Islamic Economics In Solving World Financial Crisis

The current financial crisis, paving the way for an alternative economic system emerged, among them is the Islamic finance and economics.

However, rather than simply reacting to the crisis, scholars of Islamic economics ought to explain the concept and principles of Islamic financial and economic system and present a reference and its application to a wider audience.

Islamic economic and financial system is based on a set of values, ideals, and morals, such as honesty, credibility, transparency, clear evidence, facilitation, cooperation, complementarity, and solidarity.

This moral and ideals are fundamental because they ensure stability, safety, and security for all those involved in financial transactions. Furthermore, Islam prohibits Shari`ah economic and financial transactions that involve lying, gambling, cheating, gharar (risk-taking), gahalah (unawareness), monopoly, exploitation, greed, unfairness, and taking people's money unjustly.

In addition, the Islamic economy promotes participation in profit, loss, and exchange real money and assets. In fact, there should be real interaction between the wealthy, employers, employees, and financial experts.

There is no party that is a winner or loser remains constant; Another is to share profit and loss.

According to the rules of Shari`ah, economic contracts involving mudarabah, sharing, murabaha, istisnaa`, salm, damaged and sharecropping. Shari`ah prohibits all forms of financing investments based contracts involving interest loans forbidding financial transactions involving gharar (risk-taking) and gahalah (unawareness).

Actually, economic experts assert that the system of financial derivatives can not bring real development. Financial derivatives create only money without real value, causing inflation and price rise, and moral decay. For example, financial derivatives caused quick collapse of the East Asian financial institutions.

Regarding the debt, sell Shari`ah prohibits all forms of debt, such as discounting promissory notes and checks with deferred payment. Also prohibited under Shari`ah is rescheduling debt at higher interest rates. Prophet Muhammad (peace and blessings be upon him) forbade the sale of debt. In fact, economists argue that sell debt has exacerbated the financial crisis.

In fact, the Islamic economic and financial system facilitates the borrower to repay the debt. Allah says: "And in the case of any person under difficulty, then he should be (given) to the last (time) ease ..." (Chapter 2 Verse 280).

Shari`ah allow investment and financing system based on participation in both the profit and loss and the interaction between capital and labor. Shari`ah calls on the parties involved in the transaction is behaving in a way that is true, honest, clear and transparent to prohibit gharar, gahalah, cheating, gambling, lies, rumors, exploitation and take people's money unjustly.

In short, the only way out of this crisis can be found in the principles and rules of Islamic economics.

SOURCE: Alternative For Financial Crisis