Future of Banking In Gold Dinar Economy – A Prescription To Uplift Ummah Economy (Part-2)
by Abdul Halim Abdul Hamid and Norizaton Azmin Mohd Nordi*
First and foremost, an “entrepreneur bank” is an entrepreneur by itself in which it will require its own capital to invest. It accepts deposits in terms of dinar and dirham and it operates electronically based on dinar and dirham. All dinar and dirham deposited into an entrepreneur bank is ‘real money’ with a hundred percent reserve requirement. Entrepreneur banks will act as a safe keeper or trustee for dinar and dirham deposits.
Fig. 3: The present banking system
Some guiding principles that an entrepreneur bank need to follow are:-
- A. All wealth belongs to Allah SWT and an entrepreneur only act as trustee or manager.
- B. The ‘entrepreneur bank’ must be reminded that they are the trustees for Allah’s wealth in this world. As mentioned in the Al-Quran; To Him belongs what is in the heavens and on earth, and all between them, and all beneath the soil. (Taha: 6)
To Allah belongth all that is in the heavens and on earth. Whether ye show what is in your minds or conceal it, Allah calleth you to account for it. He forgiveth whom He pleaseth, and punisheth whom He pleaseth. For Allah hath power over all things. (Al-Baqarah: 284)
It is He who hath made you (His) agents, inheritors of the earth: He has raised you in ranks, some above others: that He may try you in the gifts He hath given you: for thy Lord is quick in punishment: yet He is indeed Oft-Forgiving, Most Merciful.(Al-An’aam: 165)
Allah strongly forbid Riba, as mentioned in the Al-Quran: Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: “Trade is like usury”,
Fig. 4: The proposed banking system.
“but Allah had permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the Fire; they will abide therein (forever). (Al-Baqarah: 275)
Allah further forbid taking extra money out of debt, and He and his messenger declare war to those who commit Riba. In addition, He said without Riba, one will do justice to others, and others towards him or her. As mentioned in the Al-Quran: O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers. (Al-Baqarah: 278)
If ye do it not, take notice of war from Allah and His Messenger; but if ye turn back, ye shall have your capital sums; deal not unjustly; and ye shall not be dealt with unjustly. (A-Baqarah: 279)
B. Promoting real economy.
In today’s world, everyone rush to get into the cities and so called to be successful there by becoming bankers, engineers, accountants, doctors, etc. No ones like to do the farming jobs in cultivating the land to generate food and to prosper the villagers in a traditional non polluted way. If this carries on, then who will put food on the peoples table? Can the world stand much longer in this global warming threat? Therefore, it’s high time that entrepreneur bank set to become the institution that promotes the development of Muslim ummah (community) through real economy activities.
One of the objectives of Islamic financial system in the context of tawheed (spiritual) and taqwa (obedience) is to make the life in this world a happier and prosper place through a financial system that portrays an Islamic socioeconomic values . In an Islamic ethics, each and every one of us has the obligation to contribute to create a system based on Islamic teachings. Islam gives the rights to its ummah to seek help from one another and help each other according to their ability .
C. Discourage debt and promotes partnership.
Fundamentally, banks should change its role from becoming a debt provider to a partnership . Debt should be highly discouraged and should be avoided whenever possible. As mentioned in a hadith narrated by ‘Aisha, the wife of the Prophet: Allah Apostle used to invoke Allah in the prayer saying “…. O Allah, I seek refuge with You from the sins and from being in debt.” Somebody said to him, “Why do you so frequently seek refuge with Allah from being in debt?” The Prophet replied, “A person in debt tells lies whenever he speaks, and break promises whenever he makes them”. This clearly showed that being in debt should be avoided. Perhaps, banks should become a trustee and a partner in business, instead of being a guarantor for debts.
D. Be an active partner and provide expertise.
Here, an entrepreneur bank should become an active partner and able to provide professional consultation to entrepreneurs. If a customer approaches the bank for business loan, an entrepreneur bank should treat it as a partnership, in which the bank shall also take part in running the business. Musyarakah Mutanaqisah (Diminishing Partnership) is the sharing of the revenue with progressive dilution of shareholding.
An entrepreneur bank shall not merely observe from afar and reaps the profit when the business succeeds and left the business in despair when it fails. Banks should provide advises and assistance to entrepreneurs on how to improve the performance of their business. This is the most crucial element in an entrepreneur bank because this may become its major source of income replacing the interest income. Initially, the ownership of the business will be divided between the entrepreneurs and the bank with the ratio agreed by both parties. The entrepreneurs shall buy the shares from the bank through their profit until they owned 100 % of the business. In other words, banks have to release the business to the entrepreneurs when they afford to buy back all their shares.
E. Encourage spending on savings not on credit.
An entrepreneur bank should encourage spending on savings instead of spending on credit. If its customers want to buy a car or a house, or planning to go for a vacation, bankers should design their financial planning so that they can afford it. Perhaps, customer may opt for Musyarakah Mutanaqisah Home Financing (Lease Purchase with Diminishing Partnership) In a Musharaka Mutanaqisah home financing scheme the customer and financier jointly acquire and own the property.
