The Solutions for the Economic Crisis in Sri Lanka: An Islamic Perspective

Abstract

The current economic crisis in Sri Lanka is precipitating diverse socioeconomic and political challenges. This situation had arisen due to the erroneous decisions made within the previous government's policies. Various parties are proposing policy amendments to extricate the country from this crisis. Against this backdrop, the study aims to identify the factors contributing to the country's economic crisis, analyse the consequences faced by Sri Lankans, and recommend the most appropriate Islamic guidelines for the country's recovery from the crisis. This qualitative study adopts a sociological approach. Primary and secondary data were used. According to the study's findings, one of the primary reasons for Sri Lanka's economic decline is the avoidance of interest-free lending relationships with Middle Eastern countries and transactions with usurious lenders such as Russia and China. The researcher recommends some recommendations to alleviate the country's economic crisis. Most significantly, the country's economic recovery could be achieved by implementing an Islamic economic system and prohibiting usury, deception, and fraud, which are forbidden in Islam.

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MSI Journal of Economics and Business Management
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Vol-1, Iss-1 (December-2024)
©Copyright 2024 MSI Publishers. All right reserved.
The Solutions for the Economic Crisis in Sri Lanka: An Islamic Perspective
M.B. Fowzul*
Department of Islamic Studies, Faculty of Arts and Culture, Eastern University, Sri Lanka
Corresponding Author: M.B. Fowzul
Article History
Received: 21 / 11 / 2024
Accepted: 02 / 12 / 2024
Published: 05/ 12 / 2024
Abstract: The current economic crisis in Sri Lanka is precipitating diverse socio-
economic and political challenges. This situation had arisen due to the erroneous
decisions made within the previous government's policies. Various parties are
proposing policy amendments to extricate the country from this crisis. Against this
backdrop, the study aims to identify the factors contributing to the country's economic
crisis, analyse the consequences faced by Sri Lankans, and recommend the most
appropriate Islamic guidelines for the country's recovery from the crisis. This
qualitative study adopts a sociological approach. Primary and secondary data were
used. According to the study's findings, one of the primary reasons for Sri Lanka's
economic decline is the avoidance of interest-free lending relationships with Middle
Eastern countries and transactions with usurious lenders such as Russia and China.
The researcher recommends some recommendations to alleviate the country's
economic crisis. Most significantly, the country's economic recovery could be
achieved by implementing an Islamic economic system and prohibiting usury,
deception, and fraud, which are forbidden in Islam.
Keywords: Economic Crisis, Sri Lanka, Solution, Islamic Perspective, Covid 19
Introduction
Sri Lanka's economy depends mainly on the export trade of
plantation crops such as tea, rubber, cocoa, cloves, remittances from
foreign workers and tourist arrivals (Sumedha & Sonal, 2021).
Especially, a significant amount of foreign exchange is earned
through workers in Middle East countries (Pallegedara et al., 2021).
It is also worth mentioning that the funds provided by Sri Lankan
Tamils living in the Sri Lankan Diaspora to support their families
are also a source of income for Sri Lanka (Syrett & Keles, 2022).
Sri Lanka, which was famed since ancient times for its precious
commodities such as gems, ivory and pearls, was renowned for its
commercial crops such as cinnamon, tea, rubber and coconut since
the colonial era (Dash, 2023; Sumedha & Sonal, 2021). After
independence in 1948, Sri Lanka pursued a short-lived capitalist
economy and carried out several progressive social welfare
measures in Asia (Aysha, 2024). However, the government that
came to power in 1956 followed a socialist economic policy. Since
1977, it has been privatized and moved towards open market
economy policies and export-oriented trade. By 1996, plantation
crops accounted for only 20% of exports (Abeysekara & Prasada,
2021). Nevertheless, by 1970, it had risen to 93% (Gunawardena &
Kadirgamar, 2021). Gross Domestic Product (GDP) achieved an
average annual growth of 5.5% in the 1990s (Mustafa &
Santhirasegaram, 2003). Drought and deteriorating security
conditions pushed growth back to 3.8% in 1996. During 1997-2000,
there was an economic recovery with an average growth of 5.3%
(Jayasinghe et al., 2021).
Sri Lanka's current economic crisis, which has gone through ups and
downs, culminated in the Easter attacks of 2019 and the corona virus
pandemic that affected the global economy (Saujan et al., 2023). It
was the worst economic crisis in the country since independence in
1948. Since 2010, Sri Lanka's external debt has risen sharply
(Athukorala, 2024). 2019, it reached 88% of the country's GDP
(Bhowmick, 2022). The onset of the global economic recession
caused by the COVID-19 pandemic accelerated the crisis.
