Bismillahirohmanirohim (In the name of Allah, the Most Merciful and the Most Compassionate)
When we use the word investment, it usually projects a succesful way for the future. Investment are usually associated with business investor, corporate people. How often we see that business investments assure the return on the profit of investments with certain amount of interest. In Islam interest are prohibited and through the development of Islamic banking, investments without interest are made possible. Sometimes these return on investment (without interest) have fixed percentage of rate which might look like interest. As a muslim we should always be aware on the differences between these two because of the similiarity we (muslims) might be doing the prohibited.
When should one start to invest? As I mentioned earlier, investments are always associate themselves with successful or high profit return. Therefore we usually think that it is safe to venture into these investments with having minimal funds. We have this mentality whereby to secure our financial future or after retirement, we need to invest. I am not trying to imply that investing is a dangerous thing to do. Investments will be beneficial if it is done in a proper manner. By investing, it also benefits the economy because of the circulation of wealth.
These business are usually run by a person or a group that have the idea and managing capabilities but do not have suffucuent funds to run the business. Therefore investor helps in initiating a business which consequently help the economy. (Surah al-Imran verse 180) "And let not those who hoard up that which Allah has bestowed upon them of His bounty think that it is better for them. Nay, it is worse for them. That which they hoard will be their collar on the Day of Resurrection. To Allah belongs the inheritance of the heavens and the earth. Allah is well aware of what you do."
As a middle income earners, the income are usually just enough to pay the bills. Some people starve themselves to fork out money (take a loan) to invest in order to secure the financial future. This, in my opinion is a very dangerous thing to do because the reality of investing failing. Hence, financial future are not secured and also ending up with debts. These debts will then force people to work outside their own field (ordinary way/qualification) and will be a forced labour just to cover their bills. This will effect on the productivity as people with certain expertise working with a non-related expertise. It will also effect on the morality of workers as people are often not happy with their job. Their unhappiness will gradually make them feel morally down and will make them turn to any sort of way to gain more money without considering if it is halal (permissible) or haram (prohibited). This will then cause further damage to the economy.
Back to the question of when should a person invest? It is best for a person who are wealthy to invest and not the middle earners. Those who are wealthy should invest appropriately (within the laws of Islam) to avoid negative effect to the economy. Those wealthy should also not demand their return on investments if the business aquire loss for they are responsible for their own investment. If the wealthy investor have the right to get an amount of profit, it is only fair for them also to acquire the loss. Their loss will not have any burden as it is not based on debts. This is what spending wisely means and not spendthrift.
We should only invest when we have EXTRA MONEY and not do any loan for investments. We have witnessed that Portugal, United Kingdom and etc have debts worth billions due to investment/bad investments which have a chain reaction to one another causing debts everywhere around europe/world. Therefore it is only wise to invest when there are often resources and not invest when there are limited resources which causes for them to seek loan for investing.
It is wise to do trading when investment is not possible. But trading will only be possible when there are capable investor. This is what circulation of wealth means in Islam. HELPING EACH OTHER! Rather than spending lavishly on luxury cars,handbags or golds, ir should be invested appropriately. We need to understand our individual role in order to improve the economy. Spend wisely and not spendthrift. This refers to a previous entry which include the verses of the Holy Qur'an on circulation of wealth. It does not always mean that we just need to sadaqah (give charity) to circulate wealth, investing appropriately in the laws of Islam is also another way to circulate wealth.
Bismillahirohmanirohim (In the name of Allah, the Most Merciful and the Most Compassionate)
Surah Al-Jumu'ah verse 11 "Yet no sooner than they saw some trading or amusement, they flocked to it and left you standing by yourself. Tell them: "That which is with Allah is far better than amusement and trading. Allah is the Best Provider of sustenance." "
Although this incident refers to a trading caravan which had arrived in Madinah from Syria exactly at the time of Friday Prayer, it indicates a kind of weakness of faith or their wilful preference for worldly benefits over the Hereafter. Even though we are encouraged to earn an income, we should not be obsessed with it (or be materialistic) and should live according to Islamic principles of circulating the wealth.
