The Western Culture VS. Islamic View on How to Spend Money

Disclaimer: I am not an expert, this is what I learned from my Legal Environment of Business class.

The western world is one large melting pot of cultures and religions learning to live together. Taking the time to understand the rules that guide each other’s lives will help us be more empathetic. This article looks at how Islamic culture relates to money. There are roughly 3.5 million Muslims in America, many of whom practice Islamic Finance. Morals highlighted in the Qur’an guide Islamic finance which creates one of the many stark contrasts between Islamic finance and Western finance.

“Unhealthy human instincts are exploited to make money through immoral and injurious products” (11). — Mufti Muhammad Taqi Usmani in An Introduction to Islamic Finance

Shari’ah is the fundamental values preached from the Qur’an and translated into Islamic law. The main principles relating to finance in this body of law are:

1.No Interest Loans

This is one of the most central aspects of Islamic finance. Lenders become equal partners in the business enterprises they choose to finance. In the Western world, a borrower is beholden to pay interest on a loan. In Islamic finance, the borrower only pays “interest” if a profit is made. The lender risks taking a loss.

Lending money under Shari’ah law is not a cut-throat transaction, it’s a business partnership.

2.No Immoral Spending

Islamic finance laws only approve spending money on goods that follow the values of the Qur’an. This eliminates obvious immoral activities or products such as drugs, alcohol, or gambling. Investing in the stock market is seen as a gamble, but it is permissible under Islamic law as long as the corporation is moral and has the best interest of the investor at heart.

3. Shared Risk

The relationship between the bank and the business owner is an equal partnership in the profit OR loss, sharing in an Islamic investment puts the burden on both parties. As mentioned under “no immoral spending”, investments must align with the teachings of the Qur’an.

4. Asset-Backed Transactions

Islam will only view profit in the form of an asset, not money. Islam will only view profit in the form of an asset, not money. If a company is profitable, Islamic law will not recognize the gains in terms of paper money, only asset-backed transactions. The belief is profits are only generated through the sale of these real assets.

Profit made on money vs. assets seems the same to me, but the distinction seems important in Islamic law.

5. God’s Hand in Financial Transactions

Islamic finance works hand in hand with the teachings of the Qur’an, so all monetary choices must be religiously acceptable. It is key to remember in Islam everything revolves around God creating and controlling the universe. The main belief is that God is a guiding hand to govern human lives loosely. He does not make any judgments on anyone’s decisions but teaches a set of principles to be applied and considered.

Since the Western World includes many cultures it is hard to impose restrictions on financial transactions unless it is unlawful- that’s why it’s called the ‘Free World.’ It is important to open up your eyes and understand other people’s values that may be different from your own.