Moreover, by 2021, external debt has risen to 101% of the country's
GDP (Nishan et al., 2021). This pathetic situation led to an economic
crisis. The aftermath of the economic crisis led to a people's
revolution and political change in 2022 (Aysha, 2024).
The major factors impacting the economic crisis in Sri Lanka
include the policy failures of the Gotabaya Rajapaksa-headed
government (Singh, 2023). Due to the unplanned tax cut made by
the government at its inception, the budget deficit created a
disastrous situation for Sri Lanka (Aysha, 2024). Ordinary citizens
in Sri Lanka cannot afford the rising cost of living, leading to social
unrest and protests (Athukorala, 2024).
Islamic economics emphasizes social justice and equality (Saujan,
Rifas, et al., 2024). Therefore, it prohibits exploitation or oppression
of any kind. It prohibits usury, which is the cause of social injustice.
It operates on profit and loss sharing rather than interest-based
credit. In addition, the Islamic economy promotes ethical behaviour
in economic activities such as fair trade, transparency, and
accountability. Overall, Islamic economics aims to promote a just
and equitable economic system that benefits all members of society
while adhering to the principles of Islam (Rifas et al., 2023).
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©Copyright 2024 MSI Publishers. All right reserved.
Literature Review
M.N.F. Nishfa, A.M.F. Sharmina & M.S.F. Nisfa In a 2022 article
titled Zakat's Contribution to Poverty Alleviation: A Descriptive
Study, poverty is identified as one of the most pervasive and critical
challenges facing humanity in contemporary times. Islam has
proposed balanced economic strategies for poverty eradication. This
study aims to examine the contribution of Zakat to poverty
alleviation, which is considered its most significant aspect.
Consequently, this qualitative study was conducted with a focus on
reviewing the existing literature. For this research, information on
poverty and Zakat was obtained from secondary sources such as the
primary Islamic texts, including the Quran and Hadith, Islamic
historical texts, previous studies, online articles, and academic
journals. The findings were subsequently collated and presented. By
allocating wealth according to divinely prescribed methods,
individuals are safeguarded against negative traits such as
miserliness, narrow-mindedness, hard-heartedness, ruthlessness,
and greed while developing positive attributes, including generosity
and benevolence. This phenomenon is evident in Islamic rulers'
implementation of the Zakat system throughout history. In this
context, Zakat's contribution to poverty alleviation is deemed
exceptional.
Safna, H.M.F. Lyuagaye R.A.G. Islamic Finance: The Future of
Islamic Finance in Sri Lanka is a study by: The global economy is
experiencing a slowdown. The primary factor contributing to this
situation is the capitalist economic system. The communist-socialist
economic policy has previously demonstrated its ineffectiveness.
Now, capitalism has also exhibited signs of failure. Consequently,
the world requires an alternative economic policy. In this context,
the Islamic economic order has garnered international attention.
Over 350 financial institutions are operating successfully in more
than 75 countries. The economic slowdown did not directly impact
the Islamic finance sector, although it is acknowledged that there
were some indirect effects. The Islamic finance sector has gained
popularity among both Muslims and non-Muslims.
Furthermore, non-Muslims are among the resource persons in this
field and have authored books on the subject. Against this backdrop,
Islamic finance is experiencing global growth. The Islamic
economic order has also emerged in Sri Lanka in the last two
decades. Approximately ten financial institutions in Sri Lanka are
making significant progress in the Islamic financial market. This
study aims to investigate whether the Islamic finance sector in Sri
Lanka is growing and if there is potential for further growth. The
Islamic finance sector in Sri Lanka is indeed expanding. This study
concluded that there are opportunities for future growth.
M. Kabir Hassan, Rasem Kayed, (2021) "The Global Financial
Crisis and Islamic Finance" The study has concluded that the current
global financial crisis is attributable to exceptionally high liquidity,
irresponsible lending practices, and the accelerated pace of financial
engineering that has produced complex financial instruments
utilized for risk transfer.
Habib Ahmed, Mehmet Asutay & Rodney Wilson (2014) "Islamic
Banking and Financial Crisis Reputation, stability and Risks" In the
book ILAMIC and Equilibrium Syllables, the authors have
presented an analysis examining whether Islamic financial
institutions demonstrate superior performance compared to their
conventional counterparts during financial crises and the extent to
which risk management systems require modification based on the
distinctive characteristics of assets and liabilities in Islamic financial
institutions and the necessity for Shariah compliance.
A study by Mehdi Hadian, Islamic Finance and the Fluctuations of
Investment and Output: The Role of Monetary Policy in 2019,
determined that the recent global financial crisis has once again
highlighted the detrimental effects of interest-based contracts on the
conventional financial system. The study advocates for the Islamic
financial sector as an alternative financial system.
