Implementation of Islamic Banking System

on Sunday, September 8, 2013

The system of economics and finance that a country adopts is the deciding factor for its future. All is said and done with Socialism and Capitalism; both have failed miserably, as well as, failed every nation that adopted those systems. The aftershocks of the most recent financial crisis are still affecting the nations worldwide. Whether we admit it or not, this has only happened because of the faulty and exploiting contemporary banking system.

I personally believe that the only way we can get out of ongoing debts and financial disasters is to adopt interest free Islamic banking and financial system. The difference between both has already been discussed in one of my previous articles; now, we identify the significant supremacy of Islamic Banking system over the western interest based banking system. Eradication of exploitation and financial abuse has been rejected by Islam, and Allah has ordered His believers to stay far from evils of Usury and Interest.

Implementation of Islamic Banking system is a huge question which is still unanswered. A much noteworthy improvement is the introduction of Islamic Banking in most of the Islamic countries. Though, there are many controversies regarding the work of these banks – whether they operate in utter Islamic spirit or not – yet their mere existence is a ray of hope.

The dual-operational banking by many contemporary banks is yet another positive step; where both western as well as Islamic banking systems are provided simultaneously.

To understand Islamic banking system, we must first understand the principles upon which the Islamic economic system is based. Islam promotes charitable acts, as well as, Zakat in one of its major pillars; both of these institutions aid in flow of capital. Islam opposes accumulation of wealth in few hands as it encourages exploitation. An Islamic society is one where every individual takes care of their neighbours and community members, thus eliminating poverty and its root causes. Western system, on the other hand, is entirely opposed to this concept.

On the contemporary economic and banking system, an individual’s life becomes extremely difficult after acquiring loan from a financial institution. Interest rate on the amount of debt makes him more miserable than before. This is why Allah loathes “Riba” (interest/ usury) because it is the system of abuse.

Another concept of Islamic banking is risk factor. Prophet Muhammad (PBUH) said:

“Profit comes with liability.”

It implies that Fixed Profit Ratio, Monthly Profit Scheme, and Savings Accounts of contemporary banking are utterly non-Islamic. This is why we see the options of Mudarabah and Musharakah in Islamic Banking System.

There isn’t any alternative of interest in the Islamic Banking System; it provides better options than interest. We need special concern of our leader and rulers in order to take up Islamic Banking wholly. If our governments are not interested, it is the religious obligation of our scholars to urge the leaders regarding this matter.

Though it isn’t a simple process; however first step is indispensable in order to get to the destination. Legislation, codification and implementation, as well as, replacement of current financial system are long term plans. Undoubtedly, it is the government’s duty to take the initiative; but educated populace can always advice wisely. It is imperative to begin now if we want a brighter future.

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