Inner Meanings of Islamic Finance: Understanding the Theory Behind All Theories
Massachusetts Institute of Technology (MIT); Masdar Institute of Science and Technology (MIST); Higher Colleges of Technology
July 12, 2011
5th IIUM International Accounting Conference, Kuala Lumpur, Malaysia, July 12-13, 2011
For many centuries, there have been many interpretations of the rules in Islamic Finance. With the modern banking system, more challenges have arisen throughout the world, especially with globalization. Reasons behind Islamic Finance have been studied within the disciplines of philosophy and ethics of the financial system. However this paper looks into deeper mysteries of Islamic Finance and shows how Islamic Shari‘ah for commerce mirrors how Allah deals with humanity. The longest verse in the Qur’an is known as the verse of the loan (āyat al-dayn) [Qur’an 2:282]. This verse is analyzed to understand how commercial contracts permitted between people is mirroring the commercial contract Allah makes with humanity, according to the Qur’an.
Usury occurs from loans with a fixed period of time (ila ajalin musamma). The Qur’an also states that human souls are also loaned from Allah for a fixed period of time. Also, the Qur’an states that Allah buys from the believers their souls in return for heaven.
This paper looks at how the Islamic rules of commerce and finance is exactly mirroring how Allah deals with the souls of human beings, which are loaned to them for a fixed period of time, and then sold back to Allah. It shows what usury (riba) really means and why only Allah is allowed to deal with usury, since even in semantics, the word for usury (riba) and Lord (rabb) in Arabic come from the exact same root. Similarly the word for loan (dayn), religion (dīn), and Judgment Day (Yawm al-Dīn) also come from the exact same root. It also delves into the inner meanings why during the call of prayer on Friday, commerce is prohibited in the Qur’an.
This paper uses a unique method of esoteric exegesis (ta’wīl) of the Qur’an to understand the beauty of its eloquence and how the rules of commercial contracts in the Qur’an is exactly the commercial deal that Allah makes with the souls. Once the deeper and spiritual meanings of the rules are understood, then understanding rules of commercial contracts between people becomes plainly clear.
Number of Pages in PDF File: 33
Keywords: esoteric, exegesis, finance, interest, Islam, Islamic Finance, judgement day, loan, Qur’anic interpretation, Riba, Ta’wīl, Usury
JEL Classification: A1Accepted Paper Series
Date posted: October 12, 2011
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