The only proper use of money arise from its purchasing power So the government

The only proper use of money arise from its

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The only proper use of money arise from its purchasing power. So the government should take necessary measure to maintain the stability of the real value of money or its purchasing power.
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However this purchasing power cannot be used to make more purchasing power without going into intermediate step which is its use for purchase of goods and services. In other words, money should not be used to give rise to more money via fixed interest payment. The human efforts , initiative and risk involved in a productive venture are more important than money use to finance it. Therefore, money is potential capital rather than capital in financial meaning. It become capital when it is invested in business.
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Accordingly, money advanced to a business as a loan is regarded as a debt and not as a capital. Therefore, not entitled to any return. Muslims are encouraged to purchase good and services and invest in business venture but are discouraged from keeping money idle. In any business private investment take place in two different ways: 1- active investment , where one or more people put their own capital into a project. Manage it themselves and enjoy the benefits of their labor and capital themselves.
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2 - passive investment , where the investors provide the capital and receive a return but take no part in the project. Passive investor has three 3 options: 1 - Depositing in a bank and receiving interest . 2 - Buying securities or bonds and receiving interest . 3 - Buying shares in a company and receiving a dividend . As far as the basic principles of Islamic economic are concerned the first two types of the investment is considered riba therefore prohibited.
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While the last option 3 the active investment are permissible. Both conventional and Islamic systems permit and encourage active investment, which reward labor and capital from realized profits. They also permit and encourage passive investment in share holder companies which reward capital from the realized profits in the the form dividends. But they differ in the other options of passive investment. Because any investment that bring in riba income or financing that involves they payment of riba is prohibited in Islamic economic system.
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So the need to finance is same in both of the systems. However, options available to Muslim investors or entrepreneurs are different. Therefore, it is necessary to explore the option available in the context of an Islamic framework.
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Basic principles of Islamic Finance 1-Qard al-hasan , Islam allow only one kind of loan that is Qard hasan. It literally means beautiful loan whereby the lender does not charge any interest or additional amount over the money lent. QH was the primary source of financing introduced by the prophet pbuh after migration to Medina. It was the only form of financing transaction praised in the Qur’an.
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