Introduction

Islam is an entire way of life,

and Allah's guidance extends into all
areas of our lives. Islam has given
detailed regulations for our economic
life, which is balanced and fair.
Muslims are to recognize that
wealth, earnings, and material goods
are the property of God, and that we
are merely His trustees.
Islam has set some principles in economics system
for people to follow as they are very comprehensive
and it is vital for a healthy society. This principle is set
up so that people have an equal share of the bounty of
Allah. Although money is very important in life, yet they do not lose sight of
the fact that its position is secondary to the real purpose of human
existence, which is the worship of God.
Islam doesn’t necessarily concern about the money, income, expenditure
of the transaction, but they are more towards the spirit of the economic
system, which has kept balance in the economic world.

Individual Right

Allah said “168. O ye people! eat of what is

on earth, lawful and good; and do not follow
the footsteps of the evil one, for He is to you
an avowed enemy.”
- Islam does not interfere with the freedom of
speech, work and earnings of an individual.

- The right which has given by Islam is the

right for them and it is answerable to Allah
SWT for his or her action.

- Islam has given human to do whatever they want but the main purpose of
their creation is to worship Allah SWT.

Right of Property

Allah said “19. and In their wealth and

possessions (was remembered) the right of the
(needy,) Him who asked, and Him who (for some
reason) was prevented (from asking).”
- Allah SWT states that the earth natural resources
which has given to them is to used to for the benefits
of humankind and not to be kept idle and possessed
to themselves alone.
- Anyone who keep his or her land unused for more than three years which has not
been not cultivate or construct any material to the land for
a good use are to make it available for anyone who wants
to use it to a good use.

- Anyone who takes possession of the earth’s natural

resources and puts them to good use acquires a rightful
title over them.

The Problem of Equality

Allah said “165. it is He who hath made you (His) agents,

inheritors of the earth: He hath raised you In ranks, some
above others: that He may try you In the gifts He hath
given you: for Thy Lord is quick In punishment: yet He is
indeed Oft-forgiving, Most Merciful.”

Allah said “32. is it They who would portion out the Mercy of Thy Lord? it is we who
portion out between them their livelihood In the life of This world: and we raise
some of them above others In ranks, so that some may command work from others.
But the Mercy of Thy Lord is better than the (wealth) which They amass.”

- Allah has not distributed His gifts and favour equally among mankind but, in
His infinite wisdom, has given some individuals more than others.

- Equality in Islam is very natural and it is the

driving spirit of behind human endeavour and
excellence which is the spice of life.

- The equality which Islam believes in is equality of

opportunity to secure a livelihood and to climb the
ladder of success and prosperity
Social Security

Allah said “1. seest Thou one who denies the Judgment (to come)? 2. then such is
the (man) who repulses the orphan (with harshness), 3. and encourages not the
feeding of the indigent.”

- The social security system is built in the Islamic economic system to help the poor,
needy, unemployed, orphans, handicapped, and so on.

- Islam has provide security for the people who are in needs by
giving them funds or charity, this will make the Islamic economic
grow and people will have an equal share of all things which are
provided by Allah SWT for their benefits.

- Islam doesn’t want the needy, poor and so on to be left aside in

the social security. This will make the Islamic economic to be
unbalance.

Social Justice

Allah said “25. we sent a foretime Our apostles with Clear Signs and sent down with
them the Book and the balance (of right and wrong), that men may stand forth In
justice; and we sent down iron, In which is (material for) mighty war, As well As
many benefits for mankind, that Allah may test who it is that will help, Unseen, Him
and His apostles: for Allah is full of strength, Exalted In might (and able to enforce
His Will)”.

- Islam does not want this economic race to take place

in an atmosphere of moral neutrality and social
apathy.

- People should be kind to each other and doesn’t keep

other people aside like the poor and the needy. They
should receive a share of the blessing of life from this
social institution

- People who can’t participate in the economic race should be given assistance for
those who lacks the necessary means and abilities.

Interest

Allah said “275. those who devour usury will not stand except As stand one whom
the evil one by His touch hath driven to madness. that is because They say: "Trade
is like usury," but Allah hath Permitted trade and forbidden usury. those who after
receiving direction from their Lord, desist, shall be pardoned for the past; their case
is for Allah (to judge); but those who repeat (the offence) are companions of the
Fire: They will abide therein (for ever).”

- Means to excess or increase, profit which comes free from compensation or

that extra earning obtained that is free of exchange

- Islam recognises trade and commerce not only as a lawful profession but
also as a moral duty. Islam has laid down a complete set of rules for trade.
The reason for these rules is to specify what halal earning is.

