Islamic Finance World in a Scholarly Approach

Most investors outside the corridors of Islamic finance have a negative perception of trading opportunities in Islamic nations. This has been cultivated by a history of limitations posed by religious principles applied in almost all sectors of the market. It has been, and still is, a mandatory requirement that all trade be conducted in strict accordance with the Islamic law. Re-evaluation of these requirements has been ongoing, following the influence of western markets. Consequently, there has been a redefinition of Islamic finance principles to an extent that offers non-Muslim investors the go-ahead to seek markets in areas predominantly Muslim.

To understand this liberal but silent movement of the Islamic finance world, a scholarly approach is the most ideal. Islamic economics as a term can be used to refer to the application of the Islamic law in the conventional economic activity of a market segment, whether or not such application is in free will or by force. Islam and finances have a meeting point, in which the financial interests of market players are met at certain conditions required by the religion. That meeting point is where the Islamic finance world operates. This in turn demands the establishment of an Islamic economic system, based on saving, spending, and investing policies accepted by trading partners.

After such an understanding, prominent Shia scholars like Mahmoud Baqir al-Sadr and Mohammad Taleghani have helped redefine the enforcement of Islamic regulations in the market in such issues as Zakat, interests, currency trading, insurance and inheritance. Today, most Islamic nations have implemented broader and more liberal economic policies targeted at the Islamic society and the other communities with whom they can do business. This has been adopted as the only means of uplifting the deprived masses from poverty through regulating and boosting an equitable distribution of national wealth, monetary circulation, and equity among market participants. For the first in history, some Muslim nations like the United Arabs Emirates have entered into the marketplace in complete understanding of the risks and liabilities of investment. This system of economy is neither Socialist nor Capitalist.

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Basically, these new developments in scholarly thought translates to the fact that Islamic law has been developing key areas of financial law that greatly correspond to capitalist secular laws such as insurance, contracts, interests, risks and liability, and even torts. At this point in time, many oil tycoons from the Islamic finance world are entering Wall Street, hitting Europe, and buying out key assets all over. Europe’s most lucrative industry is football and football fans know of tycoons with oil money who have purchased prominent clubs at head-spinning price tags. This indicates that the Islamic finance world is not just letting in western and eastern investors to their market, but that they themselves are coming out to play at a level ground with hitherto condemned capitalist markets.

A classical Muslim thought as regards economic activity would be something like, interest should not be charged on loans, deposits should not earn profits, charity should be used as the channel of uplifting the poor and insurance policies are an abomination since it is God who grants and takes away when He wills. When this is taken to a national level, no financial trading can accrue between the non-Muslim and Muslim states. To a large degree most Muslim states have been basing their economic planning, analyses, and evaluations on and from the Sunnah of Prophet Muhammad.

The renowned Islamic scholar Ibn Khaldun is today regarded as the father of modern Islamic economics. He wrote prolifically on Islamic finance and associated politics in his text ‘History of the World’. It is in this book that he first agitated for a liberated market such that economic growth and development should be allowed to positively stimulate market supply and demand. Other prominent scholars have also sought to reduce the market interference by religious principles to an extent of barring growth. Such Muslim scholars include Abu Yusuf, Ishaq bin Ali al-Rahwi, Al-Farabi, Qabus, Ibn Sina, Ibn Miskawayh, al-Maqrizi among others.

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[ad#downcont]Following this line, Western ideas and Western economics have exerted great influence to the Islamic finance world, especially after these nations have failed to rid their masses of poverty and have sought outsiders help constantly. The Muslim world has realized that their dream of creating an independent Islamic economy, unique and superior to the non-Islamic finance systems, is wanting in application. What has happened since the 1960s is that Shia Islamic scholars have systematically and gradually reworked previous stand points and developed a unique Islamic finance world that understands, appreciates and faces contemporary economic woes from a liberal market perspective.