Ferrari 430 in my neighbourhood in Malaysia
It is evident that we see today some of us live luxurious life. Some who are wear handbags that might worth millions, some who upgrades their luxury cars just to make it look "nice" or to showoff. The wealth is then not being circulated but is being stucked to the rich. Although the money is being transferred from one to another in the transaction (of buying the handbag/spending on the car), the asset/entity is stucked to that particular rich person. This will be a sort of symbol where "I" (the rich person) can afford and "you" can't! Gradually this will come to a stage where it is provoking the poor. Therefore it is advisable for a muslim not to spend extravagantly according to the verse of the Holy Qur'an "(The true servants of the Merciful One are) those who are neither extravagant nor niggardly in their spending but keep the golden mean between the two;" (Surah al-Furqan verse 67). "Do not keep your hand fastened to your neck nor outspread it, altogether outspread, for you will be left sitting rebuked, destitute. (30) Certainly Your Lord makes plentiful the provision of whomsoever He wills and straitens it for whomsoever He wills. He is well-aware and is fully observant of all that relates to His servants." (Surah Bani Israil verse 29). The Arabic idiom 'to keep one's hand fastened to one's neck denotes'miserliness and 'to outspread it, altogether outspread' denotes extravagance according to Sayyid Abul A'la Mawdudi.
Pininfarina near my neighbourhood in the UK
"Allah has favoured some of you with more worldly provisions than others. Then those who are more favoured do not give away their provisions to their slaves lest they become equal shares in it. Do they, then deny the favour of Allah?" (Surah Al-Nahl verse 71) In this verse, people are reminded of an actual fact of life where they do not share their wealth even if it is not theirs (which has been bestowed upon them by God). This verse supports the the symbol of "I" (the rich person) can afford and "you"(the poor) can't because of their fear of being equalled to the poor. This also leads to these certain group of people who believe that they deserve more to be protected (i.e gated community, bodyguards and etc) because they consider themselves better or richer.
We need to remind ourselves that the economy revolves around everyone, not only leaders even though leaders are given the authority/power. By spending appropriately it does not only benefit individuals but the performance of the country will be improved. Ibn Khaldun explains that over indulgence of materialism causes people to abandon religion resulting in the disintegration of a nation and government.
Let us remind ourselves that we have obligations to fulfil and should always look at the bigger picture (the whole community) rather from a narrower persepective (individual).
Surah Bani Israil verse 26 "Give to the near of kin his due, and also to the needy and wayfarer. Do not squander your wealthwastefully"
Bismillahirohmaneerohim (In the name of Allah, the Most Merciful, the Most Compassionate)
I have given up on the toothbrush for more than a year now. I've got to say, using the siwak makes it feels really clean. Once I had gingivities even when I brushed my teeth every day using the toothbrush. Now that I've used the Siwak, I've never had such problem and the plaques in between my teeth are not as hard as it used to be. It is much easier to remove the plaques now.
The Siwak, as we know was used by the Prophet salallahualaihiwassalam in his lifetime. Abu Hurayra reported that the Messenger of Allah salallahualaihiwassalam, may Allah bless him and grant him peace, said, "If it was not for the fact that I might have been overburdening my community - or the people - I would have ordered them to use the siwak for every prayer."
Therefore from this, the use of the siwak is a strong suggestion for the community by the Prophet salallahualaihiwassalam. But it wasn't enforced to be as the toothbrush or to use the siwak for every prayer. The community have the option to use the siwak or to use the toothbrush. It is not stated in the Qur'an that a Muslim must use the siwak. But I have prefered to use the siwak anyway.
In my opinion, it is the same with gold and fiat money (paper money). Based on my research the Prophet salallahualaihiwasalam had never used his authority to state that gold is the money for Islam. He did not mint gold or declared it as the only money for Islam. I have not come across any Hadith which is even close to the Hadith of the siwak that I quoted above that strongly suggest it(gold) to be used. In fact there was a hadith that was mentioned by my lecturer that states the most miserable servant, is the servant of dirham/dinar (please do not take my word for granted as it is better for one to research).
"Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt - like for like, equal for equal, payment being made on the spot. If the species differ, sell as you wish provided that payment is made on the spot" (Hadith Muslim)
Paper money used to be a debt of real wealth of gold and silver, and this would not be allowed because of the prohibition from one of the Prophet’s Hadith about any transactions in gold, silver, wheat, barley, rice and dates is to be done on the spot and hand to hand. If the paper money represents gold, therefore this transaction goes against the hadith as the gold is not being transferred from one person to another.