In a research paper authored in 2017 by Ahamed Shibly, the causes
of Sri Lanka's economic crisis and its economic development are
examined in the study entitled Economic Crisis and Its Impact On
Economic Development (Special Reference to Sri Lanka). The
research also aims to identify recovery methods to mitigate the
impact of the crisis. Data was collected from articles, books, and
internet sources. The study suggests that it is advisable to develop a
novel or alternative economic model (based on a community-based
market economy) in which the benefits of economic growth are not
concentrated among a select few but are distributed equitably.
Problem Statement
The current economic crisis in Sri Lanka is precipitating diverse
socio-economic and political challenges. The economic downturn
that adversely affected the livelihoods of Sri Lankans, particularly
post-2019, was attributable not solely to the COVID-19 pandemic
and the Easter attacks but also to the misguided policy-making of
governments. In order to mitigate the social ramifications
engendered by this situation, this study emerges from the imperative
to explore alternative solutions for recovering the country from the
economic crisis experienced by Sri Lankans.
Research Objective
1. To identify what factors are contributing to the country's
economic crisis.
2. To analyze the consequences facing Sri Lankans.
3. To recommend the best Islamic guidelines for the
country's recovery from the crisis's causes.
Materials and Methods
Since the study is qualitative and adopts a literature review, primary
data collection sources such as Reports and Al-Quran were vastly
quested and cited for further explanation. Other secondary Data
were collected through various methods such as previous studies,
journals, articles, local and foreign journals, annual reports, books,
journals, and websites. Qualitative and quantitative data were
analyzed, and results were obtained.
1. Causes and consequences of economic crisis
a. Ineffective policy-making and self-interested politics
Sri Lanka is experiencing a severe economic crisis due to politicians'
lack of foresight in prioritizing temporary solutions and short-term
planning over long-term strategies. One contributing factor was the
propensity of politicians to utilize foreign loans obtained for
infrastructure development projects to serve their interests. In 2021,
the Sri Lankan government officially declared the worst economic
crisis in the country in 73 years (Tripathi et al., 2023). Sri Lankan
local newspapers featured caricatures depicting Sri Lanka seeking
financial aid from neighbouring SAARC countries. Udaya
Gammanpila, Sri Lanka's energy minister, acknowledged that the
crisis could lead to financial catastrophe (Gammanpila, 2022).
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©Copyright 2024 MSI Publishers. All right reserved.
b. Foreign debt crisis
Certain analysts attribute the debt crisis to China. However, Lowy
Australia noted that Sri Lanka "does not fall into a Chinese debt trap"
as of April 2021 (Sachini, 2022), with China accounting for only
10% of its debt. Furthermore, the majority of Sri Lanka's foreign
debt shares were derived from international capital markets,
amounting to 47% (Sumanaratne, 2022). An additional 22% were
obtained from development banks. Subsequently, Japan accounts for
10% of Sri Lanka's external debt (Athukorala Prema, 2024).
In 2020, a New York-based company asserted that Sri Lanka's
financial resources were insufficient to cover credit service
requirements, estimated at $4.0 billion in 2021. Rather than
formulating appropriate economic strategies to address these issues,
there had been an increase in the printing and circulation of currency
notes, leading to inflation and further exacerbating the country's debt
situation (Saliya, 2023). Bellwether observed that to resolve the debt
crisis, Sri Lanka requires a credible fiscal plan and monetary policy
and that taxes should be increased to facilitate debt repayment, such
as adjustments in interest rates and allowing imports to contribute to
the exchequer. While raising interest rates and generating dollars to
repay foreign debt by reducing domestic debt is theoretically
possible, sustaining this approach consistently for several years is
practically challenging. If investors observe an increase in foreign
exchange reserves after debt repayment, confidence may be restored
(Gunaruwan & Liyanage, 2024); however, the efficacy of this
strategy may vary based on current economic ideology.
3. Covid-19 and the decline of the tourism
industry
The impact of the COVID-19 pandemic on Sri Lanka's tourism
sector was identified as a significant factor in the country's inability
to generate sufficient national revenue to repay its debts (Bhowmick,
2022; Roshana et al., 2020). According to the World Bank, "The
impact of the Covid-19 pandemic on Sri Lanka's economy and the
lives of its people, despite the challenges, would be enormous, and
the economy would recover in 2021" (Weerakoon, 2021). Positive
indicators of recovery are already evident, and it is imperative to
encourage measures that reduce over-reliance on taxation rates and
foreign debt in the future to foster self-reliance (George & Baskar,
2022). Current social security measures to support those who lost
employment during the economic downturn are deemed adequate.
