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Originally Posted by Hassan02
First define"Interest". I for one don't think that the concept of interest as used in modern economies is the same as the concept of interest prohibited in Islam.
2nd why do you want to develop a interest-free economy? If you want to introduce an entirely new economic model, you must back it up with arguments. Do you have conclusive proof that an interest-free economy is better than our current system?
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Seriously, you think that the modern economies have a different notion of 'interest' in comparison to the one identified by Islam? Everywhere in the world, the term 'interest' refers to the payments made in addition to principle amount of the debt/borrowing. In Quran, it is referred as 'Riba' and it is defined in the exact same notion. All banking systems and institutions rely on the 'interest income' to generate revenues. All countries/nations borrow and lend money by charging interests depending on the sovereign risks etc. Take the example of the transactions between IMF and Pakistan. Moreover, all companies (Either private or public) include 'interest charged debt' in their capital structure and the term leverage is also related to represent the level of borrowings. Take any company from KSE 100, NYSE 100 and FTSE 100 list and you will find intensive debt borrowings. There is no doubt in the validity of the statement that this 'interest' is exactly the same 'riba' discussed in Quran. If you want to explore the concept of Riba in Islam, read versus of Surah Bakara (following verse 275).
If you differ in stance, please explain, in your opinion how modern economies constitute 'interest' other than the core concept discussed above.
As far as the arguments against interest based economy are concerned, an Islamic state should follow the ruling of Quran and sunnah. Hence, regardless of the 'outcome', the observance of the general sharia principles is must for all Islamic economies. Therefore, the economy should ideally be free of interest regardless of the feasibility of the system.
Let's ignore the concept of Islam and tackle the question from a pure economic perspective. How can economies bridge the gap between the rich and the poor? By allowing the large corporations to use the money of the common people (in the form of debt from bank), generate enormous gains and transfer it's small portion to the banks who subsequently pay less than half of it to the depositors? This is the current scenario and as per theory and the real outcome, this system accumulates wealth in the pockets of a handful of individuals/parties. Islam proposes that the money given as 'ammnah' to the banks should be returned with its full rewards (percentage of the profits from the investment). If the interest based system is superseded by the Islamic based economic model, surely the gap between the rich and the poor is destined to abridge.
Additionally, Islam also proposes that no asset should be traded until and unless it is 'capable of delivery', 'capable of ownership' or is backed by some real tangible asset. The financial crises of 2007-2008 is the outcome of the absence of these factors. This is the prime reason why the not-so-Islamic 'Islamic banking' has attained record growth figures in the recent years. If you really want to learn the arguments against the interest based economy, please refer to the literature of Maulana Justice Taqi Usmani in relation to 'the Historic Judgment on Interest Given by the Supreme Court of Pakistan'. You will also note that how lawyers, bankers and multinational corporations twisted the basic arguments to win the ruling in favour of the interest based economic system. Google it and you will find the text+judgement.
Quote:
Originally Posted by rehmanuddin
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due to all these reasons rich are becoming richer and poor, poorer.
so an interest free economic model is the answer to avoid this problem. but how an interest free economic model can be developed i don't have any answer for that and that is the reason i started this thread to know the views of others.
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Well the aspect of incorporating the entire economic system of Islam in the Muslim countries is a far cry. You cannot do that unless all other aspects of legal and social justice are coherently present with the economic model. Moreover, all islamic countries, ever since their inception, had adopted interest based banking systems. So a sudden change will cause an enormous loss to the people in genral, and economy as a whole. This was the same logic put forward by the banks during the 1991 Supreme Court decision. And it was owing to the feasibility of the current economic system, that supreme court ruled in favour of interest based system. If any Islamic country decides that Interest is prohibited from today, investors, depositors and companies will lose a major chunk of money, stock markets will crash and economy will consequently suffer a huge setback.
One feasible option is to alter or change the mode of banking in steps. However, it will require a substantial time period. In the current scenario, no country can survive if it adopts an interest free economy model. Hence, the transition should take more than a decade. Firstly, the banks would be regulated to provide the share of profits to the depositors. Moreover, the balance sheets of the companies will consequently constitute an 'all equity' capital structure. The entire system will be fall apart. You should go through the 'supreme court decision' in order to spot the arguments for the existence of interest free economy. Essentially speaking, you can theoretically spot a lot of arguments for the interest free system but you will not find the practical steps to implement one.
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