remind Muslims to watch over the needy.

Society's internal cohesion must be extended to international relations. As international cooperation within a partnership cannot be one-sided, employment and income levels will rise in both countries. For example, one country will produce oil and another one will process it, and agriculturally dependent countries will be able to import the food they need from agriculturally developed countries. A manpower-poor country’s need will be met by another Islamic country, while rich countries will be able to invest in and help out a manpower-rich country that does not have enough jobs for its people. This will be to the benefit of both. Sharing know-how and experience will increase prosperity, and all Muslims will benefit from technological developments.

Joint ventures that realize the Islamic world's unification of opportunities and means will enable

Muslims to produce hi-tech products. The Islamic common market will enable Muslim-made products to be marketed in other Muslim countries without the hindrance of customs, quotas, and other cross-border obstacles. The marketplace will grow, the market share and exports of all Muslim nations will rise, industrialization will speed up, and economic development will bring progress in technology. The living standards and wealth of Muslim nations will increase, and their existing inequalities will disappear. Some free trade agreements are already in place between countries in the Gulf, the Pacific Rim, and North Africa. Trade agreements signed by Turkey are already operational in the Islamic world. Bilateral cooperation exists in some regions; however, their scope must be widened. Such cooperation will safeguard the rights and interests of all Muslim nations and lead to all of them becoming developed—a result from which all of them will derive a far greater benefit than if they do not cooperate with each other.

All of these can be realized only under a central authority's leadership and coordination. Achieving this will be possible if Muslim nations adopt the Qur'an's values and the Prophet's (May God bless him and grant him peace) Sunnah, or, in other words, if they adopt Islamic culture. The Islamic Union must lead the way to this cultural awakening, as well as the resulting political and economic cooperation.

Mutual cooperation among Muslims, part of the Islamic code, must be adhered to by all Muslims, for God commands people to refrain from avarice and to guard the needy and support one another. In fact, destitute people have a due share of the believers' wealth (Qur'an, 51:19). As the Qur'an proclaims:

Those of you possessing affluence and ample wealth should not make oaths that they will not give to their relatives, the very poor, and those who have migrated in the way of God. Rather, they should pardon and overlook. Would you not love God to forgive you? God is Ever-Forgiving, Most Merciful. (Qur'an, 24:22)

He who has plenty should spend from his plenty, but he whose provision is restricted should spend from what God has given him. God does not demand from anyone more than He has given it. God will appoint ease after difficulty. (Qur'an, 65:7)

Our Lord also reveals that believers are one another's guardians (Qur'an, 9:71). The word "guardian" conveys such meanings as friend, helper, mentor, and protector. It also expresses the importance of cooperation and solidarity between Muslim nations. The cooperation that will arise from this fraternal awareness between Muslim nations will bring prosperity and wealth to Muslims and eradicate poverty, an important problem of the Islamic world. Societies that follow the Qur'an's values will not experience famine, destitution, and poverty. Muslims will develop their nations by following rational and long-term policies, establishing good relations with other nations and people, valuing trade and development, and learning from other cultures' experiences. This was so in history and, God willing, under the Islamic Union's leadership it will be so once again.

Author: Harun Yahya

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Using Islamic microfinance to alleviate poverty

Poverty alleviation has traditionally been the domain of the interest-based development agency and profit generation has always been the mainstay of the corporation. Rarely have the two overlapped: corporate shareholders have no interest in giving money away and development banks have little to offer profit-oriented investors. Until microfinance. For perhaps the first time in economic development history the poor are seen as potentially profitable.

Microfinance is a financing tool that sustainably provides very small loans to the working poor. A handful of borrowers, usually 5 to 20 individuals, assemble themselves into groups. The first set of loans are extended to an initial subset of individuals within the group, for instance 2 out of the group's 5 individuals, and once these loans are repaid, a second subset of individuals receive their loans. This continues through the entire group, circulating until a final loan is extended to a designated group leader.

Variations of this general theme abound but the basic underlying principle remains the same: a borrower is much more likely to repay on time if not doing so affects one's selected group partner, usually an acquaintance. The fear of a faceless bank is replaced with the mercy for one's own neighbor. This non-traditional concept of "social collateral" banking allows the poor to break out of the poverty cycle: the provision of capital allows for greater business investment, which leads to increased income,resulting in higher household savings and eventual financial independence.

