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Monday, March 24, 2008

Qirad for Economic Development of Moslems

In the last January 16, 2008 I wrote about the instruction to circulate property widely as an implication of not allowing hoarding as mention in the Phrase of Al-Quran 59:7 “….so that the property is not only run in the circle of the rich amongst you…”

In that article I explained the beneficial of the productive property with the equation of exchange that is M xV = P x Q (in which M= money supply; V=velocity of money; P= average price level goods and Q=supply of goods and service). If it is implemented in the economy that is free from usury it will make Moslems become wealthy.

In today’s article I would like to give a simple example of how the concept of property circulation we implement in the Qirad System that has been introduced in the previous article. InsyaAllah we can see how imposing the phrases from Allah if we really implement them.

Let use the equation of exchange to compare two conditions as follows:

First scenario is that you have money of one Dinar (M=1) and keep it for one year (V=1), assume the level of price in one unit (P=1), the flow of economy that are created by using your money in one economy unit (goods or services) is also ONE (1x1=1xM). One Dinar that circulates in one year is able to move one economy unit.

Second scenario is that we change the speed of the circulation, V, from one to become six, it means your one Dinar circulate once within two months. So unit economy that is circulated by your money is six (1x6=1xM).

I-Qirad : Dinar Minting Financed by QiradDue to the Qirad program that we introduce is Qirad limited in the purchasing of Dinar, so for each Dinar that you Qirad, insya Allah can help produce six other Dinars. See the illustration in the side of this article to picture this explanation. How if you have 1000 Dinars that will be Qirad? What if 1,000,000 Dinars that you Qirad? These days the price of Dinar is cheap, so insya Allah we are able to produce more Dinars from our fiat money – while the value of our fiat money still high.

From this actually it is not difficult to imagine (more precisely to vision it), how Dinar will return amongst the Moslems in line with the awareness to implement Religion directions full heartedly. So it is not the amount that is important, but the circulation is the most important. The instruction from Allah is not to increase your capital, but the instruction to circulate your capital.

For sure it is not stopped here, in a very short time insyaAllah we are able to choose real investment program that can be financed with this Qirad System. Since we introduced Qirad last month, at least I had met two business groups that very possible to be financed with this Qirad System.

The first business group is in organic foods; the future product because people nowadays are very concern of being healthy and the effort to maintain it.

The second business group is linked with my article dated March 13, 2008 about Price Increase and the Shortage…., which one of the issues is to utilize wind power.

With Allah scenario, in this opportunity I met with one of the Governor in this country – I was introduced to a big entrepreneur that has produced a small scale electric wind power. Our theory….has been produced in this country……!

Even though these two kinds of business were potential, I am not in a hurry to recommend you to Qirad your money to that kind of business. I shall review them first and involved further until I am convinced that these are good investments – here and the hereafter – after that I shall offer you in the form of Limited Qirad where you can limit your Qirad only to a specific business that visible.

The road is still long, but after we do what we know – insyaAllah, Allah will always guide us and direct us to things that we have not known yet. Wallahu Allam.

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Understanding More about Qirad...

Amongts the Fiqih Ulama, there are those who said that these two things are the same, but there are those who said that these two things are different. Those who said they are the same amongst others are lain Dr. Wahbah Al-Zuhayli in the book Al-Fiqh Al-Islami Wa-Adillatuh where he explained that Qirad and Mudarabah is just a matter of different wording from different area. The word Qirad is from Hijaz while Mudarabah is from Iraq.

Qirad emphasize on the capital loan aspect and the delivery of part of the profit for the lender, while Mudharabah emphasize on the profit sharing between the capital owner and the entrepreneur that receive the capital.

Consensus of the validity of Qirad Contract is based on ijma (consensus of opinion) amongst the Ulama referred to tradition of Disciples of Muhammad SAW. One of them is narrated by Malik in Al-Muwatta, that: “Abdullah and Ubaydillah, both are sons of Umar bin Khattab RA. When they were on the move with their troops in Iraq, they stopped by to meet Abu Musa Al-Ashary, which is one of Umar bin Khattab’s staff. He offered to support money to both, Abdullah and Ubaydah, and the money will be taken from the State Treasury as a loan, and they could use it for buying goods from Iraq and to be sold in Madinah, took the profit and pay back the nominal to their father. They did it as proposed by Abu Musa, and came to their father. But their father got very angry, then asked whether Abu Musa gave the same offer to their troops? They answered it no! He got angry and said: ”Both of you are the sons of Amirul Mukminin (Commander of the Faithful Muslims) so that Abu loaned you some money for getting a profit?” Then Ubaydilah answered, “Ya Amirul Mukminin, if we lost the money, sure we will guarantee” But Umar RA still doesn’t want that they take the profit. When Ubaydillah expressed the reason again, one of the presence audiences said, “Ya Amirul Mukminin, maybe you can treat as Qirad (that is giving the half profit to them and the other half to the State Treasury). Umar agreed with this rule.”

