Friday, November 5, 2010
India is growing and growing very fast but where is its poor going...........unfortunately I am not able to see. Stock market is zooming, how many indians are investing in it. When world's biggest capitalist is coming to India, at this time the most important question the government must answer .. " Where its commitment lies?".
Unfortunately this goverment may be good for rich, but with all words of development poverty is rising. If India fails to include its poor in growth and development, then it is going to be disastar for the nation.
Unfotunately present government with all its rhetoric for inclusive growth fail to include the poor in this story of development. Life and its affordability becoming more and more difficult for poor.
Healthcare, drinking water and electricity, housing , sanitation all are absent in rural India. Electricity comes occasionaly and yes no water in summer. Malnutrition Childs are highest here.
Without taking all together, growth can not be servived.
Water Conservation and Agriculture and village industries should be the pririty of the development.
Privatisation ............ or selling of old assets of nation can't solve the real problem.
New paradigm of development is must....... which includes all sections of societies.
Thursday, April 29, 2010
- Financial Crisis and collapse of financial industry, moral hazard is the core of the causes.
- Securitization eliminates the incentive for the originator of the loan to be credit sensitive... With securitization, the dealer (almost) does not care as these loans can be laid off through securitization.(called a ‘‘moral’’ hazard). The originating banks replenished their funds, enabling them to issue more loans and generating transaction fees.
- Credit rating agencies having given investment-grade ratings to MBSs based on risky subprime mortgage loans. However, there are also indications that some involved in rating subprime-related securities knew at the time that the rating process was faulty. ( moral hazard)
o Unethical Practices and Moral Hazard
o Securitization and speculation
o Paper Currency
If we look at the core of the financial crisis, it all started with unethical practices of lenders/banks to lend the money who can not afford it. These bankers are only interested in getting processing fees and placement fees and making money on it. They bundled these entire low quality loan into securities, and sold to the market. Most importantly rating agencies rated these securities wrongly to get good rating. Then market players sold CDS and Interest rates swaps on them based on these rating. Then speculators played on these securities to generate profits.
When it comes to commodities I can say securitization of commodities market and derivatives played by the speculators are the sole reason for the high prices of commodities across the world. Derivatives are the other reason of collapse. Role of paper currency is another very important issue at the center of financial crisis. These papers currencies which do not have any weight themselves has become most important tool of the speculators, derivatives, currencies and their casino’s has played key role in financial crisis. Securitization and securities market has become the 24 hour casinos for the speculators who play on 95% barrowed money. (Commodities, currencies and derivatives)
But a crucial question remains that has not had much exposure: where were the auditors? Unqualified audit reports up to the collapse had concluded that the directors’ reports and accounts reasonably reflected reality.
Auditors have contributed to the crisis by accepting directors’ “mark-to-market” valuation of trading assets, when some basic questions would have shown them that those directors (i) hadn’t the remotest clue what was in the mortgage / loan packages they had acquired; (ii) were utterly bemused by the nature of the complex derivatives on which their asset valuation rested; and (iii) knew that there was no market to “mark” to.
Derivatives are central to the demise of Lehman. Its annual accounts mention derivatives contracts with a face value of $738bn and fair value of $36.8bn.
Flaws in rating methodologies were the major reason for underestimating the credit default risks of instruments collateralized by subprime mortgages.
The governance of credit rating agencies did not adequately address issues relating to conflicts of interests and analytical independence.
Tuesday, December 15, 2009
This is the real Dubai World. The leader of Gambling in the world. Those who do not understand Islamic Finance Should not certify. The shariah Scholar who certified Nakheel and its Parent Company Dubai World must answer this.
These Sukuk voilates first principle of Islam i.e. Maqasid Al Sharia. The income or rent Sukuk holders has received is basically from Prohibited Businesses i.e. Haram Activities ( Alcohol, Pork, Gambling, Dancing and Prostitution.). The income and guarantee of income from Haram Sources are Haram. All the income received by Sukuk holder therefore is haram and must be cleaned.
Structures and Contract are two essential things but what is more important is business model which should not voilate Maqasid Al Shariah. Even if the structure and Contract are valid but Business Model voilates Maqasid Al Shariah and indulges into Haram such structures and contracts are void. It is very important that complete value cycle of the product must be shariah compliant. The income from such void contract is Haram.
