Islam is a complete system of living, which has rules, recommendations and prohibitions to organise a Muslims life which all believers must follow. The system incorporates the Qur’an and the Sunnah of Muhammad into the Islamic law, Shari’ah.
All Muslims are ordered by Allah in the Qur’an to refer any disputes to Allah and his Messenger Muhammad:
“O you who have believed, obey Allah and obey the Messenger and those in authority among you. And if you disagree over anything, refer it to Allah and the Messenger, if you should believe in Allah and the Last Day. That is the best [way] and best in result.” (4.59)
It is unrealistic to think that events which happened in the 7th century when Islam emerged would hold all the answers for modern day situations.
There are situations which could not be foreseen, due to advances in society, it’s structure and technology, so scholars pre-empted this issue by the way of a Fatwa (Islamic legal ruling). A fatwa is issued by a person in Islamic (religious) authority, with extensive knowledge of Islamic jurisprudence. In practice this would be an Sheikh, Mufti or Imam who is male.
Islamic law and fatwas define and clarify what is permissible (Halal) or not permissible (Haram) in Islam.
In modern times, one big topic which gains importance is how finance is treated under Islamic law. Commercial insurance, for example, is a segment of finance, with Islamic law rules, that believing Muslims must follow.
Generally, any type of commercial insurance is not permissible by Islamic law.
That rule applies to house, phone, car, or any other type of commercial insurance. But there are some special allowances. For instance, in the case of health insurance, it is permissible if there is no other way, or if it preserves a Muslim’s life. Islam prohibits avoiding risk altogether, but it allows a Muslim to reduce a risk to himself. Islam also teaches that Allah will provide for any Muslim if a need arises.
If a Muslim is in a country that does not legally require him to take out commercial insurance, then it is a sin for him to do so. The prohibition is detailed within Islamic law.
Commercial insurance is forbidden because any type of transaction where there is an outlay of money given with no guarantee of any return, with or without delay, is prohibited. It is also seen as a type of gambling. For instance, there could be a profit or loss incurred on such a financial transaction. However, Muslims do need to raise large amounts of money at times. It is unrealistic to fail to provide compensation for loss from accident, injury, or property damage or loss, so scholars devised Islamic insurance within an Islamic financial system, which adheres to the shari’ah, the system is called takaful.
Takaful roughly translates to solidarity or mutual guarantee. As a finance model, it complies with shari’ah and is used throughout the Islamic financial sector throughout the world. Takaful derives from the traditions in the Sunnah of Muhammad, regarding the prohibition of Interest or gain, (riba) gambling (maysir) risk or uncertainty (gharar).
The takaful scheme works by participants pooling money into a takaful fund. The participants are said to donate. The fund is there to provide for all participants within the scheme. An agent is required to oversee the funding process, and he may be a Muslim or a non-Muslim, this would be the bank, who would have no dealings with the shari’ah aspects of the scheme.
The fund participants also pay fees for the agent, plus administrative and marketing costs. There is also a separate shareholder fund, which is used for any needed start-up of the takaful fund.
Any surplus at the end of the year is invested into shari’ah-compliant businesses. Any returns on these investments are pooled back into the takaful fund and to shareholders. In addition to this, the participants receive premiums for renewals. This ensures a rotation of the funds throughout the Islamic economy and the Islamic community.
The shareholders are required to be responsible for any loss the company may incur. There is an additional system called retakaful, by which Islamic institutions may invest into the system, to reduce the risk of insolvency; for example, in the case of many participants needing to claim at the same time, due to a natural disaster or unforeseen event.
The takaful scheme is open to Muslims and non-Muslims, but investments from the surplus funds can only be made to shari’ah-compliant businesses.
This means there will be no investment into any businesses which deal with products such as pork, wine, gambling, or that involve anything else that is prohibited by shari’ah.
An advisory board comprised of Islamic scholars is required to oversee the whole process: to ensure that all requirements for shari’ah are met. The advisory board will use their Islamic legal knowledge to ensure conventional banks which offer Islamic insurance – including western banks -adhere to Islamic law.
Islamic Finance dates from the early Islamic state which Muhammad controlled, although it was primitive compared with caliphates later on. This system of finance was gradually eroded and then lost in the early 20th Century, this was due to the collapse of the caliphate of the Ottoman Empire.
Regrouping didn’t take long and after the Ottomans were finally defeated in 1922, the Muslim Brotherhood was formed by an Islamic scholar, Hassan Al-Banna in 1928.
Hassan Al-Banna brought the financial system mandated by the Qur’an and the Sunnah of Muhammad into the 20th century by creating a financial system of a political and economic structure which is now know as financial Jihad.
Current Islamic financial Organisations, such as the Accounting and Auditing Organisation Islamic Financial Institutions founded in 1990 (AAOIFI), grew from Hassan Al Banna’s new system of the early century.
