The Role of Money in Capitalistic and Islamic Economic Systems: A Comparative Study

Abstract

Money has a great role to play in the economic system. It is a backbone of all commercial and financial transactions. Its role is well defined and established since ages; the fundamental role as a medium of exchange and standard of values. Furthermore, if the functional role of money is positive and productive, it leads to the economic growth and expansion of economic activities. Likewise, the injudicious role of money created several economic fluctuations and frequent financial distortions in the economic history. The article suggests that the injudicious role of money created economic disorder and caused financial crisis in the global economy. The research paper attempts to explore the role of money from Islamic and Capitalistic perspectives. In the capitalistic system, the money is being used as a tradable commodity in the banking and financial sector. The Islamic perspective is based on the teachings of Quran and Sunnah, and jurisdictions of Muslim scholars, in this context, money is only a means of exchange and measure of value. The qualitative research approach has been applied to the discussion and based on the literature review and available data, it is recommended that there is a dire need to review the role of money. The role of money as a tradable commodity caused distortions in the existing system. It is recommended that the banking business needs to be operated on profit and loss sharing rather than the trading of money as a commodity.