Rabu, 17 Desember 2014

Islamic Finance, Why Is It Capable?



Rahma Suci Sentia
A  major economics events in US  has slowed the economic growth down in 2008, its when American banks declared bankruptcy, Lehman  Brother and the largest insurance company  AIG collapsed, then almost 3 millions American lost their home due to lack of ability to pay instalmets and finally  resulted ‘domino effect’, namely global crisis. From islamic finance perpective, it is the result of combination riba/interest and gambling which if both of these come together, its a sign of doom and destruction. Both western and eastern economist  also have deeply understood that interest,  uncertainty, speculation, and gambling systems  have  made  instability of economic system for periods, but they are still confused ‘how  financial system could run without those’.
In recent years, certain countries have adopted  a policy of allowing islamic finance to  run financial activities  were previously liberalized and socialized run. However, many people are concerned about how islamic finance subtance would be capable once the huge  and super finance capitalism  gave up to tackle the crisis. There are several foundations  which make islamic finance become capable with this.

One of the major foundations of islamic finance is to prohibit riba /usury/interest creating money from  money which is very common and mayor key in reaching profit in capitalist or socialist system and to encourage profit sharing. The purpose is how the risk-profit sharing would be more conductive to the promotion of entrepreneurship and equity.  If  they made it against this foundations, it could leads  poorer  people to the over-exploitation of their resource. The advantage of this foundation would be  a strong motivations for poorer to advance their standar of living and to encourage the brotherhood and cooperation spirit among richer and lower income people in business relationship. 

Beside  islamic finance have to not be running riba/interest system, it  must be free from gharar or uncertainty which is any uncertainty transcations regarding the existence or the description of objects becauses of the lack of information. Insurance and financial derivaties are example that have developed as a result of uncertainty. If people found uncertainty practices resulting from a transaction, they could refuse to continue the economics transaction. The advantage of these policy that it would protect against unexpected losses and the possible disagrement regarding qualities or incompleteness of information. 

Another foundations of islamic finance is the  prohibition of  maysir or gambling transaction  which refers to the easy acquisition of wealth by chance, whether or not it deprives the other’s right. However, such a proposal might be highly unpopular with some people because major of world-wide cash flow had been created from this.  

To summarize, the problem of  economic crisis is not easy to resolve.   It is my view that by appling the subtance of islamic finance foundations prohibiting  riba,  gharar, and  maysir in all of financial activities ,  financial activities could be productively run and the economic equity and stability  would be reached. Islamic financial institution in several countries, like Saudi Arabia, UAE, Malaysia, Indonesia, even UK have shown their success in practicing those foundations.  However, islamic finance still need to participate actively and should get a chance to participate in solving global problem to demonstrate its capability to take long term solution. (Sentia)

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