The saving of money is called accumulation. The system of accumulations by paying interests and its lending with interest to a third side is called the credit system. Contemporary economies consider this as the central way of gathering funds. This system is mostly employed by banks.
The gathering of stocks by the system of partnerships in order to form big capitals is possible as well. This may be called the partnership system.
The bank credit is taken with the interest guaranty. Its usage period is not related with the period of the economic action.
The partnership system does not guarantee any profit. Its usage period is totally compliant with the period of the undertaken economic action.
The unused capital makes no profit. In order to make profit out of the capital it is necessary the success of all the economic action from the investment to the production and the trading of the goods or services.
The loan of 100 $ in order to take 110 $ later is loan with interests and no economic action. The economic action starts with the usage of the borrowed loan. Neither the conclusion of this action within the predicted period not the profit can be guaranteed. For this reason the interest loaded is a load that obstacles the success of the economic action.
The cash itself cannot encounter any necessity at all. It cannot be eaten, drunk, or even worn but it becomes the mean of encountering all these necessities of whoever holds it. For this reason money should be circulating the way the blood circulates in the veins. Nobody makes any profit from the money that is not in circulation.
The Koran does not command the stocking of the money; on the contrary, it commands the money’s infak. In Arabic the term ‘nafak’ (النفق) stands for tunnel, while ‘infak’(انفاق) is the action of circulating/ passing through a tunnel. The way blood circulates in the veins and is spread all over the body, that way incomes and wealth is spread to all through the circulation –the expenditure- of money.
The circulating money encounters the necessities of all. It pays the debts of some, buys goods for some others, to some becomes the source of production, while to another group is the fount of the salaries for the employees…In short, the circulating money has positive effect by increasing the production and decreasing unemployment. Nevertheless this amount of money itself is not augmented neither reduced during this period.
Every amount of money that enters the market stimulates the economy. Yet, if it enters the market as credit of interests the effect is not long-termed, as it is necessary to take this money and the interest back from the market one day before the due date. As the interest will reduce the amount of money in the market, the market will loose even its old vitality; thus new sources of money are necessary. If even this source is based on interest the market continues to narrow down. So, as this action is repeated the credit rate increases and the circulating amount of money diminish. Finally bankrupting and devastation starts.
The number of enterprisers in a society is relatively small. Due to the risk of reimbursement and the obligatory requirements of reimbursement guaranty it becomes even smaller.
Thus a very limited number of people start to administrate very big capitals relying on the credit system; still these people enter under the crediting debts. In order to transport this responsibility to the ordinary people they open big working places and make a lot of publicity aiming the domination of markets. Smaller enterprises close down with time. Whereas, the people are caught between the ones who borrow and lend money- credit- with interests. The enterprisers who are not able to pay back their credits are bankrupt. Crediting companies are negatively affected by this as well. This is how economic crisis happen, while the social order is shaken. The Glorified Allah commands:
“O believers! Fear Allah! If you are of the believers relinquish what remains (due) from usury. If you do not do it, then you are in war with Allah and His Messenger. If you repent, then you keep your capital. Neither will you suffer injustice, nor will you be made to suffer injustice. If the debtor is difficulty, then let there be postponement until he is in ease. And it is better for you to that you remit (it) as gifts. Only if you knew.” (Al-Baqara/The Cow 2/278-280)
The lending of the saved money to be paid back with the system of usury is a system that has been going long for ages. If before only those who held big amounts of money using the usury system, later with the creation of banks this system became available even to people holding smaller amounts. They lend their money to the bank, while the bank collects these amounts to form funds that they offer with the credit system to the ones who demand it.
The credit has a price which is called financer’s cost. This cost, which is reflected to the price in every step from the production to the marketing, increases the price continually. The main reason of the financer cost is interest paid for a loan. The interest taken by the owner of the money is lower. As an example, if the bank asks for a 10% interest from its client it gives the loan giver a 7% interest. If all the steps of production in such an area are taken in consideration, the rate of increasing of the goods is about 10%. Thus, the interest the loan owner gains, is lost in front of the increasing rates of goods; moreover a loss from his capital is noticed as well. As an example, if a small enterpriser gives a bank a loan of 500$ with an interest rate of 7% with a maturation period of one year when a kilo of sugar is 50 cent, he gets 535$ at the end of the year. On the other hand due to the increasing production rates during this year the price of sugar has become 55 cent. So if the small enterpriser was able to purchase 1000 kilos of sugar with his initial 500$, he can purchase 973 kilos of sugar with 535$ at the end of the year. On the other hand the loss of the ones who save the money without investing it is bigger. With the exemplified 500$ they saved they can purchase only 909 kilos of sugar at the end of a year with a loss rate of about 9%.