THE ORIGINS OF CONVENTIONAL MICROFINANCE

Microfinance grew out of the failure of cooperative movements and government-sponsored initiatives for concessional individual lending. With some of these heavily subsidized programs yielding repayment rates as low as 40%, there is little wonder they were short-lived.

In the1970s, Bangladesh's Grameen Bank revolutionized the development world by extending small, interest-based loans to the extreme poor, an economic group commercial banks refused to lend to and development banks found difficult to sustain acceptable repayment rates with. But by assembling individuals into self-selected borrowing groups, particularly in homogeneous settings, peer pressure and peer assistance lead to a form of informal monitoring that paved the way for continued success.

What began as a $26 loan to 42 village women is now a major industry in Bangladesh, with 4 million Grameen borrowers and over $4 billion in disbursed loans, of which over $300 million is currently outstanding. All collateral-free.

… ITS PROBLEMS …

But critics of Grameen and other conventional micro financiers cite Draconian interest rate levels as a major impediment to many borrowers becoming truly self-sufficient; an astronomical 22% interest rate charge at Grameen (measured on a declining basis), and as high as 50% elsewhere. Anathema to Muslims, for whom taking even the smallest amount of interest is forbidden, evidenced by a number of Qur'anic verses (2:275-279, 3:130, 4:160-161, 30:39), numerous rigorously authentic traditions of the Prophet, may God bless him and give him peace, the consensus of the four schools of jurisprudence, and the ravaging effects of decades of low-interest development loans to poor countries.

The single biggest problem with conventional microfinance, and for that matter all interest-based finance, is that the borrower has to make his interest payments even if he is unable to meet them. If his business succeeds, he pays; if his business fails, he still pays.

At a time when a young business should be concerned with innovation and expansion, an interest payment looms unavoidably large at the end of the month. Putting it off only exacerbates the problem, as interest payments often become larger than the original loan principal with the passage of time. It makes little sense for small, under-capitalized micro-entrepreneurs with nothing to fall back on to assume debt instead of equity. In a protracted market downturn, when large groups of borrowers are unable to meet their repayment requirements, this precipitates heightened levels of market volatility. End game: debt forgiveness on the lender's part or increased impoverishment on the borrower's, means bonded labor in some countries.

Further, interest-based transactions tend to focus attentions on the process-oriented task of repayment rather than on the result-oriented task of increasing profit. And because no direct causality exists in an interest-based transaction between the size of the payout and the profitability of the business (since interest payments are already fixed), conventional microfinance requires additional technical intervention on the part of the lender in order to promote business efficiency. Equity-based investments, on the other hand, already assume an effort toward business efficiency because both the investor and the worker share the same goal: increasing profit.

… AND ITS ISLAMIC ALTERNATIVE

Islamic microfinance provides an innovative interest-free alternative to conventional micro- finance. Perhaps not so innovative since interest-free, equity-based investing has already proven itself as the predominant corporate financing tool for decades, from Wall Street investment banks to Silicon Valley venture capitalists. And while the players may change, the transaction dynamics remain largely the same, whether the transaction is worth billions of euros or hundreds of rupees: an investor takes a stake in a business for a share of the business's profits, undertaking commensurate levels of risks.

Based primarily on the profit-sharing principles of equity-based finance, Islamic micro- finance offers greater resilience than conventional microfinance. If a business fails, nothing is paid; if a business succeeds, profits are shared. Risks and rewards are always pro- proportionate to equity shares. So while any return on capital in the form of interest is completely prohibited in Islam, there is no objection to getting a return on capital if the provider of capital enters into a partnership with a worker or entrepreneur and is prepared to share in the risks of the business.

The key dynamics of conventional microfinance arrangements are, however, still retained in Islamic microfinance, with small groups of self-selected individuals providing each other with emotional, technical, and financial support. By assembling themselves into their own groups, clients choose as partners only those individuals they trust most, filtering out to large extent poorer credits.

Author: Adam Garrick

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Means of Expenditure in Islam: No Poverty: No Riches

Spending in the way of God is defined in terms of the right of the poor and the needy in the wealth of other Muslims. It is prescribed in two ways:

a. Al-Zakat which means alms-giving which is incumbent on every Muslim who has wealth. It represents in al-Shari‘a a fixed 2.5 per cent yearly. The Arabic Qur'anic denotation of al-Zakat is literarily ‘purification', that is to say ‘purifying one's wealth and self from sins and dutiful obligations and responsibilities towards God by giving the needy.

