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Alternative Interest Free Economic System: Goals, Challenges and Road Map Sahulat: A Journal of Interest free Microfinance 5, Vol. 4, June 2016, No.1 www.sahulatjournal.com Alternative Interest Free Economic System: Goals, Challenges and Road Map Dr. Waquar Anwar1 This paper is based on the assumption that Interest Free Economic System is a desired alternative. This assumption is the natural corollary of the assumption that states that the conventional economic system based on interest is very harmful and there is a need for an alternative system. Any detailed discussion on this assumption-within-assumption is beyond the scope of this write-up. But a rich literature is available on the desirability of interest free economic system as well as the undesirability of the conventional system. However, some reflections of these issues will by default crop up in this article. Our task at hand is one step ahead. It requires unfolding the goals of such an alternative system and delineating the steps required for realising those goals. A goal cannot be realised without facing the challenges and obviating its consequences that may crop up in the process. Further, a clear idea about the road map and a blueprint will also be required. So the intent is to develop a model that can do both - describe the disease and prescribe the medicine. A description of Islamic economics, as such, is also not intended in these lines. However, its contours can be felt between the lines! Our methodology of discussion will be to first visit the writing of renowned Islamic economists and find what goals they have proposed and then proceed further. I shall, for this purpose, be referring to the writings of Dr. M. Umer Chapra and Dr. Mohammad Nejatullah Siddiqi. 1. Goals of an Islamic Economic System Dr. M. Umer Chapra, in his book “Islam and Economic Challenges,” has discussed the goals of an Islamic Economic System from different aspects. First, he talks about what an economic system should ensure? What it should do and what 1 Financial Advisor, Jamaat-e-Islami Hind, New Delhi 11 Sahulat: A Journal of Interest free Microfinance 5, Vol. 4, June 2016, No.1 www.sahulatjournal.com not? Then he proceeds to describe the conventional interest based system and the Islamic interest free system, concluding with the failure of the former and the success of the latter. Dr. Chapra says that an economic system should ensure:2 1. Need Fulfilment; 2. Respectable Source of Earning; 3. Equitable Distribution of Income and Wealth; and 4. Growth and Stability. [Chapra, 1992, p. 210] While describing money and banking system he says that: A. The system should not: - Promote Inequalities - Lead to Conspicuous Consumption - Bring Unemployment - Result in Unhealthy Monetary Expansion to the detriment of all [Chapra, 1992, p. 201] B. Instead the system should: - Support Need Satisfaction - Lead to High Rate of Employment - Result in broad-based Ownership of Means of Production [Chapra, 1992] [Ibid, p. 201] Dr. Chapra after describing Maqasid Al-Shari’ah (Higher Objects of Islamic Law) links the goals of economy to fulfilment of the objects and opines that only that market may be considered optimum which is in harmony with, or not at least in conflict with, the Maqasid . Chapra says, “The Islamic worldview and strategy are blended together into a consistent whole and there is complete harmony between them.” [Ibid, p. 201-202] In his opinion an economy attains total efficiency when it achieves three goals: 1.Efficient employment of total potential of scarce human and material resources; 2. Stability; and 3. Sustainable rate of future growth. 2 Chapra, Islam and the Economic Challenge (1992), The Islamic Foundation and The International Institute of Islamic Thought, p. 210 12 Sahulat: A Journal of Interest free Microfinance 5, Vol. 4, June 2016, No.1 www.sahulatjournal.com He further warns that equitable distribution of income and wealth should not affect the following four factors: - Motivation to Work - Saving - Investment - Undertaking Enterprise [Chapra, 1992, p. 3] [Ibid, p. 3] One may refer to the thoughts and works of Dr. Mohammad Nejatullah Siddiqi in his book as well as his website3. He talks about two positive traits of the economy [justice (adl) and equity (ihsan)], stressing the need of obviating two negative traits [oppression (zulm) and corruption (fasad)]. “The desired state of the world is free of oppression (zulm) and corruption (fasad) and full of justice (‘adl)…. Its hallmark is justice and equity and elimination of oppression and corruption while ensuring need fulfilment and sustainability.”4] Dr. Siddiqi has also defined, and distinguished between justice and equity. “Justice is largely perceived in terms of equivalence (in exchange transactions) and reciprocity (in social relationship). But equity (ihsan) is urged on top of justice and is defined as giving more than is due according to the standards of equivalence and reciprocity to ensure with dignity for all…. There are persons in society who are weak, invalid, poor, etc. so they have little to give. But they must receive in order to survive. Hence exchange and reciprocity is no good for them…. That is what equity envisages.”5 In other words, justice is treating equally and with fairness while equity is bringing some benefit or preventing some disutility (mafasid). It means rendering to others even more than their due. It is benevolence along with justice. Dr. Siddiqi has prescribed remedies and suggested goals for achieving the same. He has specially talked about, inter alia, discouraging interest and gambling and promoting production based economy. 