I have given some deep thoughts on the recent events that have impacted investors in Singapore, particularly those who have invested in DBS High Notes and the infamous, Lehman Brothers mini”bonds”.
I finally reached to a simple solution to all these avoidable bullshit chaos.
The solution is…..
Islamic Finance.
Islamic Finance ensures TRANSPARENCY.
There seems to be lacking of transparency, in the promotion of these investments.
People are unsure on what they invest in and just relied on “trust” from the banks.
Some of the great, great structures of Islamic finance to ensure transparency and equality are….
1) Prohibition of Investments In Companies whose primary business includes Forbidden Products
If you invest in Islamic investments products, you know where your money goes to.
Transparency is uphold, as the Shariah prohibits investments in companies whose primary business include forbidden products such as alcohol,drugs,pork,tobacco and weapon production.
Many financial institutions have a religious board to monitor and ensure strict compliance is in place.
2) Prohibition of Gharar
Gharar means sale of probable items whose existence or characteristics are not certain,due to the risky nature which makes the trade similar to gambling.
Examples of Gharar include the sale of fish in the sea, an unborn calf in its mother’s womb, unripened fruits on the trees, etc.
All such cases involve the sale of an item which may or may not exist.
In such circumstances, the fish in the sea may never be caught, the calf may be still-born, and the fruits may never ripen.
In all such cases, it is in the best interest of the trading parties to be very SPECIFIC about what is being sold and for what price.
In today’s modern context, gharar can be eliminated from contracts by carefully stating the object of sale and the price to eliminate unnnecessary ambiguities.
There must be FULL DISCLOSURE by both parties.
3) Prohibition of Riba/Usury
In Islam, the charging of interest, or riba, is strictly prohibited.
Any return on investments should be in proportion with the profits of a business and not through guaranteed interest rate.
If the investments on the pertaining business where its business profit is high, the investor/lender will get a higher return of their investments.
Conversely, if the business profit is low, the investor/lender will also get a lower return of their investments.
The risk is shared by both the principal investor and the receiver (enterprise).
Riba is prohibited to prevent unfair exploitation by one party, who owns the money or capital.
Its fundamental reasoning is ”equality of compensation”.
It’s noble aim is to prevent the investors/lenders from charging interest excessively regardless of the performance of the business venture they have invested in.
With these features in Islamic Financial Products, I am confident that peddling of ambiguous products can be entirely eliminated, if not reduced.
Insyallah! 🙂
p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
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