How Is Inflation Accounted for in "Islamic" finance

[AbdiWahab252]

So say you have $1,000 in paper currency, how does "Islamic" finance account for inflation if interest is haram ?

No stupid comments, please

[Executive]

We don't account for it at all, cause inflation is not linked with interest although they may seem to be correlations. Inflation is simply caused either by having surplus means of payments (the economy as a whole) or shortage of supply. It may my occur in a non-interest based economy just as it occurs in interest based economies.

[ms.naliaa]

We don't account for it at all, cause inflation is not linked with interest although they may seem to be correlations. Inflation is simply caused either by having surplus means of payments (the economy as a whole) or shortage of supply. It may my occur in a non-interest based economy just as it occurs in interest based economies.

I think what he is trying to ask if how do you combat that increase or decrease in purchasing power if interest is haram

[Executive]

We don't account for it at all, cause inflation is not linked with interest although they may seem to be correlations. Inflation is simply caused either by having surplus means of payments (the economy as a whole) or shortage of supply. It may my occur in a non-interest based economy just as it occurs in interest based economies.

I think what he is trying to ask if how do you combat that increase or decrease in purchasing power if interest is haram

There has to be a islamic state which can put in place economic policies and are independent from organisations such as World Bank, IMF, WTO, etc.

- No artificial money
- Hard currency backed by gold/silver...and things wit a fairly instinct value
- State controls natural resources and its pricing - The prophet pbuh said that in a hadith
- No deception or manipulation of demand or supply

there are a lot of policies in accordance with sharia regarding this, but this is all i know.

[DR-YALAXOOW]

islam is for free market, and making profit with consideration of making an a reasonable provit.


1400 ago there was NO finansial instution like Banks and BIG markets whichs global like modern times.

the world 1400 was different place REAL meanning of ribba which islam forbids in the QURAN is individual lending eachother money and before you lend money or 2 camels and you say forexample i want you puy me back 4 camels, you have to double the 2 camels which iam lending now Thats xaraaam.

but todays economy first you take 100 dollar loan from BANK, i you sappouse to buy back one year after. 100 dollar you took will not have same value after one year becouse of inflation.

second the bank have employee and other cost, if you buy bank just 100dollar, that bank will loos money becouse of inflation the 100dollar you took from bank 1years ago today is less then the original 100dollar you lended.


so 100 dollar next years you have to buy bank 110 dollar whichs same amounth of 100 dollar years ago. that 10 extra dollars you paid it covers, 1;inflation 2:banks cost 3:-and provit.


dhinaca kale tusaaale BANKIGA ayaaan lacag dhigtey 10 000 dollars ayaaa acounti BANKIGEEYGA dhigtey.BANKIGA wuxuu ii saaarey after year 2%. TAASOO la mid ah 200 dollars.MARKA suaasha waa that 200 dollar bankiga ii soosaarey maxay tahay??

200 waafirst 10 000 dollars infationkii qiima dhaca kuyimid lacagteeydii ayuu iigu darey, dhinaca kale 10thousend dollarkeeygii BANKIGA wuuu ku shaqeeystay faaiido aad ubaddan ayuuu ka helay faiidadii ayuu wax iga siiyey and bakiga wuxuu ugu yeeraaa lacagtaas INTRESST RATE..malacagtaas AYAA MARKA XAARAAN ah waa maya waa xalaal

[ModerateMuslim]

is there anything dr dameer isn't an expert in?

and is there anything from the book or the sunnah which he accepts, or at least agrees with?

[AbdiWahab252]

SomaliStar,

Keep it moving.

Dr. Yalaxow,

Jazakallah

[bareento]

Hi guys,

Very interesting topic

I have two questions:
The interest rates a bank (or a lender) asks for is roughly = inflation + the risk (that u wont pay back) + (loading for the bank's expenses)
ie higher risk=higher interest rate
Is there any other way, I mean Islamic way to integrate risk in financial transactions??

The techniques used by today's Islamic Banks are no solutions, as they r only hiding the interest rates ....as described in the previous topic
Is there any sound, viable Islam Financial Doctrine??

I googled but didnt find...

My knowledge about Islamic finance is very limited, It is highly appreciated if u can recommend books or internet sites...ty

B.

[AbdiWahab252]

Brother Bareento,

You raise some good questions.