‘And in whose wealth there is an acknowledged right, for the beggar and the destitute.' 70: 24-25

‘And be steadfast in prayer, practice the Zakat, and bow down with those who bow down (in worship).' 2: 43

b. Al-Sadaqa means charity. In this respect there is no limit for giving in charity.

Beneficiaries of expenditure

The following categories benefit directly from spending in terms of alms-giving and charity:

‘It is not righteousness that you turn faces toward East or West; but it is righteousness: to believe in God and the Last Day, and the Angels, and he Books, and the Messengers; to spend of your subsistence, out of love for Him, for your kin, for orphans, for the needy, for the wayfarer, for those who ask, and for the ransom of slaves; to be steadfast in prayer, and practice al-Zakat, to fulfil the contracts which you have made, and to be firm and patient, in suffering and adversity and in periods of calamity. Such are the people of truth, the pious.' 2: 177

‘Alms are for the poor, and the needy, and those employed to administer the funds, for those whose hearts have been reconciled (to Islam), for those in bondage and in debt; in the cause of God, and for the wayfarer: (it is) ordained by God. And God is all Knowledgeable, all Wise.' 9: 60

‘Eat you thereof, and feed such as beg not and live in contentment, and such as ask.' 22: 36

‘Then eat you thereof and feed the distressed ones in want.' 22: 28

‘For those in need, who, in God's cause are restricted and cannot move about in the land, seeking (for trade or work): the ignorant man thinks, because of their contentment abstaining from asking, that they are free from want, you shall know them by their faces: they beg not importunately from all and sundry. And whatever of good you give, God knows it well.' 2: 273

‘The righteous… and they feed, for the love of God, the indigent, the orphan, and the captive, (saying). We feed you for the sake of God alone: no reward do we desire from you nor thanks. We only fear a Day of distressful Wrath from Our Lord.' 76: 5, 8, 9, 10

If Muslims comprising the islamic Ummah (Islamic community) rating now at 1.4 billions of Muslims, then there shall be no poor Muslims and rich Muslims.

This ensures circulating the wealth of Muslims everywhere in the world today among all Muslims.

Adverse poverty is observed now among Muslims in Bangladish, Pakistan, India, Sudan, Nigeria, Somalia while absolute wealth and riches are concentrated in the Hands of Few money-mongers like the Saudi Family ( 12 billions of Dollars private fortune of King Saud), Kuwait, the Emirates, Sultan of Oman, Sultan of Brunei ( 25 Billions of Dollars and five hundred wives).

How far away Muslims now from having their own money distributed equally among them all?

This explains the frustration, the need, the hatred of those who have not against those who have in Islam.

Where is brotherhood, equity and justice. It all begins in the economic juctice. Then social and political justice follows as a consequence.

This explains the anger manifested in the rebellion and armed violence of those who do not have to restore their legitimate rights in sharing with other Muslims in the wealth of Muslims.

Author: Mardini

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Opalesque Launches New International Key Publication on Islamic Finance

Islamic Finance is steadily moving into the mainstream of conventional financial systems and has remained largely insulated from the global credit crisis. Even in the midst of a global economic crisis, Islamic banks have weathered the storm to great effect, thanks to the specific framework and rules administered by Islamic law, or Sharia.

The Islamic financing system is expected to grow faster than previous projections which were in the 15 to 20 percent per annum range. Not only Muslims are looking at the new Islamic finance paradigm as an alternative to western models, which are in turmoil now. Islamic Finance is expanding not only in the Muslim world, but also in other countries where Muslims are a minority, notably Britain, France, the US and even Japan.

There are now over 300 Islamic financial institutions (IFIs) spread over 75 countries and 300 Sharia-complaint mutual funds, whereas just one Egypt-based Islamic bank existed in 1975.

About $800bln of assets are currently deposited in Islamic banks, mutual funds, insurance schemes and Islamic branches (windows) of conventional banks. By contrast, the market was valued at only $140bn in 2000.

McKinsey & Co estimates Islamic financial assets could reach $1 trillion by 2010. Moody’s Investors Service predicts that this relatively young industry could boast worldwide assets of $4 trillion within the next five years.

