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Understanding Islamic Finance Principles

This document discusses Islamic finance and its key principles. It states that Islamic finance involves using real asset-backed contracts like sale, lease, and sharing instead of interest-based contracts. The four axiomatic principles of Islamic finance are: 1) earning through asset ownership, 2) realism, 3) financial assets representing real assets, and 4) moral commitment. Some implications of these principles are excluding debts and speculative activities, integrating finance with wealth creation, and implanting a standard of hard work in finance. The document argues that Islamic finance is a universal model of real-economy finance based on human dignity, rationale, development, and realism.

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81 views15 pages

Understanding Islamic Finance Principles

This document discusses Islamic finance and its key principles. It states that Islamic finance involves using real asset-backed contracts like sale, lease, and sharing instead of interest-based contracts. The four axiomatic principles of Islamic finance are: 1) earning through asset ownership, 2) realism, 3) financial assets representing real assets, and 4) moral commitment. Some implications of these principles are excluding debts and speculative activities, integrating finance with wealth creation, and implanting a standard of hard work in finance. The document argues that Islamic finance is a universal model of real-economy finance based on human dignity, rationale, development, and realism.

Uploaded by

Arief Cracker Cee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

WHAT IS IT?

Prof. Dr. MONZER KAHF

JAKARTA, 2019
1
COPY RIGHTS 2019
All rights reserved to the author
Presentation in any form is illegal without
a written permission from the author:
Monzer Kahf
------------------------
------------------------
Email: [Link]@[Link]
monzer@[Link]
[Link]; [Link]\blog
IS Islamic finance
Interest-free finance?
Participatory finance?
Ethical finance?
What does Islamic
finance bring about?

What is new in Islamic


finance?
The new of Islamic finance is
simple (and very innocent!)
but far reaching:
Get real life contracts from
commercial laws and plug
them in the heart of banking
and financial intermediation
The Immediate implication of
this innovation is:
Finance can only be channeled
through:
Sale contracts,
Lease contracts, and
Sharing contracts
These three channels of finance
translate into four axiomatic
principles:
1. Earning by owning,
2. Realism,
3. Financial assets are mere
representation,
4. Moral commitment.
Implications
of
Axiomatic Principles
1. Exclude objects that do not produce
real wealth: Debts, virtual assets, etc.
2. Exclude transactions that do not
produce real wealth: Zero-sum
transactions, gambling, speculative
contracts, pure cash activities where
goods are not intended,
3. Plug in an intrinsic moral screen, with
scientific rationale) of weighing
benefit and harm,
4. Stick always to the real economy, and
integrate finance with wealth creating
activities,
5. Eliminate all non-productive activities,
6. Adhere to economic justice:
Earning by ownership,
7. Can lean on partners,
8. Integrate market discipline: more
performance more deposits,
9. Do not pull out resources from real market,
rather send them back to real market,
10. Implant a standard of hard earning in
finance, no easy buck by just clicking,
11. It is necessarily developmental,
12. Bear ownership risk; if you earn you
should bear ownership risk, fairness!
13. Environment and society friendly,
14. Bring the finance sector back to basic role.
Islamic finance is a
universal finance for
all humanity
IT IS HUMAN FINANCE
It is not for Muslims alone
It is a paradigm for:
REAL-ECONOMY
FINANCE
With: Human dignity
Human rationale
Developmental vision
and Realistic approach

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