Hereon, I will use the terminology of Qirad more rather than Mudharabah because this Qirad is used often by Mazhab Syafi’i.
Qirad or Mudharabah will be the answer of the fair investment for the investors and the enterpreuners and also as an alternative from the usury system that the people should abandon.

The main conditions of Qirad or Mudharabah are:

1) The capital has to be in cash or non-cash like in the form of Dinar, Dirham or bank notes (there are some different opinions regarding cash or non-cash amongst the four mazhab. Imam Syafei’i is the only one that thinks it should be cash. But Imam Hanafi, Imam Malik and Imam Hambali have an opinion that the capital could be in the form of properties/goods which are non cash, but the one that count as capital is not the goods but the cash value of them.)

2) The amount of the capital is clear. So we can differentiate which is capital and which is profit.

3) Percentage of profit sharing should be clear between the investor and the entrepreneur. Qirad or Mudarabbah is invalid when one or both of the parties state a certain absolute amount (not percentage) for the profit sharing.

4). The entrepreneur is the receiver of Amanah, and obligated to keep the amanah, even though they don’t need to cover the losses if it’s not in purpose.

5)Qirad could be opened or limited in nature. Opened Qirad means that the kind of business, market, place etc is not limited. In limited Qirad, the business, market, place etc is subject to the investors’ agreement.

Financing through Qirad or Mudharabah will ease people who are honest, fair, careful and competent in certain business to receive amanah from the investors – and for that reason is not necessary to have material collateral. In contrary if people don’t have the character as mentioned above, is difficult to get a financial loan even though they have a lot of material collateral.

This Financial System shall create a business environment based on values that will develop good characters of the players. People who are not honest, not fair, not careful and not competent will automatically be left out from this kind of business environment. The business world will be dominated by honest, fair, careful and high competence people. This generation of entrepreneurs’ will prosper the Moslem people as a whole and will bring back the glory of Islam at the right time.

I-Qirad : Just Financing We developed this theory and basic law of Qirad’s product in Gerai Dinar. To be more impressive in this era of information the Qirad’s product is called I-Qirad; which InsyaAllah if it grows widely in global market shall have a separate domain that is www.i-qirad.com for the samples of application I will write it soon in my next article.

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Thursday, March 20, 2008

While the Fiat Money is Still Powerful

There is something strange with the capital market and global commodity in the last few days trading. We know that since September 2007 until now the Fed had cut rates six times.

Until the last five cut rates, the impact towards capital markets and commodity is obvious and easy to understand. Every time the Dollar is becoming less interesting, people rush to the capital market or commodity – oil, gold, etc. It means that after the Fed cut rates, usually the stock price increase, so is gold.

This can be seen in the graph, the Dinar price trend for the last year like I always provide in the side of this article; since September 2007 until early this week, the gold price and also Dinar, keeps going up.

The Feds rate cut of 75 basis points four days ago caused a contrary reaction with what has been happening so far. US$ is not down, instead it goes up, indicated by the increase of the US Dollar index in the last three days.

While the experts are busy trying to explain the anomaly, I honestly can’t explain it this time. All I know is that the gold/Dinar purchasing power is stable in all history, like what happened for more than 1400 years, and InsyaAllah will be stable until the end off the world. The decline of the oil price along with the decline of gold during the week, once again proves the accuracy of this gold/Dinar purchasing power theory.

While our fiat money, either US Dollar or Rupiah, is good at this point of time, it is a great time for us to return the the “money” that has a stable purchasing power for all era, the Dinar and Dirham. Dinar is “cheap” right now, in Gerai Dinar, the Dinar price this morning is almost at one month low.

There is a lot of things that we can be thankful of this decline in oil and Dinar Price; first we can breathe better that the scary increase of gasoline price and oil. Secondly, for the people that are not familiar with the Dinar, InsyaAllah the Dinar can be more affordable in the next days or weeks – hopefully enough time before it goes up again.