Opalesque's experienced staff monitors the news and global markets carefully to present this essential daily update, which can be subscribed as daily email newsletter or by RSS feed at http://www.opalesque.com/IslamicFinance_Briefing/

The Opalesque Islamic Finance Briefing news are sorted into 18 detailed categories like:

l Islamic Accounting and Audit

l Islamic Banking and Finance

l Islamic Bonds (Sukuk)

l Islamic Capital Market (Equity, Mutual Funds)

l Compliance, Tax, Legal, Regulatory

l Emerging Trends

l Islamic Financial Instruments (Credit Cards, Debts, Loans, Mortgage, Funds)

l Islamic Insurance (Takaful)

l Islamic Investment

l Islamic Hedge Funds

l Islamic Law / Economics

l Market Moves

l Performance

l Private Equity

l Property, Projects, Infrastructure

l Research

A large archive with hundreds of articles, fully searchable, is already available under http://www.opalesque.com/IslamicFinance_Briefing/?page_id=3

About Opalesque:

In 2003, with the publication of its daily Alternative Market Briefing, Opalesque successfully launched an information revolution in the hedge fund media space: "Opalesque changed the world by bringing transparency where there was opacity and by delivering an accurate professional reporting service." - Nigel Blanchard, Culross. This hybrid financial news service, which combines proprietary industry news stories and filtered third party reports, has been credited by many industry insiders with delivering precise, accurate, and vital information to a notoriously guarded audience.

Each week, Opalesque publications are read by more than 500,000 industry professionals in over 100 countries. Opalesque is the only daily hedge fund publisher which is actually read by the elite managers themselves (http://www.opalesque.com/op_testimonials.html).

Author:Nisha Mittal

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The Economic Structure in Islam: Poverty and Riches Abolished

The economic structure of the Islamic Umma, as is in the political and in the social structures, is based entirely on the man-God relationship. It is based on belief in God who provides mankind with their sources of sustenance and wealth and seeking the favour of God in order to attain the felicity in the hereafter.

The Qur'an informs us of the principle of economy in Islam:

‘And seek the abode of the Hereafter in that which God has given you, but do not neglect your portion of this world, and be you kind as God has been kind to you, but do not seek corruption on earth. Verily, God does not love corrupters.' 28: 77

Wealth and possessions are described as test and trial:

‘Assuredly you will be tried in your property and persons.' 3: 186

Humans are described as lovers of wealth:

‘And you love wealth with inordinate love.' 84: 20

The general idea of ownership in Islam is that God has bestowed it as a favour on whomever He pleases.

By doing so God has raised people in ranks according to their portions and their response to the message where they will be awarded in ranks according to their deeds in the hereafter:

‘Is it they who apportion your Lord's mercy (wealth)? It is We who have apportioned among them their livelihood in the life of (this) world, and raised some of hem above the others in rank that some of them may take labour from others; and the mercy of your Lord is better than (the wealth) that they amass.' 43: 32

‘See how We preferred some of them above others, and verily the hereafter will be greater in degrees and greater in preferment.' 17: 21

The main principles of the economic structure in Islam which the Islamic Umma ought to apply are:

a. Distribution of wealth among Muslims in a welfare community.

b. Expenditure in the way of God.

c. Middle way expenditure.

d. Forbidden income.

e. Platform-ceiling formula where poverty and riches abolished.

This schema ensures justice, equality and creates a pltafrom-ceiling formula where both poverty and riches are abolished for circulation of wealth among the totality of Muslims is an incumbent right.

Author: Mardini

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Islamic banking

Islamic banking is simple.Qruan forbibds fixed rates of INTEREST but acknowledges a banking or lending system which involes a sever planning and participation of the lender in a trade.He can be a sleeping partner and his share of profit or loss not fixed but estimated at the end of the year.Thus share selling of a bank may not be unislamic .It is the interest only which is forbidden.

This is a banking system in accordance with the law of SHARIA.

Histroy

During Islamic golden age Islamic banking and economy was in force.The bills of exchange,forms of partnerships called mufawada.ledgers,,mudraba,al-mal,nama-al-mal,cheques,loaning,promising note,trusts,waqf,assignments,Even the modern day business corporations existed independent of state in Islamic empire.Thus one conclud safely deduce tht ISLAMIC BANKING has a history and no matter has been the pioneering banking system innovation.

It has of late been overtaken by the interest bearning old Jewish system where the interest and it compound interest was making a real business loanee over burdened and the lender to enjoy without any risks. During the era a stable circulation system existed.The dinar was the currency.

