Financial interest causing problems of monetary transmission as evaluated by the Islamic alternative
Purpose – The paper's aim is to study the system of interest, its crippling of the market by monetary manipulation and creation of gross disparity and its consequences and to explore an efficient Islamic alternative. Design/methodology/approach – The application of science and its analytical tools analyses and solves economic problems. As regards Shariah perspective, it may be described as guided application of science to analyse and solve economic problems. Findings – Gross inefficiency of the system of interest arises from its conflict with nature. Its sustenance requires monetary manipulation; however, the manipulation together with interest and gross disparity and deprivation created by it cripple markets that fail to determine just prices and to maintain vital economic balances and lead to gross inefficiency resulting in massive crisis. Monetary manipulation is serious fraud and a crime against humanity. Complexity of economic environment created by dominance of interest and its manipulation of currency has created gross misunderstanding among contemporary Islamic scholars and they have failed to project efficient Islamic alternatives. Removal of these misunderstandings and misunderstanding on the growth aspect of Zakah seem to be essential for freeing humanity from the clutches of the system of interest. Linking currency with a suitable well-defined basket of national product provides a cost free exit from monetary manipulation. However, creation of mass awareness seems to be an initial first step. Research limitations/implications – Application of scientific approach and scientific knowledge to economic issues, especially the issue of currency, wealth measurement and analysis of system performance needs higher emphasis, efforts and resources. Practical implications – There is need to create awareness regarding massive losses the economy suffers due to interest and monetary manipulation and to persuade governments to link currency with a suitable and well defined basket of national product. Interest and monetary manipulation have no place in Islam and as long free floats continue to be manipulated those who shun interest and exploitation must correct their accounting for the element of fraud incorporated by monetary manipulation. Consumer price index and wholesale price index may be used as a measure of currency manipulation. Originality/value – It is an analytical study of economic problems and their efficient solution. It is most important for researchers, academics, government functionaries, social workers and all those who are concerned with economic growth, justice and welfare. JEL classification: J24, J18, J78, H42
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Volume (Year): 27 (2011)
Issue (Month): 3 (August)
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- M. Umer Chapra, 2002. "Alternative visions of international monetary reform," Chapters, in: Islamic Banking and Finance, chapter 11 Edward Elgar.
- Ahamed Kameel Mydin Meera & Moussa Larbani, 2009. "Ownership effects of fractional reserve banking: an Islamic perspective," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 25(2), pages 101-116, May.
- Islahi, Abdul Azim & Obaidullah, Mohammed, 2002. "Zakah on stocks: some unsettled issues," MPRA Paper 18631, University Library of Munich, Germany, revised 2003.
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