Abstract
The continued relevance of the Tawhidi methodological worldview in respect of the Tawhidi epistemic IIE(θ(ε))-model of IPS is now opened up to specific socio-scientific fields of discourse. The field now studied is Islamic political economy more than simply Islamic economics and finance. Rather, Islamic political economy brings out the important issues of the ethical endogenous role of selected variables that play critical role of polity-market endogenous interrelations within the framework of the wellbeing objective criterion, as was and continues to be substantially defined and explained. In this framework of polity-market ethical linkages caused by the Tawhidi IIE(θ(ε))-model of IPS, the same dynamics is enacted by the shura-tasbih consultation and guidance. This causes all factors of the wellbeing function to be endogenously interrelated. Thereby, important special areas of Islamic political economy, and more so the study of the generalized evolutionary equilibriums, have been opened. Specific areas of study are the wellbeing related intertemporal financial valuation model. This methodological approach is contrary to the static atemporal case of the same financial issues. In this latter case, the replacement of the rate of interest by the productivity rate of the real economy is not possible given the ambivalence of the market process and contingency pricing with the Tawhidi epistemic worldview of unity of knowledge as reflecting the principle of pervasive complementarities. Within these critical Tawhidi methodological approaches, substantive departure in the context of the Qur’an and sunnah has been wrongly introduced in shari’ah-compliance by the Islamic scholars; that is incorrect. The mistake in such critical studies we have made regarding important issues of the qur’anic socio-scientific worldview in methodological orientation is not caused by any incorrect importance of shari’ah as the way to understand the essential law of the Qur’an. That is Tawhid as the unity of knowledge and its embedding in the generality and issue of the metaverse world-systems.
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Notes
- 1.
In order to enable specific parts of avoidance of interest rate, we itemize the verse Qur’an (2:275): “(1) Those who devour usury (2) will not stand except as stand one whom the Evil one by his touch Hath driven to madness. (3) That is because they say: ‘Trade is like usury,’ (4) but God has permitted trade and forbidden usury. (5) Those who after receiving direction from their Lord, desist, shall be pardoned for the past; (6) their case is for God (to judge); (7) but those who repeat (The offence) are companions of the Fire: They will abide therein (forever).”
- 2.
Let the atemporal contingency-based exchange function be denoted by p=Ax1a1,x2a2,…,xnan, with p as price level, which can include interest rate. {xiai} denotes the contingent items affected by preference-based contingencies (ai), i = 1,2,…,n. In the logarithmic form of the given price function, we write dp/p = (dA/A)*(Σai*dxi/xi), i.e., in growth rates (g’s), gp = g(A) + Σai*gi(xi). This growth rate of the price level is caused by the arbitrary assignment of contingencies {ai}. If each ai = 0, then the resulting percentage change in the price level in the atemporal case of exchange is given by g(p) = g(A). This yields the market reality of exchange on prices. No interest rate implication of market prices (p) exists. When arbitrary assignments of {ai}-contingencies exist, then prices change in value different from market prices. This value is ascribed to interest rate.
- 3.
Let M1 denote finance by mudarabah. M2 denotes finance by musharakah. M3 denotes finance by foreign trade financing (FTF). Participatory financing according to the Tawhidi epistemic worldview of unity of knowledge is explained by the inter-entity financial flows explained below. The variables representing the financing entities are induced by (θ(ε)) (suppressed). Other than the instruments shown here, all other so-called Islamic financing instruments termed as shari’ah-compliant are debt-ridden and thereby not free of interest-financing in an undisclosed way.
M1
M2
M3
Spc
M1
m11
m12
m13
Spc1
M1 linkage with M1, M2, M3, Spc
M2
m21
m22
m23
Spc2
M2 linkage with M1, M2, M3, Spc
M3
m31
m32
m33
Spc3
M3 linkage with M1, M2, M3, Spc
Spc
Spc1
Spc2
Spc3
Spc,pc
Spc linkage with M1, M2, M3, Spc
We explain the above matrix interrelations between the modes of financing: Mi(θ(ε)) are interrelated, i = 1,2,…,4 meaning that some of each Mi after retention in the particular mode of financing is sent simultaneously to the other modes in order to secure balanced financing by all modes. This kind of complementary financial contract (aqad) causes modes to remain effective financing without becoming defunct. Spc linking with itself and all other modes of financing means that the recipients of productive charity fund are encouraged to hold investment funds. Spc to itself is the example of zakat that focuses financing immediate needs.