Wednesday, December 9, 2009
Islamic economics and finance is not just name of the few structures but they are system of life where good your deeds and intentions are counted. To have valid contract, structure must have Halal source of income, and its substantial income should not be coming from Haram (Prohibited) income. The product must satisfy Shariah compliance through out the product life cycle and not only the structure. The guarantees must come from Halal sources and rent must also come from Halal sources and not from Haram income.
The product must satisfy following requirement.
o Maqasid al Shariah
o Conditions of contract
Islamic Economic System
Islamic economics is based on the Shariah. The basic objectives are to ensure general human well-being and socio-economic justice.
THE DISTINCTION BETWEEN CONVENTIONAL AND ISLAMIC THEORIES
The Role of Moral Values
While conventional economics generally considers the behavior, tastes and preferences of individuals as given, Islamic economics does not do so. It places great emphasis on individual and social reforms through moral uplift.
The Importance of the Hereafter
The Hereafter is a concept which is completely ignored by conventional economics, but it is one which is greatly emphasized by Islam. Because of their innate goodness, human beings do not always try to serve their self-interest.
MAQASID E SHARIAH- the Objectives of Shari'ah
Maqasid al-Shari'ah that is, the objectives of Shari'ah can be defined as below:
· Maqasid al-Shari'ah comprises those benefits/welfare/advantages for which Allah has revealed His Shari'ah.
· Maqasid al-Shari'ah aims at the attainment of good, welfare, advantage, benefits, etcetera, and warding off evil, injury, loss, etcetera, for the creatures. (All this in Arabic terminology can be stated as Masalih al-'Ibad.)
Shari'ah aims at the welfare of the people in this life and in the life hereafter, and for this purpose it has advised the people to adopt such means and measures suggested by it (Shari'ah) as may result in advantage benefit/well-being to them and may ward off evil/injury/loss, etcetera, from them, not only in this world but also in the world hereafter. Same is the philosophy behind His commands and the worships prescribed for His creatures.
Shari'ah Approves of Good and Forbids Bad:
The main objectives of the Shari‘ah are to ensure that human life is based on ma’rufat (good) and to cleanse it of munkarat (evils). It does not, however, limit itself to an inventory of good and evil deeds; rather, it lays down an entire scheme of life whose aim is to make sure that good flourishes and evils do not destroy or harm human life.
The Shari‘ah shapes Islamic society in a way conducive to the unfettered growth of good, righteousness and truth in every sphere of human activity. At the same time it removes all the impediments along the path of goodness. And it attempts to eradicate corruption from its social scheme by prohibiting evil, by removing the causes of its appearance and growth, by closing the inlets through which it creeps into a society and by adopting deterrent measures to check its occurrence.
The Shari‘ah divides ma’rfat into three categories: the mandatory (fard and wajib), the recommendatory (mandub) and the permissible (mubah).
The observance of the mandatory is obligatory on a Muslim society and the Shari‘ah has given clear and binding directions about this. The recommendatory ma’rufat are those which the Shari‘ah expects a Muslim society to observe and practise.
The munkarat (the things prohibited in Islam) have been grouped into two categories: things which have been prohibited absolutely (haram), and things which are simply undesirable (makruh).
Muslims have been enjoined by clear and mandatory injunctions to refrain totally from everything that has been declared haram. As for the makruh, the Shari‘ah signifies its disapproval either expressly or by implication, giving an indication also as to the extent of such disapproval.
Aims of Shari'ah Unchangeable
The aims and objectives of Shari'ah are everlasting and unchangeable. They are set by Allah and their application or interpretation is not left to the sweet will of any person or class.
The Definition Of Gambling ( , )
Every transaction that is based on one party's gain and another's loss, or if the transaction is obscure, is called 'gambling' ( , ) in the terminology of the Sharee'ah. In Arabic, it is referred to as Qimaar and Maysir . Since one party gains and the other loses, it falls under the definition of gambling. Gambling, therefore, can take countless different forms. In every era and every different land gambling is practised in a variety of different ways. A special way of gambling existed among the Arabs. This particular method of gambling has been referred to in the Holy Qur'aan as Maysir and Azlaam .