MORDERN ISLAMIC BANKS

The first Islamic bank came in Egypt.Its founder was Ahmed el-naggar .This attempt has been in small town of Mit Ghamr.It was initiated in 1963 and lasted for few years upto 1967. exercise continued and succeeded in nine other branches and from 1972 this mit gramr saving has become a part of NASR SOCIAL BANK These axperiments led to the Islamic Development Bank and first modern Islamic bank is Dubai Islamic Bank opened in the 1975.Islamic Banking is on rise at @15% ANNUALLY .

On date we have 300 banks in 51 countries.A branch in Univerty of Michingan.In 2005 a total of 0.5% OF TOTAL WORLD assets are managed by Islamic Banking.The vetican too has recommended Islamic banking to undo failing markets.The loaning agaist mortgage is accepted and garuentee the repayment.The mortgage transactions are simple the bank values it and purchases it without any other penalities and liability and sells it to a prospective buyer .They facilite him the buyer with loans too.

THE SYSTEM CAN BE EXPLINED AS.

If you wish to have a loan from an Islamic Bank for the purchse of a vehicle.The vehicle cost with profit shall be evaluated b the bank and sold to the buyer.The amount so agreed upon shall be paid to bank in instalment aginst mortigaing this vehicle and the vehicle shall be in his name from day one..No monthly or annunl interest charges .He has to return the money in time or lose vehicle mortigaed which may be resold by the bank.May we accede here some of the extracts obtained from websites in original for general information of our viewers

"An innovative approach applied by some banks for home loans, called Musharaka al-Mutanaqisa, allows for a floating rate in the form of rental. The bank and borrower form a partnership entity, both providing capital at an agreed percentage to purchase the property. The partnership entity then rents out the property to the borrower and charges rent. The bank and the borrower will then share the proceeds from this rent based on the current equity share of the partnership. At the same time, the borrower in the partnership entity also buys the bank's share of the property at agreed installments until the full equity is transferred to the borrower and the partnership is ended. If default occurs, both the bank and the borrower receive a proportion of the proceeds from the sale of the property based on each party's current equity.

This method allows for floating rates according to the current market rate such as the BLR (base lending rate), especially in a dual-banking system like in Malaysia." FLOATING INTEREST RATES. The Islamic bank can lend the money on floating interest rates.The companies raising money from Islamic bank pay rate of retuns and not a fixed rate at loaning.The difference between the the normal banking in vogue and Islamic banking is the participation of the technocrat s of the bank in the business management of the company and share profits and losses both.For sound global economy free of recession this Islamic banking is the only solution to undo recession tremers ruinig the global economy and forcing powerful to vage warsin Iraq or Iran or Afganistan to either divert attension of falling economy at home or simply to recover it through proxy by looting others resources.

The Islamic banks can not invest in wine,women,pork or im moralventures like gambling thus curing the mafia and underworld social erosions .This is thus going to bring morality in this immoral world ,where balck money rune rackets and is responsible for all evils of politics,administration and regime changes.The technical assessment as revealed by some in the web publication can be quoted as. "In theory, Islamic banking is an example of full –reserve banking with banks achieving a 100% reserve ratio.However, in practice, this is not the case, and no examples of 100 per cent reserve banking are observed" Islamic banks have grown recently in the Muslim world but are a very small share of the global banking system. Micro lending institutions founded byMuslims notably Gamen Bank of Bengladesh, use conventional lending practices and are popular in some Muslim nations, especially Bangladesh, but some do not consider them true Islamic banking. However, Muhammad Yunus, the founder of Grameen Bank and microfinance banking, and other supporters of microfinance, argue that the lack of collateral and lack of excessive interest in micro-lending is consistent with the Islamic prohibition of usury (riba).

Potential Drawbacks

While Islamic financial institutions have made rapid progress in the US in a relatively short time, to date most of the opportunities are only suited for wealthy or upper middle-class customers. Minimum investment for membership in MSI is $1000, while the marketing strategy of BMI Inc. is geared towards Muslims with a net worth of over $200,000. Muslims with middle to lower incomes, who most need assistance with major purchases, are largely unable to partake of such programs. MSI President Masood Ajazi explains the contradiction by pointing out that because there is no guaranteed profit in such transactions, only "low-risk" investors can be considered. Four years ago, he notes, there were no alternatives at all for Muslims in the US desiring interest-free transactions For more reading readers are requesyed to go through the following references. • World Database for Islamic Banking and Finance • Risk and Compliance Management in Islamic Banking - Kit • Islamic Banks and Financial Institutions Information • Islamic Financial Services Board • AIBIM - Association of Islamic Banking Institutions Malaysia • Accounting and Auditing Organization for Islamic Financial Institutions •

