A seminar on Muamalat as prescription to Global economic crisis was organised recently by the Shariah Department in collaboration with the Islamic Economics and Finance Research Group (EKONIS) and Faculty of Economics and Business, UKM. Parallel programmes were run in Arabic, English and Malay. In English sessions 14 papers were presented. These included papers on stock market, shares, venture capital, Hedging, Sukuk, banking, Tawarruk, financial engineering and many other important contemporary issues.
Issue of Gharar repeatedly came under discussion. It was argued that any transaction involving credit/deferred transaction where freely floating fiat money (fffm) is used as a denominator (unit/measure) does involve major uncertainty as fffm neither has any intrinsic value nor is defined and is variable, indefinite and unknown. Government fiat makes fiat money equivalent to a basket of national products. Future quantity of this basket is not known. Thus all our Muamalat specifying capital or dues in Fiat money are uncertain and involve a lot of Gharar. Credit sale for say 10gm of gold is allowed as it is a definite quantity of gold but credit sale for 10 pieces of gold without specifying mass of the piece is indefinite and unknown quantity of gold and will not be permitted due to Gharar.
Another general issue raised was that in holding that creditors are not entitled to any fixed return and to share profit they must bear the loss completely implies that any mechanism used to ensure that the creditor gets some part of the profit but do not have to bear the loss by hedging/ insurance or any other means seem to be a device to undo what the Shari’ah has ordained.
In his paper Hifzur Rab contended that the system of interest cannot be sustained without monetary manipulation and it is in gross conflict with nature as its efficient working requires rate of return of economic activities to be nearly equal while natural laws ensure that it is distributed over a wide range and that leads to unemployment as well as inefficient allocation of resources. It causes gross economic imbalance. Purchasing power of prevailing currencies continues to fall due to manipulation of the quantity of national products. While it may allow the system of interest to be sustained for some more time, it is a serious crime as it amounts to manipulation of common medium of exchange that is the unit/scale that the market uses for measurement of wealth.
Just measurement of prices is essential for existence of Justice in Exchange, for Rate of Return to relate to productivity of the enterprise for the economy and for Profit Motive to be an efficient driver of Investment. Thus failure of market to measure prices correctly results in gross injustice and inefficiency. Further it leads to failure of market based economic checks and balances. Together with interest, monetary manipulation is the root cause of most of the problems being faced by the humanity as these lead to massive injustice and exploitation and make it impossible for the market to determine just prices that has led to massive inefficiency and waste. Allah ordains just measurement and that is not possible if scale is manipulated. Currency is the measure of wealth that market uses as the scale in the process of determination of prices that is what constitutes measurement of wealth. Thus manipulation of currency is strictly prohibited in Shari’ah. It is implied that error in measurement has to be corrected and it means that we must correct our accounting.