All posts filed under: Economy

Islamic Monetary Policy in light of Pakistan’s ban on riba (interest)

The Federal Shariat Court (FSC) of Pakistan announced on April 28th 2022 that the current interest-based banking system is against sharia, and directed the government to implement an interest (riba)-free banking system by December 2027.[1] In fact, the first petition for the abolition of the interest-based banking system was filed in the FSC on June 30, 1990 and it has taken 32 years for a final verdict to be issued![2] It is well-established in Islam that riba is against sharia because of the numerous clear-cut verses of the Holy Quran such as, “O believers! Fear Allah, and give up outstanding interest if you are ˹true˺ believers. If you do not, then beware of a war with Allah and His Messenger!”[3] and “But Allah has permitted trading and forbidden interest.”[4] While most Muslims support a ban on riba, very few understand the alternatives to the existing economic system of banking and monetary transactions. The alternatives that emerge focus on offering interest-free loans through complex financial products, where the recipient still pays more than the capital. Those …

Islamic Inheritance vs Freedom of Ownership

A fundamental principle of western civilisation is the freedom to own and dispose of wealth. This means in relation to inheritance that if a man has ten daughters and one son, he can disinherit all his daughters and leave his wealth to his son. He can favour siblings or relatives or friends as he deems fit, and even leave the entirety of his estate to the family dog! Countess Karlotta Libenstein of Germany left approximately $106 million to her dog in 1992 and she is not alone. The richest dogs in the world can be seen here.

Islamic Inheritance: Clarifying the Misconceptions

BY ABU NAJAR ASH-SHAMI. REPRODUCED FROM KHILAFAH.COM فَلِلذَّكَرِ مِثۡلُ حَظِّ ٱلۡأُنثَيَيۡنِ “for the male, what is equal to the share of two females” [Surah an-Nisa’a 4:11] There are verses in the Book of Allah which the secularists and enemies of Islam are itching to abolish if they could. Malicious people always direct their arrows of slander and falsehood toward Islam through these verses, and the most prominent of these is the saying of Allah (swt), يُوصِيكُمُ ٱللَّهُ فِيٓ أَوۡلَٰدِكُمۡۖ لِلذَّكَرِ مِثۡلُ حَظِّ ٱلۡأُنثَيَيۡنِ “Allah instructs you concerning your children: for the male, what is equal to the share of two females.” [Surah an-Nisa’a 4:11]

Caliphate Manifesto: THE ECONOMY

This is an extract from the book ‘The Islamic Khilafah: A Manifesto for Change’ by Hizb ut-Tahrir Britain. PART II: THE ECONOMY – Empowering Individuals, Business and Government KEY THEMES a. THE SHARI’AH FREES WEALTH BY ELIMINATING INTEREST (RIBA) Islam categorically prohibits riba at any interest rate in all its forms. And when one looks at the impact of interest based loans on the economy (as we do in the following subsections) then one can immediately see the damage it causes and the relief to the economy of removing it.

The Caliphate’s transition to the Gold Standard

BY FARUQ IBN QAYSR Introductory Remarks In his tract on monetary reform, John Maynard Keynes referred to gold as a barbarous relic, whose rigidity had fettered the world from economic freedom and prosperity. He spoke at a time when the Occident were suffering from macroeconomic anaemia and were yearning for a solution. In sheer desperation, fiat money became the drug that gave growth-addicts what they craved for in the short-run. However, years after its introduction, the fiat system has induced far more volatility than it sought to resolve. In truth, Keynes failed to realise that barbarity was a trait not of gold but of fiat, insofar as it has plagued the world with monetary anarchy. In fact, the very system he consigned to history has never been more relevant than it is today.

Taxation in Islam: Wealth Tax

The following article is based on the book Funds in the Khilafah State which is a translation of Al-Amwal fi Dowlat Al-Khilafah by Abdul-Qadeem Zalloom. Allah سبحانه وتعالى has revealed a comprehensive economic system that details all aspects of economic life including government revenues and taxation. In origin, the permanent sources of revenue for the Bait ul-Mal (State Treasury) should be sufficient to cover the obligatory expenditure of the Islamic State. These revenues that Shar’a (Islamic Law) has defined are: Fa’i, Jizya, Kharaj, Ushur, and income from Public properties.

Currency of the Caliphate

The Caliphate’s currency is based on the gold and silver standards where the coins and notes in circulation are 100% backed by gold and silver. Islam did not leave any question unanswered, especially questions concerning the complexities of economic life. The Shari’ah has therefore defined the Islamic currency as gold dinars and silver dirhams along with their corresponding weights in gold or silver. The Shari’ah rules related to money such as zakat, blood money (diyah) and hoarding all specify values in gold and silver.[1]