Islamic Ways Of Investment
Islam is not only a religion of rites and rituals but a code of life
, a comprehensive set of instruction for the humanity, who choose to follow it. As far as the economic sphere of human life is concerned, Islam provides its program for it too. In the books of Islamic Fiqh you can find the major portion discussed by the scholars is economics and finance, which shows how important it has been in Islamic Fiqh.
The leadership and management of Islamic finance are alive to practice Ijtihad to find the ever emerging economic problems in the light of the principles set by the Holy Quran and the Sunnah of the Holy Prophet (S.A.W). But still there is a long way to go. Islamic scholars are doing marvelous job but
leadership development program are yet running short of the required level. Some institutions like MILE (Madinah Institute for Leadership and Entrepreneurship) and Mohammad bin Rashid Almaktom Foundation are working on the leadership development program which is admirable.
There are some basic principles of Islamic investment on whose base the whole structure of Islamic finance is built. The
leadership and management of Islamic finance must make them pivotal of their economic policies.
Here we will have a quick look of the different forms of investment and will find out the fundamental differences between Islamic economics and capitalism.
Basically there are four forms of investment:
i)The capitalist or (Rabb ul Mal in the terminology of Islamic Fiqh) makes investment in business and runs his business on his own without taking help of any other. This is a kind of private business. This is practiced in modern capitalism and also permissible in Islam, provided, the business must deal with the things and services which are Halal and permissible by Quran and Sunnah of the Holy Prophet (S.A.W). In this case the whole profit belongs to the capitalist and wages to the workers if any.
ii)Some partners in a joint business make investment. This is called in Islamic Fiqh Shirkat ul Aqd that is partnership in contract. All the investors manage the business and hence the prophet is distributed among the partners. This form is too permissible in principle with the condition that the business must be of Halal goods and services.
iii)Investor makes investment only; he does not play an active part. The active partner who manages the business does not make investment. This form of joint venture in Islamic Fiqh is called Mudarabah. In this case both partners share the profit. The investor takes it in the form of profit and the manager takes it in the form of wages. Also the loss is shared. In this case the investor loses his share of profit and the manager his wages.
iv)Capitalist lend out money in the form of debt to someone to manage a business. No matter, business runs in profit or loss, there occurs fixed interest for the investor. This form of business is categorically prohibited in Islam. This is called Riba that is usury or interest.
God declares in the Holy Quran:
O, believers, fear Allah, and give up what is still due to you from the interest, if you are true believers. (2:278)
And
If you do not do so, (that is if you do not give up interest), then take notice of war from Allah and His Messenger. But, if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it. (2:279)
From these two verses it is clear that any form of business in which capital incurs a fixed ratio of interest without taking share of loss is completely inadmissible in Islamic economic system.
by: Anna Williams
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