3 www.siddiqi.com/mns 4 [Islamic Economics between Aspirations And Realities, http://www.siddiqi.com/mns/ISLAMIC_ ECONOMICS_BETWEEN_ASPIRATIONS_AND_REALITIES_.htm] 5 [Siddiqi, Riba, Bank Interest and the Rationale of its Prohibition, Markazi Maktaba uislami Publishers (Delhi), 2004, p. 24] 13 Sahulat: A Journal of Interest free Microfinance 5, Vol. 4, June 2016, No.1 www.sahulatjournal.com “Reducing the role of debt and eliminating gambling from financial markets should, therefore, be on top of the agenda for Islamic economics.”6 “Islamic Economics looks at production as a life sustaining activity. It aspires to promote a type of economy that sustains life for all, the weak and the poor included. It does not equate life sustaining productive activity with profit making activity. It is also aware of the limits to growth that ecological and environmental considerations impose on us.”7 “The key to Islamic economics lies in positioning the Islamic vision in place of the Anglo Saxon economic vision. But the Islamic economic vision has to be universal and contemporary not chauvinistic and medieval. As we move in that direction we may be pleased to discover we have good company from amongst modern economists in the West and East. The search for a more humane political economy is now universal. The challenge is, who leads the way.”8 It is true that ‘the search for a more humane political economy is now universal.’ It is also true that a majority of goals described above are also universally accepted. However, Islamic approach has certain characteristics which we are repeating hereunder for the purpose of highlighting so that our discussions ahead may become more meaningful. 1. Reducing the role of debt and eliminating gambling 2. Production based economy 3. Savings based economy resulting in investment wherefrom Another very important goal of an interest free economic system is that wealth created should permeate all ranks and files of the economy and it should remain in circulation. One may refer to the verse of the Qur’ān that tells us the basic reason of this goal. “And what Allah restored to His Messenger from the people of the towns - it is for Allah and for the Messenger and for [his] near relatives and orphans and the [stranded] traveller - so that it will not be a perpetual distribution 6 [Future of Islamic Economics, http://www.siddiqi.com/mns/future_of_islamic_economics. html] 7 [Risk Management in an Islamic Framework, http://www.siddiqi.com/mns/ RiskManagementInAnIslamicFramework.htm] 8 [International Workshop on Islamic Political Economy in Capitalist Globalization: An Agenda for Change, http://www.siddiqi.com/mns/nature.html] 14 Sahulat: A Journal of Interest free Microfinance 5, Vol. 4, June 2016, No.1 www.sahulatjournal.com among the rich from among you. And whatever the Messenger has given you - take; and what he has forbidden you - refrain from. And fear Allah; indeed, Allah is severe in penalty.” [Al-Qur’ān 59:7] This verse has a particular historical reference to an event in Madinah. But the message of keeping wealth in circulation so that it may not remain in the hands of the rich alone is universal. One can imagine a production based economy with least dependence on debt and high reliance on savings based investments wherein wealth created is not allowed to circulate only between upper strata of the society. Obviously the fruits of such an economic development will seep into all the fibres of the economy in all pervading fashion. 2. Challenges A changeover to, even a move towards, interest free economy from conventional interest based economy will throw three types of challenges: (i) Natural challenges; (ii) Resistance from Stakeholders of the existing system; and (iii) Self Inflicted Problems. Any system in vogue, whatever level of ills it may contain, cannot be thoroughly contaminated. It must be serving some purpose otherwise it would have been thrown into the dustbin. A completely bad thing cannot see the day of light even for some hours of a day. The whole idea of revolutionary changes makes no sense. Changes have to be evolutionary in nature. This step by step approach demands that questions arising at every stage are addressed logically and seriously. Interest free economic system demands that all premiums on debts without any counterpart be prohibited.
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