The financier then leases his share of the property to the customer on the basis of Ijara (lease). The customer, as an owner-tenant, promises to acquire periodically the financier’s share in the property. The customer pays rental to the financier under Ijara, which partially contributes towards increasing their share in the property. (eg. If the financier owns 70% of the property and the customer owns 30%, and the customer’s monthly rental is USD1,000 then USD700 goes to the financier and USD300 goes to increase the customer’s share of the property.) At the end of the lease term and upon payment of all lease rentals the customer would have acquired all the financier’s shares and the partnership will come to an end with the customer being the sole owner of the house .
For smaller expenses, an entrepreneur bank should encourage the used of debit card instead of credit card. Credit card promotes over-spending, which means a person spends using money that he or she does not have. This is against Islamic teaching, as mentioned in the Al-Quran: Those who, when they spend, are not extravagant and not niggardly, but hold a just (balance) between those extremes. (Al-Furqan: 67)
Allah further stated that overspend makes a person closer to the devil, as mentioned in the Al-Quran: Verily spendthrifts are brothers of the Evil Ones; and the Evil One is to his Lord (Himself) ungrateful. (Al-Isra’: 27)
F. Promote business creation and entrepreneurship.
Next, an entrepreneur bank should encourage Muslims to do business instead of working with others. The Prophet encouraged his ummah to do business. Al Suyuti mentioned in Al Jami` Al Saghir, a hadith on the authority of Rafi` that: The Prophet was asked: “which are the best forms of income generation?” He replied: “A man’s labor, and every legitimate sale”.
This will give all Muslims an equal opportunity to prosper and at the same time, discourage monopoly business. Those who worked hard enough will earn a just reward for their effort. As mentioned in the Al-Quran: And when the Prayer is finished, then may ye dispersed through the land, and seek of the Bounty of Allah: and celebrate the Praises of Allah often (and without stint): that ye may prosper. (Al-Jumu’a: 10)
G. Educate Muslim ummah on daily matters.
An entrepreneur bank should educate the Muslim ummah about daily matters and help strengthened the ummah faith and belief in Allah. This is because the stronger the faith and belief in Allah, the stronger they will be in adhering to Allah’s command. A research conducted in Kuala Lumpur, Malaysia showed that almost all Muslim’s respondent knew the existence of Islamic banking in Malaysia, however, only half of it used the facilities. From this half, only 15 percent able to answer correctly the meaning of each product offered by Islamic banks . A brief layout of an entrepreneur bank can be seen in fig. 5.
Finally, banks should be more innovative, creative, more sophisticated and more professional when dealing with gold dinar economic system. The electronic payment system may take most of banks’ role as the medium for payment . It is only a matter of times that gold dinar economy system becomes a reality. And hopefully, when it’s finally arrived, banks are prepared with the new renaissance of an Islamic monetary system.
To fine tune with this ideal system, let’s contemplate the hadith narrated by Abu Huraira: The Prophet said, “An Israeli man asked another Israeli to lend him one thousand Dinars. The second man required witness. The former
Fig. 5: A Brief Layout of an Entrepreneur Bank replied, “Allah is sufficient as a witness.” The second said, “I want a surety.” The former replied, “Allah is sufficient as a surety.” The second said, “You are right”, and lend him the money for a certain period. The debtor went across the sea. When he finished his job, he searched for a conveyance so that he might reach in time for the repayment of the debt, but he could not find any. So, he took a piece of wood and made a hole in it, inserted in it one thousand Dinars and a letter to the lender and then closed, i.e., sealed the hole tightly.
He took the piece of wood to the sea and said, “O Allah! You know well that I took a loan of one thousand Dinars from so and so. He demanded surety from me, but I told him that Allah’s guarantee was sufficient and he accepted Your guarantee. He then asked for a witness and I told him that Allah was sufficient as a witness, and he accepted you as a witness. No doubt, I tried hard to find a conveyance so that I could pay his money but could not find, so I hand over this money to You.”
Saying that, he threw the piece of wood into the sea till it went far into it, and then he went away. Meanwhile he started searching for a conveyance in order to reach the creditor’s country. One day, the lender came out of his house to see whether a ship had arrived bringing his money and all of a sudden he saw a piece of wood in which his money had been deposited. He took it home to use for fire.
When he sawed it, he found his money and the letter inside it. Shortly after that, the debtor came bringing one thousand Dinars to him and said, “By Allah, I had been trying hard to get a boat so that I could bring you your money, but failed to get one before the one I have come by.” The lender asked, “Have you send something to me?”
The debtor replied, “I have told you I could not get a boat other than the one I have come by.” The lender said, “Allah has delivered on your behalf the money you sent in the piece of wood. So, you may keep your one thousand Dinars and depart guided on the right path.” This hadith tells us that if we are honest and sincere in our endeavor to create a true Islamic monetary system as well as creating a just and fair banking system, Allah surely will give us the way, Insya’Allah. (T/AHAH/NAMN/P-01/E1).
*Faculty of Business and Law, Multimedia University, 75450 Bukit Beruang, Melaka, Malaysia.
Mi’raj News Agency