- Islam has encouraged men to earn their own provision and to provide it to
their families.
- Any sort of transaction that does not correspond to the rules of trade will
not be allowed. Interest is amongst those conditions which all dealings must
be free from.
ISLAMIC FINANCE

Refers to commercial or mercantile activities conforming to Islamic Principle were

made under the umbrella of either “interest free” or “Islamic banking”.

ISLAMIC BANKING IN MALAYSIA

- Were created so that Malaysia can trade with other countries and make the Islamic
economic grow.

- The emergence of Islamic banking is to reduce the capitalism of western banking;

today they are trying to apply Islamic banking to their system so that the economic
growth will prosper with cleaner trade without the usury or interest.

- To remodel their social and economic life in accordance with shariah.

Bank Islam Malaysia Berhad (BIMB)

- Was established in 1983 under Islamic Banking Act (IBA), IBA permitted the
establishment of the first Islamic Bank in Malaysia.

- Carrying out their activities on an interest free basis.

Takaful Malaysia

- Was incorporated on 29 November 1984.

- Converted to public quoted company and are in Main Board of KLSE and share its
equity with BIMB (65.5%)

- Objectives: To provide takaful services (Islamic insurance) at the highest standard

of efficiency and professionalism to all Muslim and people of Malaysia.

Lembaga Tabung Haji

- Objectives: Enable Muslim to gradually save money to meet the cost of performing
the Hajj or other benefits expenses

- Enable Muslim through the use of their savings, to take part in capital investment
in a way, halal to Islam and provide protection, supervision and welfare to Hajj
pilgrims.

Pusat Pungutan Zakat

- Responsible to collect zakah for the Council and it is not responsible for zakat
distribution which is done by other agencies or states Council.

EMERGENCES OF
ISLAMIC BANKING

- The likes of Bank

Islam Malaysia
Berhad, Takaful
Malaysia, Pusat
Pungutan Zakat
(Zakat Collection
Centre) and
Lembaga Tabung
Haji (Pilgrims Fund
Board) which has
reshaped the
economics of Islam
in Malaysia are
interest free basis
when carrying out
any activities.

ISLAMIC BANKING
CONCEPTS
Al-Wadiah Yad Dhamanah (savings with guarantee)
Al-Mudharabah (profit-sharing)
Al-Musyarakah (joint venture)
Al-Murabahah (cost plus)
Bai’ Bithaman Ajil (deferred payment sale)
Bai’ al-Dayn (debt trading)
Al-Ijarah Thumma al-Bai’ (leasing and subsequently purchase)
Al-Ijarah (leasing)
Al-Qardhul Hassan (benevolent loan)
Bai’ as-Salam (future delivery)
Bai’ Al-Istijrar (supply contract)
Al-Kafalah (guarantee)
Ar-Rahnu (collateralised borrowing)
Al-Wakalah (nominating another person to act)
Al-Hiwalah (remittance)
As-Sarf (foreign exchange)
Al-Ujr (fee)
Al-Hibah (gift)

LIST OF FINANCIAL INSTITUTION OFFERING ISLAMIC BANKING

Islamic Banks: Bank Islam (BIMB), Bank Muamalat Bhd

Commercial Banks: Affin Bank, Alliance Bank, Arab-Malaysia Bank, Citibank and
others.
Finance Companies: Affin-ACF Finance, Finance Arab-Malaysian Finance and EON
Finance

Merchant Banks: Affin Merchant Bank, Alliance Merchant Bank, Arab-Malaysian

Merchant Bank and others.

Discount Houses: Abrar Discounts, Affin Discount, Amanah Short Deposits, CIMB
Discount and others.

As a conclusion Allah said in Surah AlBaqarah ayat 274

“those who (in charity) spend of their goods by night and by Day, In secret
and In public, have their reward with their Lord: on them shall be no fear, nor
shall They grieve.”

Islamic finance is a centuries-old practice that is gaining recognition

throughout the world and whose ethical nature is even drawing the interest
of non-Muslims. Given the increased wealth in Muslim nations, expect this
field to undergo an even more rapid evolution as it continues to address the
challenges of reconciling the disparate worlds of theology and modern
portfolio theory.

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41. and know that out of all the booty that ye may acquire (in war), a fifth share is assigned
to Allah,- and to the Messenger, and to near relatives, orphans, the needy, and the
wayfarer,- if ye do believe In Allah and In the Revelation we sent down to Our servant on the
Day of Testing,- the Day of the meeting of the two forces. for Allah hath power over all
things.