MONEY MATTERS FROM ISLAMIC PERSPECTIVE

Today, I would like to share with all about money matters from an Islamic perspective.

Most of our Muslim brothers and sisters have lost their perspectives especially in matters concerning money and this article is just the right remedy for us to return to the rightful path and could be of use in our daily lives from now onwards :

On interest

The state of the money–lender in this life is just like a man who is touched by devil , always in troubles , thinking , deviated and completely absorbed in his affairs and his state in the hereafter is greater .

Allat swt says in the Holy Quran :

“Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say: Trade is just like usury; whereas Allah permitteth trading and forbiddeth usury. He unto whom an admonition from his Lord cometh, and (he) refraineth (in obedience thereto), he shall keep (the profits of) that which is past, and his affair (henceforth) is with Allah. As for him who returneth (to usury) Such are rightful owners of the Fire. They will abide therein” (Al-Baqara : 275)

“O ye who believe! Fear God, and give up what remains of your demand for usury, if ye are indeed believers.” (Al-Baqara : 278)

“Allah will deprive usury of all blessing, but will give increase for deeds of charity: for He loveth not creatures ungrateful and wicked. (Al Baqara : 276)

Usury has penetrated the very structure of our economic systems and financial institutions. The hardship has become collective. Prophet Muhammad (saw) has spoken of the coming of such an age as a sign of the coming of the last day. Prophet Mohummed (saw) said :

“There will come an age where everybody eats usury and those who don’t will be touched by its dust.”

“If adultery and usury spread in a village, the people of that village are asking for the punishment of Allah.” The Prophet (saw) cursed usury, those who take it, write its contract and those who witness such a contract. Narrated Jabir ibn Abdullah: Allah's Messenger cursed the accepter of interest and its payer, and one who records it, and the two witnesses; and he said: They are all equal (Muslim).

Abu Huraira related that the Prophet (saw) said: “On the night of the Mikraj I came upon a group of people whose bellies were like houses. They were full of snakes which could be seen from outside their bellies. I asked Gabriel who they were, and he told me that they were the people who had practiced Riba (Interest).” (Ahmad, Ibn Maja)

Abdullah ibn Hanjalah related that the Prophet (saw) said: “A dirham of Riba (interest) knowingly taken by a man is a sin worse than committing Zina (fornication) 36 times” (Ahmad, Daraqutni).

On zakat payment

"And they are ordained naught else than to serve Allah, keeping religion pure for Him, as men by nature upright, and to establish worship and to pay the poor-due (Zakah). That is true religion." (Quran 98:5)

Abbas related that a man asked the Prophet, Tell me what should I do to be admitted to Paradise and he (the Prophet) answered: Worship Allah associating nothing with Him, observe Salat, pay Zakah and strengthen the ties of kinship. (Bukhari, Muslim)

On inheritance and wills

"And unto each We have appointed heirs of that which parents and near kindred leave; and as for those with whom your right hands have made a covenant, give them their due. Lo! Allah is ever Witness over all things" (Quran 4:33)

Ibn Umar related that the Prophet said: “It is the duty of a Muslim man who has something which is to be given as a bequest not to have it for two nights without having his will written regarding it.” (Bukhari, Muslim)

Anas related that the Prophet (saw) said: “If anyone deprives an heir of his inheritance, Allah will deprive him of his inheritance in Paradise on the Day of Resurrection.” (Ibn Maja)

On how we earn our money?

Abu Huraira narrated that the Prophet (saw) said: “A time will come upon the people when one will not care how one gains one's money, legally or illegally.” (Bukhari)

It is reported by Jabir that the Prophet (saw) said: “The flesh and body that is raised on unlawful sustenance shall not enter Paradise. Hell is more deserving to the flesh that grows on one's body out of unlawful sustenance.” (Ahmad).

Abu Said related that the Prophet (saw) said: “The truthful and trustworthy businessman will be in the company of Prophets, saints and martyrs on the Day of Judgment.” (Darimi, Tirmidhi)

On debts

It is narrated by Abu Musa Ashari that the Prophet (saw) said: “After the major sins which must be avoided, the greatest sin is that someone dies in a state of debt and leaves behind no asset to pay it off.” (Darimi)

On loans

Abu Qatadah related that the Prophet (saw) said: “If anyone would like Allah to save him from the hardships of the Day of Resurrection, he should give more time to his debtor who is short of money, or remit his debt altogether.” (Muslim)

On striving with our wealth

"Believers are merely those whose hearts feel wary whenever God is mentioned and whose faith increases when His verses are recited to them. On their Lord do they rely. Those who keep up prayer and spend some of what We have provided them with are truly believers" (Quran 8:2-4).