The linearly independent form of asset-valuation model different from the Tawhidi formalism is V(t) = a1*M1 + a2*M2 + a3*M3 + a4*Spc. The weights ai’s are arbitrary, i = 1,2,3,4. They can be assigned interest-based discount factors like ai = (1/(1+i))t, t:time. Mechanically replacing “i” by the rate of return is an error in fiasco. Islamic bank scholars have been practicing this method of valuation.
- 4.
The Prophet denied in a hadith, “getting a profit without working for it.”
- 5.
Net Present Value of Cash Flow from interest-bearing loanable capital = -Debt*(1+i)T + Σt=1T[CF*(1+(g-i))t] > 0 implies Σt=1T[CF*(1+t*g)] > Debt*(1+i)T + t.i. “t” denotes time valuation over t = 1…,T. Now as “i” decreases, g increases according to (g/i)↑ in the productive real economy caused by the potential availability and usufruct utilization of resources in the absence of interest-financing of loanable capital. Financial valuation depreciates by the depressive impact of interest-bearing debt and interest-bearing cash flows. Financial valuation increases the productive returns caused by the effect of the growth rate of the productive use of capital, denoted by “g.”
- 6.
Anas ibn Malik reported (Sahih al-Bukhari, 6369): The Prophet, peace and blessings be upon him, said, “O God, I seek refuge in You from anxiety, sorrow, disability, laziness, cowardice, miserliness, the burdens of debt, and the repression of men.”
- 7.
Eight mandatory directions of zakat spending (asnab): (1) destitute (fakir), (2) needy in necessaries (masakin), (3) in the path of God’s service (fisabilGod), (4) to liquidate personal debt (gharimin), (5) to free the bondage slaves (riqab), (6) to meet the needs of new Muslim converts (muallaf), (7) those who manage zakat funds (amil), and (8) stranded travelers in a good cause (ibnassabil) (Qur’an, At-Taubah, 60).
- 8.
In various verses, the Qur’an declares regarding the promise of benefits to the risk and uncertainty bearers for the pleasure of God’s cause through the thick and thin of life’s experiences:
(Qur’an 45:23) Then seest thou such a one as takes as his god his own vain desire? God has, knowing (him as such), left him astray, and sealed his hearing and his heart (and understanding), and put a cover on his sight. Who, then, will guide him after God (has withdrawn Guidance)? Will ye not then receive admonition?
(Qur’an 3:139) “So do not weaken and do not grieve, and you will be superior if you are [true] believers.”
(Qur’an 10:65) “And let not their speech grieve you. Indeed, honor [due to power] belongs to God entirely. He is the Hearing, the Knowing.”
(Qur’an 2:195) “And spend in the way of God; and do not cast yourselves into destruction with your own hands; and do good work. Verily, God loves the good-doers.”
- 9.
The Qur’an (57:10) in many verses establishes such an endogenous theory of ethics in the way of God even in the face of trials and tribulations: “And why do you not spend in the cause of God while to God belongs the heritage of the heavens and the earth? Not equal among you are those who spent before the conquest [of Makkah] and fought [and those who did so after it]. Those are greater in degree than they who spent afterwards and fought. But to all God has promised the best [reward]. And God, with what you do, is Acquainted.”
- 10.
For loss of non-Cartesian display, the above solid Cartesian geometric figure shows a Tawhidi IIE(θ(ε))-path under the impact of ethical vector (“eth”), all variables being induced by the Tawhidi episteme of unity of knowledge explained by “θ(ε).”
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Choudhury, M.A. (2024). Tawhidi Epistemic Theory of Abolition of Interest and Charity as Productive Spending. In: Handbook of Islamic Philosophy of Science. Springer, Singapore. https://doi.org/10.1007/978-981-99-5634-0_12
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