InsyaAllah the introduction of Dinar does not stop with the holders of Dinar just keeping them, the capital loan (Qirad) program we started in the last three weeks has opened the implementation of Dinar that is Subhannallah.. while there is a lot of time in this long weekend, I will try to write more detail about the capital loan (Qirad) program. May Allah Make Ease of His Way for all of us.
Labels: Dinar Price, Gold Price, the Fed

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Tuesday, March 11, 2008

How to Make Your Dinar Productive…

Alhamdulillah since I wrote about how to make the Dinar of our customers productive in the article The Next Step after the Dinar Introduction, we receive many responses.
But since it is a new for all of us, not all the questions regarding the Qirad program are easy for me to explain and not all is easy to understand. To help me explain, I present a graphical illustration of this program.
Dinar Based Qirad System

The explanation of the graphical illustration as follows:
1) If you’re interested in Qirad your Dinar; you could send your Dinar to us or register to us your Dinar to be traded. No need to doubt, the gold/Dinar to Rupiah trade is allowed based on the hadits from Rasulullah SAW narrated by all the big narrators except Al-Bukhari, as follows, from Ubadah ibn Al-Samid: “Gold with Gold, silver with silver, wheat with wheat, wheat rice with wheat rice, dates with dates, salt wth salt, same amount, from one hand to another, if it is a different kind, then trade as you want as long it is from one hand to another”. What is forbidden is trading the same kind of money (i.e Rupiah with Rupiah) but with different amount – because it is usury.
2) After we receive the Dinar or registered in Gerai Dinar, therefore the Dinar is traded and the buyer purchase from Gerai Dinar with Rupiah.
3) From the sale of the Dinar, the Rupiah is then used by Gerai Dinar to order Dinar from Logam Mulia
4) After Logam Mulia finish production and deliver to Gerai Dinar, Gerai Dinar take part of the surplus to net tax allocation (difference between expense tax and income tax), operational cost and delivery/insurance for around about 3%.
5) The net proceeds after deduction from the cost is point 4; let say around 2%, then this 2% is shared between the capital owner of Qirad and Gerai Dinar.
6) The Qirad capital and the share proceeds is given back to the investor, or if agreed by the two parties, can be used for another round of trading.

And so on so that your Dinar is safe in Dinar as well as growing with the permitted trading, not by the prohibited usury.

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Monday, March 10, 2008

Three Choices for Your Dinar….

To answer the question and meeting the demand of the public that is familiar to the Dinar, Gerai Dinar is improving its service so that the public can choose - what to do with the Dinar they own.

In principle, there are three choices now, the first and earliest service is for the public to purchase Dinar at Gerai Dinar and then keep it themselves. The advantage is that the owner keep the Dinar themselves so they can feel more comfortable. Another advantage is the Dinar can be used anytime. The disadvantage is that the owner must think about a safe storage themselves. Another example is that for residents of small cities in Indonesia – most probable is that they cannot have the Dinar because of delivery problems.

Tiga Pilihan Dinar - Three Dinar OptionsThe Second service is the service that we give informally so far for those who ask for us to help with the storage of their Dinar. Because is involves storage responsibility, syariah insurance protection and safe deposit box fee, we are formalizing the service. The implication is that the people that use the storage service for their Dinar is asked to contribute on the cost, currently 0.5% of the value of the Dinar stored. The main cost for is the insurance cost, ranging 60% - 80% of the total storage cost.

The benefit of this protected storage service is that your Dinar is safe and can still be used/ redeemed anytime needed. The disadvantage is that you pay extra fee of 0.5% of your Dinar value annually.

The third service is that your Dinar is loaned for trading ( Qirad) to Gerai Dinar, explained in my article on 29/02/2008 and on 9/03/2008. The advantage of this program is that your Dinar is productive and grows the Halal way because it is through a real trading. The growth will InsyaAllah always more than enough to cover the storage cost, insurance, etc. The other advantage of this service is that it can be the solution for those who is starting to migrate to Dinar but are worried to excessively store the Dinar because it can be categorize as hoarding - which is prohibited in Islam, by Qirad, it will be safer (from hoarding) because the Dinar will be a real trading commodity or investment in the form of productive wealth.

The disadvantage is Dinar that is loaned for trading/Qirad cannot be redeemed anytime, if the owner wants to redeem before expiry date according to the Qirad agreement – then the owner need to wait around one month before they can have their Dinar back. This is because the Dinar that was Qirad is on circulation or in the process of reprinting.

So with the plus – minus of each of the choices; people can choose which is most appropriate for their Dinar. Whichever they choose, InsyaAllah it will be a non losing trade – tijarotan lan tabuur – amin.

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