All praise belongs to Allah alone, and blessings and peace be upon the final Prophet

Islam is a middle path. It balances the interests of the individual and the economy, without compromising one for the other. For this reason, Islam does not separate its moral aspect from its economic one. By incorporating ethics and morality in all aspects of life, including economics, it helps one to achieve falaah in both the worlds. In this materialistic world, for a non-Muslim this could mean achieving peace and contentment that is so elusive to many. Well take a look at just one sphere-Islamic Finance, as nonMuslims have considerable interest in this field. Though Islamic Finance and Banking is relatively young, its future is bright. Not only has it shown resilience to the financial crisis, but has grown remarkably well. It has been reported to be growing annually at 19%. At least 1.3 trillion US dollars worth of assets are under Islamic investment. 1 Over 300 Islamic banks operate in more than 51 countries and a number of Shariah compliant mutual funds too. 2 With so much optimism in Islamic products in the present financially unstable world, no non-Muslim would turn a blind eye to learn some reasons behind the success of Islamic finance.

Zakah-A moderation between Communism & Capitalism.

The downfall of the USSR due to its communist policies is a lesson learnt in the last century. Though absolute equality seems like a wonderful idea, where is the motivation and incentive for a capable person to work? At the same time, giving a free reign to capitalism is also dangerous, as it results in the uncontrolled accumulation of wealth in the hands of a few. Where is the balance? Zakah, of course. The Islamic zakah rate of 2.5% on ones surplus wealth above the Nisab, after meeting all expenses, is a feasible one acceptable to people, unlike the exorbitant rates of taxation that reach 30% or more of ones income in some developed countries. The only sure way to eradicate poverty is also sincere payment of zakah by those who have the Nisab. "Give Sadaqat freely, as a time is to come when people will offer

1 2

World Islamic Banking Competitiveness Report 2012 2013, p. 6 Problems and Prospects of Islamic Banking: a case Study of Takaful, p. 2

Sadaqat and there would be none (needy person) to receive them." 3 The truth in the narration had been witnessed during the late years of the four rightly guided caliphs due to their strict implementation of zakah.4 It was such a major issue to them that the first thing Abu Bakr (ra) did on assuming the caliphate was to wage war against the many tribes of Arabia who refused to pay zakah. He understood from the Quranic verses that one who didnt pay zakah was an apostate, because salah and zakah were mentioned simultaneously in most verses. 5 Another wisdom behind zakah is the discouragement of wealth from accumulating idly. The great Caliph Umar ra discouraged idle wealth as it incurs zakah without any benefit to the individual, Trade with the property of orphans and then it will not be eaten away by zakat.6 So, we see the balanced attitude of Islam-it encourages one to invest the money so it can benefit not only ourselves, but also the community.7

Benefits of an Interest free economy

The economic dangers of riba (interest) may not be known to the average non-Muslim, but its deep dangerous results are clearly visible on a massive scale in the present economic world. The beginning of the sub-prime mortgage crisis in US, the collapse of the banks, followed by the financial crisis and recession are just the tip of the iceberg we can see. Far more remains hidden. Non-Muslim economists have begun voicing their concerns lately8, besides a numbers of those throughout history whose warnings have been drowned out. The Quran, Sunnah and scholars are unanimous on the prohibition of riba and this forms a fundamental principle of Islamic finance. Almost every Muslim is aware that riba is THE major problem we have with conventional finance and banking. The hadith equates riba with other major sins like adultery: The Prophet cursed the lady who practices tattooing one who eats Riba' and the one who gives it. the price of a dog the money earned by prostitution, and .the makers of pictures.9 Ibn Abbas, the Mufassir of the Quran said that the last verse revealed in the Quran to the Prophet was regarding riba.10 The one who borrows on interest is always the loser. Often not just individuals, but entire nations have crumbled due to the accumulating debt of repaying the capital plus the interest. The Islamic solution is that Muslims should be partners in business, by sharing not only profit, but loss as well. This fair deal eliminates oppression for both parties involved.
3 4

