Q.8 Islamic Financial and Economic system is the solution of the human financial problems”. Discuss. 2020

The Islamic financial and economic system is based on the principles of Shari’ah, the moral and ethical code of conduct derived from the Quran and Sunnah. This system has been gaining attention in recent years as an alternative to the conventional financial system that is often associated with economic instability and inequality.

One of the key features of the Islamic financial system is its prohibition of interest, or riba. Instead, Islamic finance operates on the principle of profit and loss sharing (PLS), where investors share the risks and rewards of an investment. This encourages equity-based financing and discourages speculative activities, which can lead to financial crises.

Another important principle of Islamic finance is the concept of Zakat, or the mandatory charitable contribution that Muslims are required to make. This promotes social justice and helps to reduce poverty and inequality. In addition, Islamic finance also encourages ethical investment practices and prohibits investments in activities that are considered harmful to society, such as gambling and alcohol.

Overall, the Islamic financial and economic system offers a comprehensive approach to addressing the economic challenges faced by humanity. Its emphasis on social justice, ethical investment, and risk-sharing can help to reduce inequality and promote economic stability. However, it is important to note that the implementation of an Islamic financial system requires a supportive legal and regulatory framework, as well as a strong governance structure to ensure compliance with Shari’ah principles.