Poverty and Islamic Banking

Poverty and Islamic Banking

The World has become a harsh place to live in. With the Dramatic change in the climate there is little or no rainfall and diseases have widespread in to the lands. If we take a closer look into the problems among them would include a gigantic increase in the population, Scarcity of clean water, Poverty, Corruption, Less Availability of jobs, Malaria.

Although the government of Pakistan have taken steps to tackle the problems and solve them and to some extend they are successful, but two of the problems remain unsolved which include poverty and Corruption and it has plagued the lands of Pakistan in the form of Black money, Hunger, Less availability of Jobs.

Every Problem has a solution, If not it may not be the problem. Poverty, Corruption are not mutually exclusive they are solely dependent upon the evil of Interest based Banking. Interest (usury) is unjust it uses the poor’s position as an advantage against him, the rich becomes richer while the poor becomes poorer in a state relying heavily on conventional banking.

Some of the people might avoid the evil conventional banking due to the fear of Allah incorporated into their hearts but sadly somehow they are all directly or indirectly connected with such evil. This surely is a vital problem and it can be solved through properly collection of zakat, taxes as per the teachings of Islam.

Many people disbelief that how does Zakat help solve such problems although there are no mathematical evidence up till now but we can think of it as zakat increases the purchasing power of the poor which ultimately help circulation of money among people rather than concentration of it among the elite. “O you who have believed, do not consume interest, doubled and multiplied, but fear God that you may be successful. And fear the Fire, which has been prepared for the disbelievers.” (Quran 3:130-131).

Scholars to some extent have proposed an alternate system which does not include the “interest” and is solely made as an Islamic Banking System for those who fear Allah but it has not still been implemented to full extent within the boundaries of Pakistan. It can only be possible if Government annul all the Conventional banking practices and declare Islamic Banking system as the only practice valid within the state, although it might be hard at the start but thinking long term it will solve the problems such as poverty, corruption to a greater extent.

Let’s take an Example to have a better insight about the Problem at hand, Suppose we have a widow with 4 small kids, she cannot earn due to her heart problem and she begs for money at the streets. Most of the people might think of her as fraud but who knows she is doing it for the sake of her kids everyone is busy in their normal life buying things they don’t need to impress people they don’t like, we have a materialistic society. The only way out through this poverty is education she has a small land at hand which she gives to the bank as a security and takes some money on interest for the education of her kids.

Now she has to pay Interest as well as the Principle amount the longer period she takes the higher the compounded interest becomes, now she has more problems. But what if we had a proper Islamic System, Through Zakat she wouldn’t need to beg on the streets and didn’t had to pledge her land for a small amount of money on interest and could easily afford to pay for school through zakat, The Teachers would get their salary from the students paying fees and a healthy circulation of money would be easily seen. The small businesses would flourish as the purchasing power of people had been increased and instead of saving money for an uncertain future they would spent money and give zakat.

Indeed Allah is the creator of everything and he knows better. We should follow the system proposed by him instead of manmade system. Through this not only will we be able to tackle corruption poverty. But we could also be safe against Financial Crises, Global recession.

References

Abubakar, M. and Bello, A. (2014). Challenges and Solutions to Islamic Banking System in a Pluralistic – Secular Country Like Nigeria. Journal of Islamic Economics Banking and Finance, 10(3), pp.184-202.

Shaiban, M. (2016). Contagion Effect from US Banking to Conventional and Islamic Banking in Dual-Banking System During the Global Financial Crisis. SSRN Electronic Journal.

Khan, A., Saboor, A., Hussain, A., Karim, S. and Hussain, S. (2015). Spatial and Temporal Investigation of Multidimensional Poverty in Rural Pakistan. Poverty & Public Policy, 7(2), pp.158-175.

Do Islamic Banking Standards Convey More Financial Transparency than Conventional Banking Ones?. (2018). Turkish Journal of Islamic Economics.

Author: Mahnoor Sharif | Comsats


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