[Dhaga Bacayl]

Abdi,

Spend what you earn. Don't live beyond your means. If that is hard for you to maintain, move back to Africa.

You can stop buying all tese fancy SUV for one.

Bal xal raadis baad tahaye saaxiib ma amaahdi baad badsatay?

[AbdiWahab252]

Dhaga,



At least take your interest and give it to needy people in Somalia instead of letting Bank of America keep it

I receive interest, and avoid paying it

[Dhaga Bacayl]

Dhaga,



At least take your interest and give it to needy people in Somalia instead of letting Bank of America keep it

I receive interest, and avoid paying it

Of course you should take your interest and give it away. It won't be charity but it would help someone for sure!

[xamd]

islam is for free market, and making profit with consideration of making an a reasonable provit.


1400 ago there was NO finansial instution like Banks and BIG markets whichs global like modern times.

the world 1400 was different place REAL meanning of ribba which islam forbids in the QURAN is individual lending eachother money and before you lend money or 2 camels and you say forexample i want you puy me back 4 camels, you have to double the 2 camels which iam lending now Thats xaraaam.

but todays economy first you take 100 dollar loan from BANK, i you sappouse to buy back one year after. 100 dollar you took will not have same value after one year becouse of inflation.

second the bank have employee and other cost, if you buy bank just 100dollar, that bank will loos money becouse of inflation the 100dollar you took from bank 1years ago today is less then the original 100dollar you lended.


so 100 dollar next years you have to buy bank 110 dollar whichs same amounth of 100 dollar years ago. that 10 extra dollars you paid it covers, 1;inflation 2:banks cost 3:-and provit.


dhinaca kale tusaaale BANKIGA ayaaan lacag dhigtey 10 000 dollars ayaaa acounti BANKIGEEYGA dhigtey.BANKIGA wuxuu ii saaarey after year 2%. TAASOO la mid ah 200 dollars.MARKA suaasha waa that 200 dollar bankiga ii soosaarey maxay tahay??

200 waafirst 10 000 dollars infationkii qiima dhaca kuyimid lacagteeydii ayuu iigu darey, dhinaca kale 10thousend dollarkeeygii BANKIGA wuuu ku shaqeeystay faaiido aad ubaddan ayuuu ka helay faiidadii ayuu wax iga siiyey and bakiga wuxuu ugu yeeraaa lacagtaas INTRESST RATE..malacagtaas AYAA MARKA XAARAAN ah waa maya waa xalaal

You're close but you're not there yet and really you're really far off.

Executive is very close.

Before one can diss on the revelation that was revealed to the best of creation, you have to analyze the question.

The Question of how Islam accounts for inflation when interest is forbidden assumes that interest can account for inflation. In order for this to be true one must know 1) whether there will be inflation instead of a deflation, and 2) the precise amount of that inflation. If these two things are not true, then one is charging a price for his money based on uncertainty. You're saying 'I'll charge you $5 because the $100 I'm loaning you may or may not decrease in value. and if it increases in value or its value remains the same, then tough luck!' It is clear when analyzed in this fashion how far removed interest of any amount is from business. In a business transaction the seller and the buyer agree on the price, period.

Now for the reason as to why there is inflation. And it is not because our currency is not based on gold/silver, although if that was the case it would definitely help. It is because the treasury PRINTS MORE MONEY than is needed to accommodate for the growth in the economy. If the increase in paper money was proportioned to the growth of the economy, then there wouldn't be inflation!

So if you're a muslim country that follows the shariah, there wouldn't be any need for interest because there would be no inflation to account for!

Also, the interest rates are ALWAYS much higher than inflation. Inflation is usually 1 or 2 or 0% in interest based economies such as the US; have you ever seen banks regularly charging such low interest? No.

And for the reason of paying bank staff and making profit, this can be done by 1) charging flat fees for services and not for money and by 2) sharing risk and profit. This has been proven to work and it is much better for the people, where as the previous way of charging 10% interest regardless of whether one's business makes any profit is just pure slavery and no less.

[AbdiWahab252]

Xamd,

You made some excellent points. However, I do disagree that there is no inflation in an economy that does not use paper currency.

[Dudaaye]

Islamic Scholar Imran N Hosein
If you want to read more on Islamic Finance http://www.imranhosein.org