The Prohibition of Gambling
Islam, the all-embracing religion, not only displayed its just and moderate systems in beliefs and devotion, but also in economics and social orders. This just religion could not tolerate the unjust seizure of another person's wealth (through games of chance) which resulted in crippling the poor even more and strengthening the rich by accumulation of wealth without any effort nor could it tolerate the collection of a large amount from the poor and making it one person's property without any lawful religious reason. Consequently, gambling was declared unlawful.
In the beginning of Islaam when the Holy Prophet sallallahu alayhi wasallam was asked aboutalcohol and gambling, this verse was revealed, They ask thee concerning wine and gambling. Say: In them is a great sin and some benefit for men. The sin is greater than the benefit. (2:219) This verse is indistinct regarding the lawfulness and unlawfulness of wine and gambling. Some high-ranking Sahaabah radhiyallahu anhum understood from this verse that these things are undesirable and detestable. They began abstaining from these things immediately. Generally, the people participated in gambling and wine drinking, since a clear ruling declaring the unlawful and Haraam was not revealed and since there had been no definite decision from the Holy Prophet sallallahu alayhi wasallam . Then this verse of Soorah Maa'idah was revealed, O you who believe! Intoxicants and gambling, (dedication of) stones and arrows are abomination of Shaytaan’s handiwork: Abstain from it so that you may prosper. Shaytaan's plan is (but) to excite enmity and hatred between you, with intoxicants and gambling, and binder you from the remembrance of Allah, and from prayer: Will you not then abstain? (5: 90,91)
Islamic Commercial Law -Legality of Cause, Object and Consideration
The need to respect the precepts of Islam also results in rules concerning the cause (sabab) of the contract, as well as assets that are its objects and the consideration payable in respect of them.
Legality of Cause
The underlying cause must be lawful. A useful definition of cause can be found in the law, the ‘direct purpose aimed at by the contract’. So a contract to buy grapes is invalid if the underlying cause of entering into the transaction is to make wine.
Legality of Object
The object of the contract must be legal (mubah), ie:
- Beneficial; examples of assets which are not beneficial include vermin and animals not useful for hunting;
- Capable of being traded; examples of assets not in this category include public property (a mosque, or assets subject to a waqf), and birds not yet caught;
- Capable of being delivered; an asset not capable of being delivered is a beam in the roof of a house which cannot be removed without harming its structure;
- Lawful; wine, pork, blood and idols are examples of forbidden commodities (most schools prohibit the sale of dogs, apart from hunting dogs).
Legality of Consideration
The consideration must also be legal. For example, one cannot pay for goods with wine.
Prohibited Matters in Business Transactions
So far we have focused on one aspect of the business ethics – guidelines prescribed by Islam for conducting business transactions. Another aspect of business ethics is the various forms of unethical business practices a Muslim businessman must avoid in his business dealings. Some of these prohibited and undesirable business practices are as follows:
Dealing in Prohibited (Haram) Items
Dealing in unlawful items such as carrion (dead meat), pigs and idols is strongly prohibited in Islam. Likewise, trading in pork or intoxicants and sale of idols and statues is not permitted in Islam. A verse of the Holy Qur’an says:
Forbidden to you [for food] are: dead meat, the blood, the flesh of swine and that on which name of other than Allah has been mentioned. (5:1)
The Holy Qur’an also says: O you who believe! Intoxicants and gambling [dedication of] stones and [divination by] arrows are an abomination of Satan’s handiwork: so avoid it in order that you may prosper. (5:90) The Prophet (sws) is also reported to have said; Allah and His Messenger made illegal the trade of alcoholic liquors, dead animals, pigs and idols. (Bukhari, No: 2082) The Prophet (sws) also said; If Allah makes something unlawful, he makes its price also unlawful. (Ahmad, No: 2546)
Sale of Al-Gharar (Uncertainty, Risks, Speculation)
1.1. Arbitrarily Fixing the Prices
1.2. Hoarding of Foodstuff
1.3. Exploitation of one’s Ignorance of Market Conditions
The company which has its substantial income coming from Casino’s, Alcohol, and Prostitution can issue sukuk and guarantee it. Where whole company philosophy and business model is based on Haram income can issue Shariah compliant product. In this situation not only the issuer but also Shariah Scholars are at fault.
