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PHILOSOPHY & PRINCIPLE OF ISLAMIC BANKING (ISB 546)THE ISLAMIC GOLD DINAR
Presented by: EKA PUSMAWATI BT ABD WASIR HUZAIMAH BT JAIMIN SOFIAH BT ARIP SMELTA AK JUDI WAN RASHIDAH BT WAN HASSAN
History of Gold DinarMuslims used gold and silver by
weight and the dinar and dirhams that they used were made by the Persians
These coins differ from the original ones in that an Arabic inscription is found in the obverse margins, normally reading "in the Name of Allah“
Gold and silver coins remained official currency until the fall of the Khalifah
Modern History the Islamic Dinar system being proposed in this
modern era is basically an electronic payment system that is gold backed
As a consequence of currency crisis in Asia, in first of 1997, then Prime Minister of Malaysia Mahathir Bin Mohamad proposed introduction of Islamic Gold dinar as currency for international trade in the Muslim world
. It was supposed to suppress the too overly traded American dollar and ensure that dollar’s instability does not affect international trade because Islamic gold dinar was to be tied to price of gold and thus provide stable value of the currency
Introduction of Gold Dinar
Gold dinar known as an Islamic currency and which is to protect its sovereignty and to promote a just monetary system, a nation my have to redefine money and eliminate interest rates from the economy
• Claimed by a Muslim scholar, Ibn Khaldun that God created the two precious metals, silver and gold to serve as a measure of all commodities
• Gold had played an important role for many centuries in a way or another until the end of Bretton Wood’s system
Differences between Current Monetary System & Dinar
SystemCurrent Money SystemPaper money quantity can be increased
at will any time since there will always be demands from the public to increase the quantity of money which would cause inflation
Dinar systemFixed exchange rates resulted the
absence of exchange rate instability
Why Gold Dinar?Problems in the current
monetary systemMoney Creations: The Magic of
fiat money and fractional reserve banking
Islamic Banks, Money Creation and the Law of One Price
Socio Economic Effects of Money Creation
Implication of the Islamic Gold Dinar System
Stable MoneyExcellent Medium of ExchangeMinimize Speculation, Manipulation
and ArbitrageDinar Promotes a Just Monetary
SystemSome Special Problem ReduceDinar Diversifies Risk and Promotes
TradeBusiness Cycle Effect Minimized
How Dinar can help in Economic Crisis?
Gold does not inflate in value as it is a commodity and thus has an intrinsic value
If gold coin were used, then counterfeiting would also be checked
If all these exchange rates are eliminated by means of a single currency like the dinar, then speculation, arbitrage and manipulation will be very much removed if not eliminated
Future Prospect and Challenges
Many people are aware of the shortcomings of the present system and advancement in IT technology such as the emergence of e- dinar, Gold Money and so on
Does not required substantial new regulations
Gold has high prospect as a single global currency
The challengesInstitutional setbackUS have emerged as sole superpower
in the world today after the cold war’s where US dollar play the roles as international currency
Possible attempts to fail the systemThe success of this system depends
on a gradual increase in the number of people using gold as money
Opinion from Islamic Jurisprudence about Islamic Gold Dinar
Price of stock market can give the dramatically effect as the Dollar continue to drop
Gold Dinar wants to threat U. S Dollar because some of those economies have not fully recovered
Former Prime Minister Mahathir Mohamed said that Arab Saudi should sell oil for gold not the dollar in order to avoid being short changed by a decline in U. S economy
Conclusion Islamic Gold Dinar and the Dirhams or the
silver coins should been applied in Malaysia in order to overcome the most if not all the shortcoming and the negative effects of the present day fiat money interest- based system
The gold dinar and the silver dirhams called for the re- establishment of shariah base trading
The movement of Islamic Gold Dinar and the Silver Dirhams had been stable compared to paper money and had been proved by using the Gold Dinar and Silver Dirhams as money is not a step backwards into the medieval years
THANK YOU