Financial interest causing problems of monetary transmission as evaluated by the Islamic alternative

Abstract

PurposeThe paper's aim is to study the system of interest, its crippling of the market by monetary manipulation and creation of gross disparity and its consequences and to explore an efficient Islamic alternative.Design/methodology/approachThe application of science and its analytical tools analyses and solves economic problems. As regards Shariah perspective, it may be described as guided application of science to analyse and solve economic problems.FindingsGross inefficiency of the system of interest arises from its conflict with nature. Its sustenance requires monetary manipulation; however, the manipulation together with interest and gross disparity and deprivation created by it cripple markets that fail to determine just prices and to maintain vital economic balances and lead to gross inefficiency resulting in massive crisis. Monetary manipulation is serious fraud and a crime against humanity. Complexity of economic environment created by dominance of interest and its manipulation of currency has created gross misunderstanding among contemporary Islamic scholars and they have failed to project efficient Islamic alternatives. Removal of these misunderstandings and misunderstanding on the growth aspect of Zakah seem to be essential for freeing humanity from the clutches of the system of interest. Linking currency with a suitable well‐defined basket of national product provides a cost free exit from monetary manipulation. However, creation of mass awareness seems to be an initial first step.Research limitations/implicationsApplication of scientific approach and scientific knowledge to economic issues, especially the issue of currency, wealth measurement and analysis of system performance needs higher emphasis, efforts and resources.Practical implicationsThere is need to create awareness regarding massive losses the economy suffers due to interest and monetary manipulation and to persuade governments to link currency with a suitable and well defined basket of national product. Interest and monetary manipulation have no place in Islam and as long free floats continue to be manipulated those who shun interest and exploitation must correct their accounting for the element of fraud incorporated by monetary manipulation. Consumer price index and wholesale price index may be used as a measure of currency manipulation.Originality/valueIt is an analytical study of economic problems and their efficient solution. It is most important for researchers, academics, government functionaries, social workers and all those who are concerned with economic growth, justice and welfare.