Introduction
Riba is an additional borrowing and there no justification of receiving money. In terms of Islamic, Riba is illegal or in Islam it is stated as Haram which means the people are forbidden to involve in Riba. Also, Riba have stated in Al-Quran “that which you give as Riba to increase the peoples' wealth but not with God; but that which you give in charity, seeking the goodwill of God, multiplies assorted”. (Surah al-Rum 30:39) also “And for their taking riba even though it was forbidden for them, and their wrongful provision of other peoples' property, We have prepared for those among them who reject faith a outrageous punishment. (Surah al-Nisa 4:161).
Dangers of Riba.
The dangers of Riba is it constructs a monopoly in society. The basic view of monopoly pressure the costs to society associated with price that overstates which means high cost. The monopolist can charge higher price than in a competitive market because of the shortfall of competition in financial. This will lead to less
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Unearned income means that any personal income that come from investment and more sources that not related to employment services. There are various of unearned income such as interest from saving account or bond interest. People or company start to lend on interest and like parasite that lives rather than proposition business ventures and using their business awareness, skill, knowledge and knowledge about entrepreneurship, The money or something valuable that is easily gain is usually be waste on activities that does not benefit in economics such as gamble, betting, drinking alcohol, horse-racing and others. This type of activities are illegal in terms of Islam and Muslim are forbidden to involve in those kind of activities. This is because it could destroy mankind health and prevent the economics growth. Therefore, avoid Riba can guarantee the growth of economics and could prevent any illegal activities in the
A rule making body issues authorative shari’a auditing standards for all Islamic banks and other Islamic businesses and it will be the most effective way to eliminate problems within the Islamic economy. The most effort to develop a body of consistent standards for shari’a audits has been undertaken by
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Islamic finance within compliance of Sharia law form the core of Islamic banking and have become one of the fastest growing segments of the financial industry, operating in over 75 countries (Cihak,Hesse2008). Islamic finance initially was concentrated in the Middle East and South East Asia, but is now found globally. The roots of Islamic finance stemmed from the efforts of Islamic scholars to identify alternatives to the interest based system that is prohibited and condemned by Allah within the Quran. Islamic finance also prohibits the practice of lending money for investments in tobacco, alcohol, gambling and weapons per Sharia law. In the wake of the global financial crisis however, there has been a renewed interest on the
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Similarly the selling of barley for barley is Riba except if it is from hand to hand and equal in amount, and dates for dates is usury except if it is from hand to hand and equal in amount.” (Umar). From an economical perspective, what the Prophet of Islam is referring to here is the idea that only the actual value of dates should exist in any trade transaction. For example, a bank giving out a loan for 100,000 dollars with an interest of 10% means that the 10,000 interest to be paid does not actually exist in the economy and hence to the prophet this is considered riba because the bank is gaining money out of nowhere. In the Sharia, the modern day solution to this banking issue is Islamic banking which offers; “..more just and equitable distribution of resources; more responsible and profitable lending due to the necessarily closer bank-client relationship; less volatile business cycles; and more stable banking systems.” (Evans, 1987)
My biggest fear is letting down my family and also myself. Having to pick up a job to help my family is definitely a possibility and the biggest challenge that could prevent me from getting a degree. I’ve always wanted to go to college as a kid and this is a challenge that I will have to tackle on my own.
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Main competitive pitch of Islamic banking is in Sharia compliant and interest free. But the real business of Islamic banking is producing profit.
In addition, when the lenders or financial institutions practices riba-based system, it will give a great blow to the poor or the needy due to the compounding effect of the interest. Lending riba-based loans will exploit the poor as it will result in more poverty and reducing their future earnings. This is because the longer the borrowers cannot pay the loan; the higher amount of loan will be due to its interest. On the other hand, riba-based loans make the rich lenders richer because they gain the benefit by advancing their extra money based on interest from the needy, and this will increase their future earnings. This situation shows the rich become richer and the poor become poorer. In the other meaning, riba will create wide gap between the rich and the poor, where finally the situation will divide these peoples into classes which can occur inequality and give negative picture on the social aspect of a country.