Understanding Islamic Finance - Doha Academy of Tertiary Studies

18The Way Forward18.1 INTRODUCTIONAs indicated in the Introduction to the book, I believe the socio-economic problems facingmankind today have emanated from the unbridled creation of fictitious assets, particularlyreserve currencies, and the unhindered forces of demand and supply with exploitative toolsof “sovereignty” of individuals, “unfettered self-interest” and the “interest”-based corruptfinancial system. Human beings could have avoided massive losses to life and property hadthe creation of fictitious monetary assets not been so easy and rampant. 1 The solution liesin disciplining the creation of money, limiting self-interest with social interest and businessethics, and transforming the corrupt financial system to make it free from exploitation andgames of chance, thus enabling mankind to optimally use the resources for benefits on alarger scale. Islamic finance provides a solid basis for these reformatory measures; it is upto human beings how they realize the potential.The book has discussed mainly the latter part, i.e. how the financial system can be madefriendly to human societies rather than individuals or a few strong and powerful players.This concluding chapter comprises observations and recommendations on two aspects:1. Taking macro-level policy measures to discipline the financial matters of States, corporatebodies and the financial institutions, with the objective of discontinuing, in phases, thecreation of fictitious assets.2. How to develop the financial system on a sustainable basis on the principles and philosophyof Islamic finance, which essentially revolves around real tangible assets andbusiness ethics cherished by humanity as a whole. 218.2 AGENDA FOR THE POLICYMAKERSThe Islamic theory of finance possesses a huge potential in terms of its principles andinstruments, which allow the minimum possible number of loopholes. Enhanced supply ofrisk-related permanent and redeemable capital – the most powerful fuel for the enginesof modern economies – restricted risk-taking (implied in the prohibition of gambling andGharar), a balanced return-rate structure based on real-asset-backed economic activities andsupply of money commensurate with prospects of growth in an economy provide a soundbasis for sustainable development and evenly shared income for the socio-economic benefit1 For example, in recent wars, financed in the main by deficit financing or the creation of (reserve) money, hundreds of thousandsof human beings have lost their lives without any fault on their part. According to independent sources, the cost of the Iraq Warhas been projected at about 1 trillion US Dollars (see http://www.msnbc.msn.com/id/11880954/).2 Readers are recommended to review the first chapter for this.