The idea of ethical finance is built-in to all of the major beliefs, each of which has placed ethical limitations on the actions of those active in the marketplace. The Qu’ran sets down clear ethical limitations for loaning and credit, and for trade.
These limitations have been important in the servicing of excellent cultures. As Karl Polanyi, the financial historian suggested (in his 1944 book “The Great Transformation”), control of the performance of individual matters by law is important to the servicing of civil community, and to the industry, because if ”robbed of the cover of social organizations, humans would die from the effects of public exposure; they would die as the affected individuals of serious public dislocation through vice, perversion, criminal activity and hunger….neighborhoods and scenery defiled, estuaries and waterways impure, army safety affected, the power to produce food and raw materials destroyed”.
How do we therefore reunite the ethical boundaries/regulations recommended by this belief system with the level of resistance against, in particular marketplaces, these boundaries?
That is the difficult task confronted these days by those who would enhance the idea of an ethical financial climate.
One of the most important ethical limitations set by Allah in the Qu’ran has to do with the ‘price’ compensated for a loan: the Interest amount. While many would acknowledge that the Qu’ran’s scriptures on prices are old, I would like to say that they are intensely appropriate to the modern financial disaster.
This is because one of the financial features of the interval from 1980 to the present day are high actual prices (i.e. modified for inflation/deflation) compensated by people. By this we mean prices in the largest sense: those for brief, lengthy, dangerous as well as secure financial loans. While the Government or Bank of Britain’s Funds might seem low, the actual amount compensated by bank card owners or business owners giving threats, has for a lengthy time, been much, much higher.
Indeed it is these high prices, that I claim, that led to the ‘debtonation’ of the economic state in Aug, 2007, and the most serious financial disaster in record. For it is high actual prices that eventually created financial obligations that were unpayable – for sub-prime mortgage people in the US, for the large numbers that have paid late on their home mortgages and had their houses ‘foreclosed’; for thousands of companies that have been broken by a heavy pressure of debt; by semi-states such as Dubai.
High prices across the whole structure of prices – for lengthy and brief, secure and dangerous financial loans – have became popular.
Tremendous investment profits have easily been created by those who organised resources, passed them on to government authorities, organizations or individuals, and thereby produced even greater success. This is what has always been recognized as usury.
Therefore, I truly believe Islam’s financial rules are the way to rescue today’s financial crisis.
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