Creating value- reshaping the present financial system

The present financial system is indulged in creation of money instead of value. This is being done through

creation of debt and bidding up of assets values in the financial markets. In the backdrop there are some

important questions which are to be answered. Firstly, are the money and capital markets working

correspondently to their ability of generating real goods and services? Is the growth rate (real) of a country

is reciprocal to the finances being applied? Is the requirement of goods and services of whole world

population being met? The answer to all these and similar questions is in negative. The situation is forcing

us to look into a new financial system. Further there is a dire need that we should develop new financial

institutions which may create value instead of creation of credit and money. One of the important

characteristics of Islamic financial system is that it creates values through creation of more and more good

and services. If we want financial institutions to create value we should shift to Islamic financial system.

One of the examples is venture capital which is based on Islamic concept of “Mudarabah”. We are well

aware that one of the main reasons of USA present industrial and technological development is venture

capital. However, it is very painful that so far the Muslim world has almost ignored it. Unfortunately so far

our efforts are to make some how the unlawful/undesirable western commodities acceptable through

Islamic coating. In this paper an effort is being made to look into a financial system, which can produce

value instead of money, based on Islamic Principles of finance.