“Dubai world Sukuk and Nakheel Sukuk are not Shariah Compliant and Islamic”
Just by saying Sukuk and Structuring it like Sukuk, it can not become Shariah Compliant. The Shariah Scholars who certified it are answerable Here and Hereafter for promoting Haram in the name of Halal.
Thursday, December 3, 2009
Many people may have given many reasons for failure of Dubai. Dubai was glaring example of flourishing economy and success. This story is deceptive. The success is build on very shaky foundation, basically there are no foundations there and any structures built without foundations is going to collapse one day or other. Dubai builds whole business on Haram element – (Prohibited) by Allah for which failure in both the worlds are clearly mentioned.
These reasons are as below.
1. Interest based financing – high leveraged financing.
2. Economy based on gambling and Haram trade
3. Tourism – serving of alcohol and drugs
4. Dancing, music, night club and prostitution
5. Trade in Haram Food
(Income from Haram source is Haram)
The Punishment for Dealing with Riba (Interest and Usury)
“Those who devour usury will not stand except as stand one whom the Evil one by his touch hath driven to madness. That is because they say: “Trade is like usury,” but God hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for God (to judge); but those who repeat (the offence) are companions of the Fire: They will abide therein (for ever).”
- Quran Verse 2:275 (Chapter Al-Baqara)
To understand the wisdom behind such prohibition we need to be first aware of 2 key Islamic principles on wealth-creation.
1. Islam permits increase in capital through trade and, at the same time, it blocks the way for anyone who tries to increase his capital through lending on interest (riba) - whether it is at a low or a high rate.
Allah Almighty says : “O you who believe, do not consume your property among yourselves wrongfully, but let there be trade by mutual consent…?
- Quran verse 4:29 (Chapter An-Nisa)
I would also like to point to another prohibited means of earning - ‘gharar’ (transactions based on speculation/gambling).
The Hadith of Prophet says:
Do not buy fish in the sea, for it is gharar. (Ibn Hanbal)
Buying ‘fish in the sea,’ or alternatively, ‘what is in the womb’ highlights the speculative nature of the transaction.
2. ‘Gharar’ (speculation/gambling) violates the principle that all parties have both complete knowledge and access to the product before the transaction.
In summary, Quran forbids both risk-less gain, as in the case of Riba (Usury), and transactions based entirely on risk, as in ‘Gharar’ (Speculation/Gambling). Islamic Shari’a encourages Muslims to be “risk neutral” and earn profit through neither seeking speculative gain nor hoping to lock down all risk with fixed returns.
Ibn Majah recorded that Abu Hurayrah said that the Messenger of Allah said,
(Riba is seventy types, the least of which is equal to one having sexual intercourse with his mother.)
Continuing on the subject of prohibiting the means that lead to the unlawful, there is a Hadith that Ahmad recorded in which `A'ishah said, "When the Ayat in Surat Al-Baqarah about Riba were revealed, the Messenger of Allah went out to the Masjid and recited them and also prohibited trading in alcohol.'' The Six collections recorded this Hadith, with the exception of At-Tirmidhi. The Two Sahihs recorded that the Messenger of Allah said,
`Ali and Ibn Mas`ud narrated that the Messenger of Allah said,
(May Allah curse whoever consumes Riba, whoever pays Riba, the two who are witnesses to it, and the scribe who records it.)
(276. Allah will destroy Riba and will give increase for Sadaqat. And Allah likes not the disbelievers, sinners.) (277. Truly, those who believe, and do deeds of righteousness, and perform the Salah and give Zakah, they will have their reward with their Lord. On them shall be no fear, nor shall they grieve.)
Allah Does Not Bless Riba
Allah states that He destroys Riba, either by removing this money from those who eat it, or by depriving them of the blessing, and thus the benefit of their money. Because of their Riba, Allah will torment them in this life and punish them for it on the Day of Resurrection. Allah said,
(Say: "Not equal are Al-Khabith (evil things) and At-Tayyib (good things), even though the abundance of Al-Khabith may please you'') ﴿5:100
Ibn Jarir said that Allah's statement, (Allah will destroy Riba) is similar to the statement reported of `Abdullah bin Mas`ud, "Riba will end up with less, even if it was substantial.'' Imam Ahmad recorded a similar statement in Al-Musnad.