But paper money now do not base its value on gold or silver, so it doesn't contradict with the hadith and seems like it will be permissible to use it as money. There are some that states that money should have intrinsic value because of the Hadith that has been stated above. The rationale to that statement was, all of the six items have value and can be used as money. In my research, I've not encountered that wheat, barley or dates was used as money (please advise me if I'm wrong on this). These items are perishable (may be eaten, rotten and etc) so it is rarely used as money. So, is it necessary for money needs to have intrinsic value? Who puts the value towards gold? If gold does not interest anyone, wouldn't the value of gold go down/depreciate? So it depends on the demand of the community to put the value on gold. What is the difference with fiat money? Fiat money too also depends on the demand.
I've not worked in an Islamic bank and I don't think I am biased towards Islamic banking. Some have gone to say that Islamic banking is a great deception and stuff like that. Although I do see some Islamic banks are not conducted properly, I don't think that it is a "great deception". Islamic banks needs to be improved with the help of the community.
The argument of gold as the ULTIMATE ISLAMIC MONEY, is not really accurate. Big transactions using gold will require delay payments and as the Hadith on gold earlier states that "sell as you wish provided that payment is made on the spot".I see this as a problem in using gold.If this problem and other problems on gold are being solved then there is nothing wrong on the usage of gold. I do not oppose gold nor do I support fiat money. Both have problems and in my opinion both may be used as money as long as it is being used properly.
How would you respond to the claim that Islamic money is gold and silver and that Muslims should support an international return to the gold standard?
Money that is being dealt today has given us a lot of benefits and also giving us problems that are affecting most parts of the world with the financial crisis bubble burst. Comparison between gold or silver and fiat money or paper money will be done so that the pros and cons will easily be evaluated in the perspective of economics and Sharia’.
3) Islamic perspective on money
In the period of the rising of Islam, gold and silver was used as a common medium in trading. Most of the Arabs were businessman and traders, they were not known of craftsmanship so the Arabs dealings were always conducted in gold and silver as they have nothing else of significance in high demand to be used as money.
Early Muslim scholars considered gold and silver as the natural money or money by creation. Given that fiat money has replaced gold and silver, Muslim scholars have equated the modern fiat money with the jurist rules of gold and silver. Consequently, all kinds of prohibited interest or riba on gold and silver, as well as all conditions or requirements of zakah on gold and silver have been passed to fiat money.
There is not much being said in the Islamic perspective on gold and silver as generally Islam does not really endorse on the usage of gold and silver or even opposes on the usage of fiat money. There is a hadith by the Prophet salallah alaihu wassalam that interprets most miserable is the servant of Dirham and Dinar which emphasises on the usage of gold and silver which warns us on not to be obsessed in using gold and silver . It is undoubtedly that gold and silver may lead us astray due to its inherent value but it is a reminder for us so that we will not hesitate when spending gold and silver or money and always be a servant of Allah (god) rather than the servant of gold and silver.
If paper money was a debt of real wealth of gold and silver, it would not be allowed because of the prohibition from one of the Prophet’s Hadith about any transactions in gold, silver, wheat, barley, rice and dates is to be done on the spot and hand to hand. If the paper money represents gold, therefore this transaction goes against the hadith as the gold is not being transferred from one person to another.
4) Fiat money
Generally, the value of money is determined by the law of supply and demand which has been said by Ricardo “the value of money is not determined by the labour time its substance embodies, but by the law of supply and demand only.” If money is being over produced but it is low on demand, the value of the money will depreciate tremendously. The United States of America dollars is being over produced but it is being supported by most parts of the world which makes it high on demand even though it is over produced for the capacity of its nation.
Generally fiat money will always be spent due to its specific purpose as a medium of exchange and because of its depreciating value. Time value for money will have an effect here, so people will tend to get rid of the fiat money in a shorter period compared to gold and silver. The disadvantage here is that when fiat money is over spent it will then lead to debt. Too much debt will create crisis which will affect the communities which has been experienced frequently with the likes of United States of America in recent times. Hence, it will create a bigger gap between the rich and poor which leads to a bigger disastrous effect.
Fiat money also has an advantage if it is conducted in Islamic law which eliminates riba or interest, which is proven in recent history that it is achievable. It is also possible to do it with gold and silver if it is being conducted in Islamic law as well. Both are prone to interest but it is illogical to implement it with gold and silver due to its limited resources.