Asmah related that the Prophet (saw) said: “Spend, and do not count, lest Allah counts against you. Do not withhold your money, lest Allah withholds from you. Spend what you can.” (Bukhari, Muslim)

Abu Huraira related that the Prophet (saw) said: “The Lord's commandment for every one of His slaves is, ‘Spend on others, and I will spend on you'.” (Bukhari, Muslim)

On our wealth and the issue of the poor

"Hast thou observed him who belieth religion? That is he who repelleth the orphan, and urgeth not the feeding of the needy" (Quran 107: 1-3).

Safwan ibn Salim related that the Prophet (saw) said: “Anyone who looks after and works for a widow and a poor person is like a warrior fighting for Allah's cause, or like a person who fasts during the day and prays all night.” (Bukhari)

On hoarding

"O you who believe! Lo! many of the (Jewish) rabbis and the (Christian) monks devour the wealth of mankind wantonly and debar (men) from the way of Allah. They who hoard up gold and silver and spend it not in the way of God, unto them give tidings (O Muhammad) of a painful doom" (Quran 9:34).

On charity and punishment

It is narrated by Anas bin Malik that the Prophet (saw) said: “Verily charity appeases the wrath of Allah and eases the sufferings of death.” (Tirmidhi)

On extravagance

"Give the kinsman his due, and the needy, and the wayfarer, and squander not (your wealth) in wantonness. Lo! the squanderers were ever brothers of the devils, and the devil was ever an ingrate to his Lord" (Quran 17:26-27).

Amr ibn Shuaib, on his father's authority said that his grandfather related that the Prophet (saw) said: “When you eat, drink, give charity and wear clothes, let no extravagance or pride be mixed up with what you do.” (Ibn Maja, Nasai).

On being a Miser

Abu Huraira narrated that the Prophet (saw) said: “Every day two angels come down from Heaven and one of them says, 'O Allah! Compensate every person who spends in Your Cause,' and the other (angel) says, 'O Allah! Destroy every miser'.” (Bukhari).

Abu Said Khudri related that the Prophet (saw) said: “There are two habits which are never present together in a believer: miserliness and bad manners” (Tirmidhi).

Jabir reported that the Prophet (saw) said: “Avoid doing injustice to others, for on the Day of Judgment, it will turn into manifold darkness, and safeguard yourself against miserliness, for it ruined those who were before you. It incited them to murder and treating the unlawful as lawful” (Muslim)

On moderation in giving

"And let not thy hand be chained to thy neck nor open it with a complete opening, lest thou sit down rebuked, denuded" (Quran 17:29).

(In reference to the slaves of Allah) "And those who, when they spend, are neither prodigal nor grudging; and there is ever a firm station between the two" (Quran 25:67).

On bribery

"And eat not up your property among yourselves in vanity, nor seek by it to gain the hearing of the judges that you may knowingly devour a portion of the property of others wrongfully" (Quran 2:188).

On contentment

Abu Huraira narrated that the Prophet (saw) said: “Wealth is not in having vast riches, it is in contentment.” (Bukhari, Muslim).

On envy in wealth

Ibn Masud said I heard the Prophet (saw) saying: “There is no envy except in two: a person whom Allah has given wealth and he spends it in the right way, and a person whom Allah has given wisdom (i.e. religious knowledge) and he gives his decisions accordingly and teaches it to the others.” (Bukhari).

On women and charity

Ibn Abbas narrated that the Prophet (saw) went out for the Eid prayer on the Eid day and offered a two Rakat prayer; and he neither offered a prayer before it or after it. Then he went towards the women along with Bilal. He preached [to] them and ordered them to give in charity. And some (amongst the women) started giving their forearm bangles and earrings. (Bukhari)

On the best charity

Abu Huraira narrated that the Prophet (saw) said: “The best charity is that which is practiced by a wealthy person. And start giving first to your dependents.” (Bukhari)