Giving Short Measures
The community of the Prophet Shu‘ayb (sws) was known for practicing it with impunity. Consequently, they were destroyed for their persistence in deceit and disbelief in Allah and His Messenger. Allah the Almighty has repeatedly commanded exactitude in weights and measures. One of the verses says: And give full measure when you measure, and weigh with a just balance. That is good and better in the end. (17:35)
So the earthquake seized them and they lay (dead), prostrate in their homes. Those who belied Shu 'aib, became as if they had never dwelt there (in their homes). Those who belied Shu aib, they were the losers.
Then he (Shu 'aib) turned from them and said: "0 my people! I have indeed conveyed my Lord's Messages unto you and I have given you good advice. Then how can I sorrow for the disbelieving people's (destruction)." Surah 7: 91-93
The Prohibition of Gambling
[The Quran 5:90] O you who believe, intoxicants, and gambling, and the altars of idols, and the games of chance are abominations of the devil; you shall avoid them that you may succeed.
Dealing in Prohibited (Haram) Items
Forbidden to you [for food] are: dead meat, the blood, the flesh of swine and that on which name of other than Allah has been mentioned. (5:1)
The Prophet (sws) is also reported to have said; Allah and His Messenger made illegal the trade of alcoholic liquors, dead animals, pigs and idols. (Bukhari, No: 2082) The Prophet (sws) also said; If Allah makes something unlawful, he makes its price also unlawful. (Ahmad, No: 2546)
"They ask thee concerning wine and gambling. Say, 'In them is great sin and some benefit for men; but the sin is greater than the benefit."
FROM THE HADITH
• On the authority of Abu Huraira (may Allah be pleased with him), who said: The Messenger of Allah said: “Allah the Almighty is good and accepts only that which is good. Allah has commanded the Faithful to do that which He commanded the Messengers, and the Almighty has said: “O ye Messengers! Eat of the good things, and do right..” (Quran 23:51). And Allah the Almighty has said: “O ye who believe! Eat of the good things wherewith We have provided you..” (2:172). Then he mentioned [the case of] a man who, having journeyed far, is disheveled and dusty and who spreads out his hands to the sky [saying]: O Lord! O Lord!-while his food is unlawful, his drink is unlawful, his clothing unlawful, and he is nourished unlawfully, so how can he be answered!” (Muslim).
Zinna - Prostitution
Islam has prohibited certain professions and industries to its followers because they are harmful to the beliefs, morals, honor, or good manners of the society.
Prostitution: Prostitution, for example, is legal in many countries of the West; permits and licenses are issued to those who ply this trade, and prostitutes enjoy rights similar to other professionals. Islam absolutely rejects and condemns this practice, and forbids any female, free or slave, to earn money by selling her sexuality.
Dancing and Other Erotic Arts: Similarly, Islam does not permit sexually exciting dancing or any other erotic activity, such as suggestive or obscene songs, provocative dramas, and every type of rubbish which some people today term "art" and "progress."
The fact is that Islam prohibits every sort of sexual contact and sexual relationship outside marriage. This is the secret behind the significant words of the Qur'an prohibiting fornication and adultery (both of which are known as zina in Arabic). And do not come near zina; indeed, it is an abomination and an evil way. (17:32) This indicates that not only is zina forbidden, but likewise anything which brings one near to it. Everything to which we have referred above, as people are well aware, for example, provocative dances and songs, constitutes "coming near zina;" these things are certainly intended to tempt, excite, and lead one toward such sin. And what havoc they wreak in the lives of people!
Manufacturing Intoxicants and Drugs: Earlier we saw that Islam prohibits any participation in the promotion of alcoholic beverages, whether it be in their manufacture, distribution, or consumption, and that anyone who participates in any of these is cursed by the Messenger of Allah (peace be on him). The case of other intoxicants and drugs, such as hashish, cocaine, and the like, is the same; manufacturing, distributing, or consuming any of them is haram. In short, Islam prohibits the Muslim to work in any industry, business or profession which deals in, or promotes, anything which is haram.