Mishkat "Economic System in Islam." 5 Najeebabadi 6 Malik 7 "Economic System in Islam." 8 "Economic System in Islam." 9 Sahih Bukhari, Vol. 7, Book 63, Hadith No. 259. 10 Sahih Bukhari, Vol. 6, Book 60, Hadith No. 67

Takaful vs. Insurance

Islamic financial principles appeal to common sense, if one he has knowledge of them. Takaful is a fairly new concept in Islamic finance, but increasingly becoming popular in Islamic finance as a halaal alternative to conventional insurance. The various hadith encouraging Muslims to help one another are general principles behind Takaful, but the one commonly identified as an early form of takaful is the Hadith of Nihd 11, where the sahaabaa pooled their food during battle to meet shortage of supply, and then rationed it among themselves as required.12 Besides the involvement of riba, gambling and doubts for a Muslim, even a non-Muslim will agree that the various other factors surrounding conventional insurance are not conducive to a stable society. The basis of Takaful, is Taawun- mutual cooperation, help and support. In Takaful, when one pays a small amount as a donation, with the intention to help someone in need, rather than to get any benefits from it, he is more likely not to expect returns on it. Whereas in conventional insurance, larger sums are paid as premium as the intention behind each party is to make the most money out of the other and get the maximum benefit. We see the contempt which Islam holds for a person who expects his donation to be returned in the hadith, One who gets back his gift is like a dog which vomits and then swallows that vomit.13 Also another benefit of Takaful is that, if any remaining surplus after meeting any needs from the collected amount is invested and bears profits, all the participants have a share in it, like any business. But in conventional insurance, only the shareholders partake in the profit. Conclusion From all the above examples in Islamic finance, the average open-minded person should be able to see the pros of Islamic economic principles over the cons of prevailing conventional ones. Islamic principles not only have a financial advantage, but if analyzed carefully, have moral and ethical benefits for both the individual and the community.
(Words-1200)

11 12

Razali Sahih Bukhari Vol 3, Book 44, Hadith No. 663 13 Sahih Muslim, Book of Gifts, Hadith No. 3960

Bibliography
Ahmad, Mohd. Izhar, Tariq Masood, and Mohd Saeed Khan. "Problems and Prospects of Islamic Banking: a case Study of Takaful." MPRA (Munich Personal RePEc Archive) (2010): 2. http://mpra.ub.uni-muenchen.de/. Web. 20 April 2010. <http://mpra.ub.uni-muenchen.de/22232/1/MPRA_paper_22232.pdf>. Bukhari. "Hadith Collection." Sahih Bukhari. N.p., n.d. Web. 29 June 2013. <http://www.hadithcollection.com/sahihbukhari/>. "Economic System in Islam." Iman Way. N.p., n.d. Web. 29 June 2013. <http://www.imanway1.com/economy.htm>. Ernst & Young, "World Islamic Banking Competitiveness Report 2012 - 2013." 12 2012: 6. Web. 23 Jun. 2013. <http://www.ey.com/Publication/vwLUAssets/The_World_Islamic_Banking_Compe titiveness_Report/$FILE/World Islamic Banking Competitiveness Report 201213.pdf>. Malik, Imam. "Chapter No: 17, Book of Zakat." Muwatta. N.p.: n.p., n.d. N. pag. Ahadith.co.uk. Web. 29 June 2013. <http://ahadith.co.uk/chapter.php?cid=50&page=2>. Najeebabadi, Akbar Shah. "3." The History of Islam. 1st Ed. ed. Vol. 1. Riyadh, Houston, New York, Dhaka: Darussalaam, 2000. 280-84. Print. Razali, Miza. "An Investigation of the Awareness Level of Takaful Products among the Micro Enterprises in Malaysia." Thesis. University of Sharjah, n.d. An Investigation of the Awareness Level of Takaful Products among the Micro Enterprises in Malaysia | Miza Razali - Academia.edu. Academia.edu. Web. 29 June 2013. <http://academia.edu/2330775/An_Investigation_of_the_Awareness_Level_of_Taka ful_Products_among_the_Micro_Enterprises_in_Malaysia>.