Reviewing Islamic Banking •

Muslim Investor:

A community site on Islamic investment, banking, finance and insurance • Value matter of Money - Unfair to Islamic Banking & Finance by Qazi Irfan • Riba and Islamic Banking •

Islamic Banking references •

Institute of Islamic Banking • Islamic Banking Portal • Islamic Finance Directory and Portal • Islamic Banking and Finance symposium podcasts from La Trobe University on iTunes • Islamic Banking / Finance / Takaful Directory • Islamic Banks Directory • References • ^ The Cambridge economic history of Europe, p. 437. Cambridge University Press, ISBN 0521087090. • ^ Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), p. 79-96 [81, 83, 85, 90, 93, 96]. • ^ a b Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", Historical Materialism 15 (1), pp. 47–74, Brill Publishers. • ^ Robert Sabatino Lopez, Irving Woodworth Raymond, Olivia Remie Constable (2001), Medieval Trade in the Mediterranean World: Illustrative Documents, Columbia University Press, ISBN 0231123574. • ^ Timur Kuran (2005), "The Absence of the Corporation in Islamic Law: Origins and Persistence", American Journal of Comparative Law 53, pp. 785–834 [798–9]. • ^ Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), pp. 79–96 [92–3]. • ^ Said Amir Arjomand (1999), "The Law, Agency, and Policy in Medieval Islamic Society: Development of the Institutions of Learning from the Tenth to the Fifteenth Century", Comparative Studies in Society and History 41, pp. 263–93. Cambridge University Press. • ^ Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems", MERIP Reports 68, pp. 3–14 [8, 13].

Author:  G. M. Wani

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Uk Students Can Now Achieve Islamic Finance Qualifications

The concepts of Islamic Finance are different in some key respects from those of its traditional western counterpart and demand for Islamic banking services is growing in popularity in the UK, especially since experts in the subject have suggested that its underlying principles have protected many Islamic investments from the global financial crisis.

Islamic Finance is a way of providing and receiving finance in compliance with Sharia law and has many notable features such as: - No dealing in any goods, services or products prohibited under Sharia law such as gambling, pornography, alcohol or pork - A prohibition on the payment or receipt of interest when borrowing or lending. - Individuals must not hoard their wealth, squander it, nor keep it idle, but must use it judiciously - Anything that is morally or socially harmful cannot be funded or supported by Islamic finance - Muslims are required to give a percentage of their wealth to help poor sections of the Muslim community

Among the consequences of these prohibitions are that traditional borrowing is not allowed nor is the use of derivatives for hedging or trading.

As illustrated, moral purchasing and ethical investing are fundamental principles of Islamic finance, but delve deeper and the nature of the subject it is extremely complex, and for those trained and schooled in western finance it can be very different indeed. This difficulty is compounded when it is understood that the way in which the precepts of the Qur’an are interpreted and implemented differ in different parts of the Islamic world. Because of the recent surge in interest in Islamic Finance a few universities and other higher education institutions in the UK are now offering formal qualifications in the subject, in some cases working with academics and scholars from other countries, for example, the International Centre for Education in Islamic Finance (INCEIF) and offer courses such as the full-time MSc in Investment Banking and Islamic Finance which can be accompanied by appropriate professional certification.

Formal education in the subject includes extensive study of the principles of Islamic Finance, as well as intensive learning about the mechanics and practice of the subject as practiced in the Middle East and in Malaysia, which has a very highly developed market in Islamic Finance. Indeed, some courses also offer a placement in an Islamic financial institution as part of the course, where students will get to see how Islamic finance works as an integral part of the economy.

Study of the subject can either supplement existing accountancy and finance qualifications or be studied in isolation without any prior knowledge, as it is a self-contained unit. The best courses recognise that Islamic Finance has to operate alongside its conventional counterpart and, therefore, require full study of western financial concepts alongside their Islamic counterparts. One thing is for sure, well designed courses in this vibrant and rapidly developing subject in the UK will be very popular.

