From dawn to dusk, we do many things. We start our life by brushing our teeth, having breakfast, shopping, going to the workplace and other numerous activities. Each event has a direct or an indirect link with finance. Everywhere, from riding on the bus to hiring people for getting jobs done for us, we have certain behaviors we keep in mind. We act in the role of a buyer, seller, agent, partner or surer. These all are part and parcel of our daily life. Yet, while we enter into any branch of a mainstream bank, we start behaving unnaturally. We sell or buy money from the bankers. Money, which has no intrinsic value, is the only product of conventional banks. They buy money from Surplus Spending Units (depositors) at lower rates of interest and sell the same to Deficit Spending Units (entrepreneurs) at higher rates. The philosophy of the conventional banking system is ‘money begets money’. Yes, they structure so called ‘money products’ in accordance with their risk profile and depend on collateral to ensure the security of getting money back on maturity. In this backdrop, it is a valid argument to question whether finance has any link with faith or not.
Faith Based Financial Behavior
In deciding our worldly issues, many things come in front of us. The issues range from choosing what we will eat to who we will marry. Finance, of course, is also a major and integral part of our life. Basically, personal preferences have impacts on our every decision. No doubt, faith is to be considered as an essential ingredient of decision making process from personal ones to economic ones. The conventional economic thinking process has been evolved on the myth that people are self centered by nature and take all economic decisions to protect self interest only. It has totally ignored the non monetary preferences by individuals for financial decision making. On the other hand, Islamic Financial behavior is somewhat different. In short, how Islamic Finance works may be summarized as follows:
Finance = f (monetary preferences, nonmonetary preferences)
Where, Monetary preferences = risk, yield, maturity, liquidity, marketability, negotiability
And Nonmonetary preferences = halal, haram
Where, halal = what is not, in general, haram. And haram = riba, rishwah, mysir, gharar, ihtikar, tadlis al ayb,
The rules of Shari’ah unconditionally prohibit Muslims from taking part in any transaction that might involve fraudulent, dishonesty, exploitation, and ambiguity:
Woe to those that deal in Fraud [Al-Mutaffifin 83: 1]
Prophet Muhammad (sallallahu alaihi wa sallam) has emphasized the significance of honesty, specifically in business dealings. He said: “If anyone sells a defective article without drawing attention to it, he/ she remains under Allah’s anger.” [Ibn Majah]
These noble values are treasured and shared by many Muslims as well as non-Muslims who give preference to investing in socially responsible portfolios eve though such investments might have a lower rate of return. Therefore, it would be a fair and sensible claim that each and every financial activity that complies with the Shari’ah rules and guidelines is a socially responsible activity.
Islamic financial institutions, in providing interest-free financial services and investment opportunities, are under religious and moral obligations to assume a leading developmental role in promoting productivity and entrepreneurship.
In short, social responsibility, sustainability and morality in business dealings are emerging issues that are increasingly attracting the interest of scholars, politicians, economists, social activists, as well as investors. While these issues are now topics of debate in the West, they are surrounded within the Islamic ethical code of conduct and are considered to be fundamental tenets for devout Muslims.