Two attempts of the new system failed, one in India in the 1930’s and one in Egypt of 1964, Egyptian President Gambel Abdul Nasser went on to arrest and expel members of the Muslim Brotherhood from Egypt after attempts to assassinate him.
Mit Ghamr Savings Bank of Egypt was launched in 1963.
The Muslim Brotherhood was welcomed by Saudi Arabia who provided funds to establish the Islamic University of Medina in 1961 to educate students all over the world.
In 1962 Saudi Arabia launched a joint global finance venture which saw the creation of many Islamic ‘charities’ for which most Jihad groups are funded from in present day. One being the Muslim World League, which has numerous charities linked to it and in the hundreds of branches worldwide.
In the 1970s, Saudi propagated another Muslim Brotherhood initiative, the International Islamic Relief Fund, which again is a network of worldwide charities which have been linked with funding Hamas, Al-Qaeda and many other Islamic jihad groups who went onto commit atrocities against thousands of people worldwide.
The Organisation of the Islamic Co-Operation (OIC) is a unity of 57 member states and 5 observer states. It is a Saudi backed organisation and is the “struggle for Islam, pending the liberation of Jerusalem”, and to “support the struggle of the Palestinian people”.
The OIC is second to largest International governmental organisation with the United Nations being it’s only near match.
The Islamic development bank (IDB), was founded in 1973 which has UN observer status, it was created to propagate Islamic banking worldwide, whilst upholding the principles of shari’ah.
Through discovery of bank records in the West Bank and Gaza, it has been discovered Hamas has been funded millions of dollars, further to this it was discovered the Palestinian Antifada and families of suicide bombers were funded 538 million dollars, raised publicly by Saudi and Gulf countries, this was transfered by the IDB to the financial Jihad network.
The IDB supported the “Sudan Islamic Bank Act”, of 1977, established by the Saudi King and the Muslim Brotherhood and the Muslim Brotherhood political party the “National Islamic Front”.
The first takaful scheme was devised in Sudan and launched in 1979.
New political parties formed from this who then went onto create more Islamic banks.
Sudanese government used funds obtained by stipulating 20% of the countries revenue go to fund the Islamic banks. This then led to Sudan becoming an Islamic state in 1983 and banks being Islamised in 1989.
In 1986 Amana Income fund was created, 1990 the first tradeable sukuk was launched by Shell MDS in Malaysia, Citibank started offering Islamic banking services. 1999 Dow Jones Islamic Market index was established. An international body named Islamic financial services board (IFSB) which set Islamic financial standards throughout the world was launched in Malaysia in 2002 and finally in 2004 the Islamic bank of Britain, which was the first commercial bank outside of Muslim lands.
Many other financial and shari’ah initiatives formed, primarily due to the Muslim Brotherhood and revenue raised from Petro dollars which escalated the islamisation of Muslim lands.
Al Banna’s – Muslim Brotherhood founder– initiative was launched in 1982: Towards a worldwide strategy for Islamic party, know as “The Project”.
The Project is a 12 point plan of the Muslim Brotherhood for the gradual creation a worldwide Islamic state.
A global Islamic finance report released April 2017 stated Islamic bank capital is now growing at 19.7 percent per annum, it grew from $200 billion to $3 trillion between 2000 and 2016. This is forecast to grow to $4 trillion by the early 2020s.
There has been controversy within the Islamic countries as to whether takaful is really any different from commercial insurance. That dilemma has been resolved in recent times.
In the UK, takaful has been approved by the Financial Services Authority as a suitable system for shari’ah-compliant finance. This is now an option within most conventional banks within the UK. Within two years, takaful is forecast to launch as a suitable alternative for Islamic student loans, as it has now been approved by Parliament.
Islamic Finance is now a rapidly growing sector. Since the 1970s, more than 5,000 takaful Islamic financial institutions and 500 Islamic banks have been established worldwide. Islamic financial institutions are operating in more than 75 Islamic and non-Islamic countries, the US has 25 alone – and Shari’ah compliant alternatives are increasingly being offered at conventional banks in western countries.
Digital Islamic banking is in the process of being launched and will see between $5 million and $20 million invested by Islamic banks into digital initiatives, the UK will launch in the next year and the rest of the west in the few years following.
Annual growth in the Islamic banking sector has slowed down in recent years, but the loss in annual growth has been offset by new investments into the system, this is due to the requirement of reinvestments being shari’ah compliant, the money will always remain in the Islamic economy.
As Islam becomes stronger and allowances are made for shari’ah requirements, its demands are becoming larger, more frequent, and widespread. As conventional insurance is forbidden in Islam, but as insurance is required in Western countries, this legal and cultural conflict will inevitably clash more in the future. shari’ah finance through large institutions will draw funds into the Islamic economy, which will in turn give Islam more authority within Western lands, ensuring legislative changes, a more divided society, and the further breakdown of equality laws.
Without an established Islamic financial system this vision would be unforeseeable.
Hassan al-Banna – Founder of the Muslim Brotherhood.