Islamic Finance: A Blueprint for Utopia?
By Dr. Guidance College Instructor Basil Alqudwa Oct. 16, 2017
Anyone with the little exposure to accounting principles today must know the concept of double entry accounting. This concept simply accounts for all money transactions by registering steps in two folds, positive and negative. By the end of the day, all activities have to balance and give the registrar a result of all actions. If we followed this simple concept, we have kept a healthy bookkeeping habit. As Adam Smith once said, “All money is a matter of belief,” Muslims believe Islamic money habits is a matter of double-entry lifestyle, here and in the hereafter. Brian B. Kettell, Islamic Finance in a nutshell: A Guide for non-specialists, said, ” Islam is not only concerned with the relationship between man and God, but it is also a system of beliefs, justice, equity, fairness, and morality, these being the values that underpin the entire Islamic way of life. ” These beliefs are governed by the body of Islamic principles which are referred to as Shari’a, which is, not surprisingly, the basis for the creation of Islamic financial products.
So, what is Islamic Finance? It is the system with provisions of financial activities based on Islamic jurisprudence (Shari’a).
For those who are non-Muslims, Shari’a is the collective knowledge based on the holy book the Quran, the Sunnah, the guidance of prophet Mohammad PBUH, and the scholarly knowledge based on the authenticated body of work by the companions and every one of related expertise to a subject matter relates to individuals and society.
Thus, Islamic Finance is the field of money that bans the use of interest, excessive uncertainty, gambling, and money activities that are considered harmful to individuals and society. That ban is met with an entry on the other side of bookkeeping that represents honorable dealings, fair treatment, and sanctity of a contract. Islamic Finance activities must represent real economic activities where the sharing of risk and rewards is based on equitable distribution amongst the parties that are involved in the contract. Islamic Finance products are contract based.