Author: Paul Buchanan

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Zakat Planning

Another important issue that can be brought about in the management of wealth in Islam is the paying of Zakat. Every Muslim who has the ability to pay the Zakat is obliged to do so. It is one of the five pillars of Islam. So now, you can see the great importance of paying the Zakat. Mostly in Islam Zakat is paid by the wealthy Muslims. Allah made the paying of Zakat compulsory for a reason. This was in order to help the poor and the needy Muslims or the Muslims who are completely unable to support themselves. I say paying the Zakat is a form of wealth management because the wealthy Muslims will be able to deliver some of there wealth to other needy Muslims. Therefore, in doing so the wealthier will not become more and more wealthy, but moderate. This is why God (Allah) made some people in this world rich and some poor. Wealth can be a very dangerous element because once a human being becomes possessed with this wealth. He will forget about his religion and God altogether. In order to get rid of this, Allah made compulsory for every Muslim to pay the Zakat.

However if you look at the conventional or the capitalist advocates, you will discover that most people have became inclined to their wealth that they do not have or follow any religion. In short they have become pagans. They also do not believe in the hereafter. This is so, because there is no form of wealth management such as paying the Zakat to the needy people around the world. This is why, the capitalist always concentrate on material satisfaction and not spiritual. They only seek material satisfaction and think of maximizing there wealth through all the means available, weather the right or wrong way. They also have this misconception of saying that their scarce resources and unlimited needs in the world. It is like saying that God did not know what he was doing. Because God created this world and made sure that people would be satisfied with whatever there is available.” The imposition of Zakat is to purify oneself as well as one’s own property.” “Islam believes if a wealthy person is accustomed to paying Zakat, his infatuation for wealth will be softened and it will be a source of advantage to him and the society in the end.”

“Alms are for the poor and the needy and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to the truth); for those in bandage and indebt; in the cause of Allah; and for the wayfarer: (thus is it) ordained by Allah and Allah in full of knowledge and wisdom”.                    (9: 60)

Prophet Muhammad (PBUH) is reported to have said, “Zakat is not permissible for someone who is not in need except in five cases; someone fighting in the way of Allah, someone who collects Zakat, someone who has suffered (financial) loss (at the hands of debtors), someone who buys it with his own money, and someone who has a poor neighbor who receives some Zakat and gives some as a present to the one who is not in need.”

Zakat is obligatory on all Muslims capable of paying it. Capability is referred to as nisab, a taxable minimum. It is used for specific purpose and paid to specific groups of people or individuals. The Quran lists eight (8) recipients as in the above verse. The role that Zakat plays in the distribution of wealth and income is, without doubt, very important. It reduces the gap between the haves and the have-nots, and induces saving and consumption behaviors in addition to the fact that it helps mobilize income for redistribution.

Islam discourages funds to remain idle, simply because there is no interest, as compared to the conventional system which makes up for earned income with no effort involved. If we look at the saving decision, we notice that idle savings in Islam are penalized because a Muslim is expected to pay Zakat. At the end of the day he remains worse off because for every RM100 that he saves, he loses RM2.50 (2.5% Zakat ratio). Hence, his rational option would be to incorporate investment expectations into his savings decisions. Assuming he sees no light in the direction of investment expectations, he might cut savings and increase consumption in the process, which does not go along with the poor investment expectations. Thus, inclusion of these expectations in the savings decision paves way for a balanced system. Zakat allows a minimum living standard for all residents in an Islamic society, unlike in the capitalist system where the savings of the haves double and multiply through interest, and the have-nots have no social insurance because there is no Zakat.

In a capitalist system an individual might give out part of his wealth if and only when he denies to do so with out clear guidelines as to what, how, and how much he should give, because there is a possession kind of ownership. In an Islamic framework, Zakat illustrates a utilization kind of ownership and not that of a possession kind. The former kind of ownership accrues when wealth is utilized for its purpose and benefits derived from that wealth, else, the right of ownership is withdrawn, more especially in the case of land ownership.

Islam on the other hand, has clear guidelines as to what should be given out as Zakat, who should give out Zakat and how much he should give out (see Zakat at a glance). Zakat is obligatory on every eligible Muslim male or female, and is given for the pleasure of god and to earn his grace. On the things liable for Zakat, the prophet (PBUH) is reported to have said,

            “There is no Zakat on less than five Awsaq of dates, there is no Zakat on less than five awsaq’ of silver and there is no Zakat on less than five camels. And in another Hadith, the prophet (PBUH) is reported to have said,  “On’ land that is watered by rain or springs or any natural means there is (Zakat to pay of) a tenth. On irrigated land, there is (Zakat of) a twentieth (to pay).”

Author: Prof. Dr. Mohd. Ma’sum Billah

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