Any economy based on Haram can’t succeed.
Definition of best human according to Islam –The meaning of the Quran - 49:13 “O mankind! We created you from a single (pair) of a male and a female, and made you into nations and tribes, that ye may know each other (not that ye may despise (each other). Verily the most honored of you in the sight of Allah is (he who is) the most righteous of you. And Allah has full knowledge and is well acquainted (with all things).”
Sura: 69. Al-Haqqah
(69:5) Then the Thamud were destroyed by an awesome upheaval;
(69:6) and the Ad were destroyed by a furiously raging wind-storm
(69:18) That will be the Day when you shall be brought forth (before Allah) and no secret of yours shall remain hidden.
(69:19) On that Day, he whose Record is given to him in his right hand *12 will say: “Lo! Read my Record! *13
*12 The record's being given in the right hand will by itself show that the concerned person's account is clear and settled and he is appearing in the Divine Court as a righteous man and not as a culprit. It is probable that at the time the records are distributed the righteous man himself will extend his right hand forward to receive his record. For on account of the good treatment that he would have received right from the moment of death till his appearance in the Plain of Assembly at Resurrection, would have given him the satisfaction that he was there to be blessed and not to be punished. At many a place in the Qur'an it has been explicitly stated that right at death itself it becomes clear to every man whether he is entering the next World in a blessed or wretched state. Then from the moment of death till Resurrection the righteous man is treated like a guest and the evil man as a culprit under custody. After this, froth the time the second life starts on the Day. of Resurrection, the condition and state of the righteous is entirely different from the condition and state of the disbelievers, hypocrites and culprits.
*13 That is, he will be overjoyed as soon as he receives his record and will show it to his companions. In Surah Al-lnshiqaq: 9, it has been said "He will return to his kinsfolk rejoicing."
(69:20) Verily I was sure that I would be handed over my account.” *14
*14 That is, ". He was fortunate because he had been conscious of the Hereafter in the world and had lived his life with the belief that he would have to appear before God one day and render his account to Him.
(69:25) As for him whose Record will be given to him in his left hand, he will exclaim: “Would that I had never been given my Record,
(69:26) and had not known my account.
(69:35) today he has been left here friendless;
(69:36) and has no food except the filth from the washing of wounds,
(69:37) which only the sinners will eat.”
Allah Has Destroyed People Who Involved in Haram ( Prohibited)
(7:4) How many a township We have destroyed! Our scourge fell upon them at night, or when they were taking midday rest.
(7:5) And when Our scourge fell upon them their only cry was: 'We are indeed transgressors.' *5
*5. People can learn a lesson from the tragic fate of those nations that spurned God's Guidance, and instead followed the guidance of others; and they became so degenerate that their very existence became an intolerable burden on the earth. Eventually, God's scourge seized them. and the earth was cleansed of their filthy existence.
(7:10) We assuredly established you in the earth and arranged for your livelihood in it. Little do you give thanks.
A morsel of Halaal food
Eating haraam gives rise to every type of infamy. Whereas, the halaal morsel is the cause of every kind of goodness and charity. Numerous traditions praise the acquisition of livelihood through lawful means. For example the Holy Prophet (s.a.w.s.) says, "Worship consists of seventy parts and the best part is earnings by lawful means." (Safinatul Behaar) The Messenger of Allah has also said, "When a man eats halaal food an angel stands over his head and prays for his forgiveness till he finishes eating." (Safinatul Behaar) The Prophet has remarked in a similar vein, "One who strives to earn his livelihood in a lawful manner from morning till night, achieves salvation." (Safinatul Behaar) The Holy Prophet (s.a.w.s.) states that Allah has said:
"I will not care on the Day of Qiyamat from which door he enters Hell, the person who does not care from which door he earns money in this world." (Behaarul Anwaar) The Prophet of Allah (s.a.w.s.) has also mentioned the following tradition: "One who does nor care from which way he earns wealth in this world will be sent to Hell in Qiyamat and I shall not care from which way he is made to enter it." (Behaarul Anwaar)
(Surah Nisa 4:2) It should not be that in a hurry to obtain livelihood you obtain it through illegal ways, before Allah provides you with the halaal sustenance that He had decreed for you."