Fiat money is widely known due to its liquidity. It is easily measured and managed because of its size and weight compared to the gold and silver which is a hassle to manage because it is bulky and heavy to be transferred around. This is certainly a big advantage to the fiat money and one of the reasons that the fiat money was created.
5) Gold and silver
Gold and silver are resources from the earth in contrast to the fiat money which is produced by human. Humans cannot over produce the gold and silver as it is a limited resources from the earth. This will be beneficial as it cannot be over produced but it can also be a disadvantage as it is limited and demand will only rise as the population of the world is ever growing. Although so, the higher demand for gold will only make it more valuable which makes it more stable than fiat money as history has shown it has been depreciated.
Comparing gold and silver with fiat money, the stability value of gold has always been superior in comparison to the depreciating fiat money. As mentioned by Luthfi Hamidi, one troy ounce of gold was equivalent of US dollar 1,939 in the year 1800. In 2004, one troy ounce of gold is equivalent to US dollar 455,757.This is because the US money production of the US dollar is ever growing but gold is not being over produced for the last 204 years. Gold resources are limited but the demand is growing through the population of the world and therefore makes it value appreciated and not be depreciated. It is better to leave it in the hands of god rather than in the hands of another human being or government which can or able to manipulate the value of money.
Using gold and silver as a medium of circulation could make people feel reluctant to spend or use it in circulation. People would rather keep the gold and silver due to its inherent value. This will be a disadvantage because it might not satisfy the equation of quantity theory of money which is V=Y/M. V represents the average velocity of circulation, might not be adequate due to hoarding gold. Where else fiat money has the advantage here, as it has a specific function which is to be spent in exchange of goods and services. If one decides to keep the fiat money, it is because to save up until it reaches certain amount and only to be spent in a larger amount.
People have the tendency to feel reluctant to spend unnecessarily with gold and silver, debts will be kept at a minimal and therefore may avoid being in a financial crisis. With gold and silver, it will make people more aware and only spend on necessities. Financial growth will take on a slower pace but will be considerably more stable compared to the usage of fiat money.
Due to the facts that of the usage of gold and silver people are more reluctant to spend it, it will lead on to a higher interest rate. People will be afraid to let their valuables go, therefore demanding a higher interest rate when loaning it out. Contrast to the fiat money, even though people would willingly loan it out, it will be on a lower interest rate. Interests are commonly known to be prohibited in Islam as being mentioned in the holy Quran. (2:275)
Gold and silver are limited resources therefore it will be illogical for one to demand more than what is available. In a way it can somehow stop people on dealing with interest or riba. In contrast to the fiat money which is always being produced, one can always demand on interest because the supply will usually meet its demands. Even though these interest are at a smaller percentage, too much of these small percentage of interest will add up to a big amount that can be unsustainable.
Conclusion:
Gold cannot be implemented as gold reserve standard because of the prohibition from the Prophet that gold has to be exchange from one to another on the spot. Therefore if one were to endorse the usage of gold as money, it cannot be gold reserve standard but has to be the physical gold itself.
Gold resources might be sufficient to be used commercially but the issue is that if the average velocity of gold circulation is adequate to fit in the quantity theory of money equation which is V = Y / M, as people naturally will hoard gold rather than spending it generously.
Gold would give a trade-creating effect which is positive rather than fiat money which gives a debt-creating effect that will lead to financial crisis. The important thing for the Islamic Economic System is to get back to the trading side and not to the debt-creation side. Islam generally encourages us to do trading and avoid debts.
The important goals of monetary policy in an Islamic economy:-
Ø“Economic well-being with the full employment and optimum rate of economic growth;
ØSocio-economic justice and equitable distribution of income and wealth; and
ØStability in the value of money to enable the medium of exchange to be a reliable unit of account, a just standard of deferred payments and a stable store of value” .
Gold would fit in this monetary policy as a stable in the value of money.
Gold and silver are not necessarily money from the Islamic perspective and Muslims should not support an international return to the gold standard. However gold and silver may be implemented as money if gold minting is being used. Fiat money can also be used from the Islamic perspective but it would be better if fiat money were to be more stable and perhaps new solutions for the fiat money through evolution could be ideal money.