On begging

Narrated by Hakim bin Hizam that the Prophet (saw) said: “The upper hand is better than the lower hand (i.e. he who gives in charity is better than him who takes it). One should start giving first to his dependents. And the best object of charity is that which is given by a wealthy person (from the money which is left after his expenses). And whoever abstains from asking others for some financial help, Allah will give him and save him from asking others, Allah will make him self-sufficient.” (Bukhari)

Abu Huraira related that the Prophet (saw) said: “He who makes a habit of asking from others reaches out for a brand of Fire, so let him refrain or continue, as he desires.” (Muslim)

On business conduct

Jabir related that the Prophet (saw) said: “May Allah show mercy to a man who is kind when he sells, when he buys, and when he makes a claim.” (Bukhari)

CONTROLLING INFLATION - FROM THE PERSPECTIVE OF A GOVERNMENT

I recently read this article by Frederic S Mishkin on strategies to control inflation, where he identified 3 strategies that the central banks should adopt to do the “magic” to curb ongoing inflation, i.e. :

a) exchange rate pegging

b) monetary targeting

c) inflation targeting

When Malaysia was faced with an economic attack/turmoil in 1997, the then Malaysia’s Prime Minister has adopted the exchange rate pegging – the Malaysian Ringgit with the US Dollar. And no one can say that the decision was a bad one as Malaysia managed to recover from the downturn faster than its neighbouring countries.

Controlling inflation forms a significant part of the economic activities of a nation. It is important as unrestrained increase of the prices may culminate in Hyperinflation, and an excessive fall in the prices may lead to Deflation. Both the situations are not healthy and sound for the overall growth and development of a country's economy.

In fact, keeping a strong control over Inflation has turned out to be one of the primary objectives of the governments of different countries across the globe. To this effect, efficacious economic policies are being formulated, which mainly concentrate on the fundamental causes of inflation in an economy, and try to improvise methods to keep the inflationary conditions under control.

It is worth to also highlight some methods, which have proved to be highly effective in controlling inflation to large extents:

Fiscal Policies:

Fiscal policies are effective in increasing the leakage rates from the circular income flow, thereby rejecting all further additions into this particular flow of income. This brings about a reduction in the Demand-Pull Inflation, in terms of increasing unemployment and slackening the economic growths. Following are a few types of fiscal policies commonly employed:

• Lowering the expenses on governmental level
• A fall in the borrowing amounts in the government sectors, on an annual basis
• High direct taxes, for reducing the disposable income

Monetary Policies:

Monetary Policies have a great role to play in controlling Inflation. These are policies which can actually control the rise in demand, by increasing the rates of interest and reducing the supply of real money. An escalation in the interest rates brings about a reduction in collective demands, in the following three ways:

• A rise in the interest rate discourages borrowing from both companies and households. When interest rates increase, it simultaneously encourages the savings rate, owing to an escalation in the opportunity cost of expenditure.
• Rise in the interest rates is a very useful tool for restricting monetary inflation. Increase in the real rates of interest decreases the demand for loans, thereby limiting the growth of broad money.
• There may also be a fall in the commercial investments, due to a rise in the costs of borrowing money. This exerts a direct influence on a handful of planned investment-related projects, which turn out to be unprofitable . This leads to a fall in the collective demand.
• An increase in the payment of mortgage interests automatically decreases the real 'effective' disposable income of the house owners, as well as their spending capacities. Escalation in the mortgage costs also decreases the demand generated in the housing markets.

Exchange Rates:

An escalation in the exchange rate is possible by increasing the rates of interest or buying money through the central bank interferences in the foreign exchange markets. Mentioned below, is a short-term mean by which inflation can be controlled through exchange rates:

• Income policies or direct wage controls: Setting restrictions on the growth rate of wages may decrease cost push inflation. On governmental level, an attempt to influence the growth of wage leads to limit the rise in the pay in public sectors, as well as initiates cash restrictions for making payments to the employees of public sectors.

As far as the private sector is concerned, the government attempts to convince the commercial firms and its employees to implement self-controls at the time of negotiating wages. Generally, there is a fall in the wage inflation when there is an economic depression, leading to a rise in the unemployment rates.

The long-term means of controlling Inflation are as follows:

• Supply-side Reform Policy: According to this policy, if more output is produced at a low per unit cost, there are chances for the economy to attain persistent economic growth and development, without being affected by inflation.
• Policy regarding labour market reforms: If an increase in the flexibility of the labor market permits the commercial firms to put a check on labor costs, it can lead to a reduction in the pressures created by Cost-Push Inflation.