Why money is not treated by Islamic banks as a commodity

In-Depth Analysis

Imam Ghazali, the great Islamic economic scholar and philosopher who died in 1111 AD in Tous (part of Khorasan-Iran), and the 1933 Economic Crisis Committee of the Southampton Chamber of Commerce in England which was constituted to investigate the worldwide financial crisis of early the 1930s (also known as the 'Panic of 1930') both concluded independently — 800 years apart — that money should not be treated as a commodity. From Imam Ghazali: 'When a person having money is allowed to earn more money on the basis of interest, it becomes easy for him to earn more money without bothering himself to participate in real economic activities. This leads to hampering the real interests of humanity, because the interests of humanity cannot be safeguarded without real trade skills, industry and construction.' From the 1933 Economic Crisis Committee: 'In order to ensure that money performs its true function of operating as a means of exchange and distribution, it is desirable that it should cease to be traded as a commodity.' Islamic banks do not treat the money as a commodity and hence refrain from buying and selling it. Returning to the subject of comparing the treatment of deposits by an Islamic bank, unlike conventional banks, Islamic banks do not treat money as a commodity which can be bought or sold on a deferred basis at a price higher than its current value. The customer's money becomes part of a greater pool of funds comprising monies received by the Islamic bank from scores of depositors with varying maturities. This pool is then deployed by the Islamic bank by using different Islamic financing and investment products suitable to clients' situation of requiring funding for their respective needs.