The ones using the credits consider the interest as expenditure adding it to the production of the goods and services produced with this loan; similarly they add the interest to the production of goods and services they produce with their own capital. One of the main reasons for this is the opportunity expense. As the opportunity to offer the capital as a loan with interests instead of using it in production exists as well. So there are enterprisers –companies- who pretend to have invested their money in loans and consider the collected interest as part of their capital. Another reason is the necessity to defend oneself from the inflation produced by usury –loans with interest rates-. As a result the while the prices increase, the capitals of the people with low and constant incomings melt down.
The credit system aids the passing of the wealth to the hands of the riches. As the purchasing power of the ordinary people decreases constantly in such conditions this group is urged to buy in credit. Many are unable to pay off their debts. Thus even though the shops are full of goods and the banks full of money the market slow down and economic difficulties become noticeable. The Glorified Allah commands:
“Allah desecrates (deteriorates) usury, and causes charitable deeds to prosper. Allah does not love any ungrateful sinner.” (Al-Baqara/The Cow 2/276)
The messenger of Allah shed light to this issue by claiming, Even if the income of usury is a lot, its result is shortage” (Ahmad b. Hanbel Musned, vol 1, p 395)
The verse is comparing the usury to charity. Charity –zekat- is obviously always given to people who use it immediately. Even if the amount of the charity is 1million $, this sum is used in a short period assuring its contribution in the vitalizing of the markets. Furthermore, this is a stable vitalization. The verse in relation to this issue commands:
“The situation of those who spend their property in the way of Allah is similar to a grain growing seven ears. There are one hundred grains on each ear. Allah multiplies for those who spend for hayr. Allah’s Ample-giving. He is All- Knowing” (Al-Baqara/The Cow 2/261)
Another way of supplying money in the markets is mudahare, the partnership of capital and work. For this partnership one of the sides offers its capital while the other its work. People who hold money and are unable to deal it form partnerships with people who possess this knowledge. The profit is divided according to the mutual consent while the loss is afforded by the capital. In this case the loss of the enterpriser is the result of his own work and is limited with the lack of incomings from this work.
The approval of the right of banking to these partnerships has led to the formation of non-usury banks. The time these types of banks were primarily formed in Turkey, they were given the name ‘Non-Usury Financial Company’. Later being considered of the same status with all banks, this group was given the name ‘Contribution Banks’. This later regulation assured this new type banks the right to offer all the services and undertake all actions the other banks did. The difference between these banks and the traditional banks is that these banks gather their funds without interests and maintain the right of trading and of financial renting.
After this legal regulation the contribution banks assured the right and opportunity to make business with no usury, with partial usury or basing their business on usury. This new form of banking made the identity and affiliation of the major partners an issue of curiosity. The single type of business that contribution banks should pursue besides banking services and administration is trade. As the administration of financial renting, mudarebe, muharaba, and musareke are trading tasks these companies should pursue them as such. This issue will be explicitly analyzed later.
The supplying of the savings as mudarebe capital is a well-known type of business. Yet, while before only big enterprisers were able to find strategic partners, with the opening of non-usury banking this became possible even for enterprisers holding smaller amounts. They gather these smaller capitals in order to form big funds.
As there is no fee to be paid for the capital the financer cost is eliminated, as the single to make money out of this system is the investment in an enterprise or the membership in a partnership. If this system dominated the economic markets, there would be no opportunity costs and the inflation the previously mentioned method bears would be eliminated. The prizes would wave in their natural level and costs. The owners of the capitals would expand or shrink in compliance with their partnerships.
The credit system makes the capital owners irrelevant suppliers. They do not have to take care of their capitals. After their money has joined the credit process, they are not relevant anymore and start to loose interest. All they can do is to be employed in a working place with a regular salary. As their income from this job is predicted they are not interested in the economical situation of their working place. They do the job they are paid for while their savings loose value. It is the moment when their salaries become insufficient for their livings. Being a considerable number of people, this group is the one made of asocial people encountering big difficulties to make a living. As a result they start to grow bigger reactions against these circumstances, what saddens them even more. With the growth of this group and the growth of their reaction the majority of the society turns into unhappy and hopeless forming an ill society.
On the other hand, as their capital increases the riches become even greedier wishing (and quite often succeeding) to direct even the political and social life of the country. This is what de-equilibrates all the equilibrium within the society.
Truthfully, the riches exist even in the partnership system. Yet as the smaller enterprisers expand or shrink in proportion with the bigger ones they are interested and try to always stay aware of the economic, political, and social developments. Thus, the creation of free markets where nobody profits out of the other’s position and where everyone is present and aware of the developments becomes possible.
The credit system makes the capital owner independent. In the partnership system the cooperation with the capital owner is obligatory, as the individual in this system has to think about the situation of his money and to follow all the economical developments. The responsibility of being a partner makes the individual more careful and effectual, as he feels the need to know his strategic partners and get information about the situation. Otherwise, he is afraid of the shrinking of his savings when he is awaiting for its expanding. Furthermore, during this period the capital owner can learn the markets and become a talented businessman.
In the system of partnership economical and social problems decrease while productivity increases. The businessmen feel the necessity to strive to be trusted by the society. As a result, in general happiness and confidence dominate. If the system operates in a logical order the unemployment and other work problems dominant in the contemporary economies would be eliminated as well.
The usury ban makes the credit system non-functioning: “Allah has allowed trading and forbidden usury.” (Al-Baqara/The Cow 2/275). For this reason the Muslims have to develop the system of partnership.
Many people regard usury the same to trading. These people prefer to notice the similarities between. Whereas some attention would demonstrate that two are quite different things. This issue is analyzed in a part of this book.
Usury is one of the biggest prohibitions in the Koran. Furthermore, there are many hadiths and theologians’ deductions that explain this prohibition. It must be clarified what is directly prohibited by Allah in the Koran, what is the explanation of Allah’s Messenger, and what are the conclusions of theologians deduced by the method of comparing. In the book this point has been carefully watched.
In the preparation of this book the chief source is the Koran itself and a method different from the traditional ones has been applied. This is Koran’s method. The following section will explain this method.
The main theology books have been written in the period the money was a value in gold or silver. Thus, that money was valuable all over the world. However, the banknotes gained value only after the decision of political authorities and the consent of people. The acceptation of a certain banknote’s value outside the boundaries of a country is related with the international relationships and politics, with the influence of the country the banknote belongs to in the world, and with the approval of people.
Before, the equivalence of the taken amount with that of the given when remitting a debt was calculated with weight (vezn), measuring (keyl), or counting (adediyat-i mutekaribe). As an example, someone who was indebted to somebody else by 100g of gold was free of his debt when he gave back the 100g of gold. The ones indebted in grain took and gave back their debt using the method of measuring, while the ones indebted in eggs paid back their debts using the counting method.
As a habit inherited from the previous monetary system dominant in the world, banknotes are considered numeric (counted) capital. Numeric (counted) capital are the real goods of evident standards which have no crucial value differences among their units and may be traded or exchanged with the counting method such as eggs and nuts. Banknotes do not hold such characteristics; thus they cannot possibly be numeric capital. If it were true, then the value of 1$ and 100$ which are of the same size would be the same. Similarly, the number 100 written on an egg doesn’t make more valuable than the other. Following this logic, the fact that100 TL are not equivalent to 100$ is not related with the form or material of the two. For this reason, banknotes are not evaluated according to their number but according to their buying power. The consideration of the banknote numeric capital as gold or silver (coins) is leading to big injustices. The related laws should be regulated and the banknotes should not be evaluated in accordance with the number on them but with their real value of purchasing. With such regulations all the injustices done this way would be mostly prevented.
In this book there are sections which could be regarded as the first in this area: primarily the sections discussing usury from a different point of view. In these sections it can be noticed that the hadiths regulating the trading of gold, silver, wheat, grain, date, and salt do not bring additional commands to what the verses of Koran instruct, on the contrary, they prohibit usury under the name of trading as the Koran commands. Whereas, till this day it was believed that the hadiths brought new rules and created a new path for this issue. Thus the usury issue became complex and non-understandable. With this new approach the usury issue gained a new dimension. This new approach and the given dimension is indispensable in order to base economic deals and usury on the rightful path.
Critiques and advices will help to better illuminate this issue.
 Fond is a French word defining a big amount of money, capital, and the amount necessary and appointed for an enterprise which is administrated. ( Tahsin Sarac, French-Turkish Dictionary, Ankara 1976, vol 1, p 575)