Economists have posited that appropriate taxation and export-
oriented growth are essential for the recovery of the Sri Lankan
economy from the current debt crisis, and if implemented
effectively, Sri Lanka will achieve comprehensive financial
recovery.
4. Strict Decision to Depend on 100% Organic
Farming Programme
In 2021, Sri Lanka initiated the "100% Organic Farming"
programme (Babajani et al., 2021). Subsequently, a comprehensive
prevention of synthetic fertilizers and pesticides was implemented
in the country in June 2021 (Aheeyar et al., 2023). The proposal
received endorsement from its consultant, Vandana Shiva. However,
the government disregarded criticism from the scientific and
agrarian communities, which cautioned about a potential decline in
agricultural production, including the financial crisis precipitated by
the devaluation of the national currency based on the tea industry.
Consequently, by September 2021, Sri Lanka experienced a 50%
reduction in agricultural production and food shortages (Basak et al.,
2023). The yield in the agricultural sector decreased by half. The
situation in the tea industry was described as critical. In September
2021, the government declared an economic emergency (George &
Baskar, 2022). The situation was further exacerbated by the
depreciation of Sri Lanka's currency (Bhowmick, 2022), the increase
in inflation due to rising food prices, and the further reduction in the
country's income due to the tourism sector affected by the COVID-
19 pandemic (Deyshappriya, 2020; Saujan, Rifas, et al., 2024).
The ban on the sale of chemical fertilizers and pesticides resulted in
a severe economic crisis (Rathnayake et al., 2024). As a
consequence, individuals experienced loss of income and suffered
from food shortages. The government rescinded some of these
measures. Nevertheless, the ban on importing urea remained in
effect. Sri Lanka introduced restrictions on the distribution of
essential goods. In November 2021, Sri Lanka abandoned its plans
to become the world's first organic farming country after weeks of
protests against rising food prices and organic farming (Basak et al.,
2023).
5. Power cuts and economic crisis
The Finance Minister, Basil Rajapaksa, instructed all government
officials to switch off street lighting until at least the conclusion of
March 2022 as a measure to conserve electricity (Modin-Lundin,
2022). However, this decision was reported to have adversely
affected the economic participation rate of female workers. It
impacted women's safety during night shifts in supermarkets and
other workplaces. Concurrently, Sri Lanka was experiencing its
most severe economic crisis in decades. Moreover, diminishing
foreign exchange reserves have resulted in acute electricity
consumption, fuel consumption, and cooking gas shortages.
Approximately 1,000 restaurants and bakeries ceased operations in
response to a shortage of cooking gas caused by a chaotic foreign
exchange crisis. Extended queues of vehicles were observed waiting
at petrol filling stations due to fuel shortages resulting from the
foreign exchange crisis. The increase in global oil prices exacerbated
fuel shortages in Sri Lanka, as there was a risk of excessive
expenditure, and the country was required to allocate more resources
than ever to import fuel.
At a time when ordinary Sri Lankan citizens were unable to meet
their basic needs due to scarcity of essential commodities such as
milk powder, poultry, gas, other food items, fuels, and electricity,
the Gotabaya government's disproportionate focus on investing in
economically unviable projects such as highways, expressways, and
tourist destinations was scrutinised. Authorities imposed daily
power cuts across the country to conserve electricity. These power
cuts ranged from five to seven hours a day. These interruptions in
power supply created a significant crisis in the education of students
engaged in online learning, as they experienced inconvenience
during examinations due to power cuts occurring both day and night.
6. The Consequences of Russian-Ukrainian War
The Russian invasion of Ukraine in 2022 has further exacerbated the
country's economic deterioration. This is attributable to Russia being
the second largest market for tea exports from Sri Lanka and Sri
Lanka's tourism sector being heavily dependent on these two
countries. Consequently, the Ukrainian crisis has impeded Sri
Lanka's economic recovery, with significant adverse effects on the
tea exports and tourism sectors.
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7. The Shortage of Papers and the Negative
Impact on Education
In March 2022, it was announced that examinations scheduled to be
conducted in numerous schools in Sri Lanka would be postponed
indefinitely due to the prevailing paper shortage across the country
(Robinson, 2020). The nationwide term examinations were initially
scheduled for 28 March 2022; however, owing to an acute shortage
of printing paper and ink tape, the decision was made to cancel or
postpone the examinations until the situation normalised.
8. Shortage of essential commodities
On 22 March 2022, the government instructed the Army to deploy
soldiers at various gas and fuel-filling stations to mitigate tension
among individuals queuing for essential items and to facilitate fuel
supply (Bamunusingha et al., 2022). According to various reports,
at least 15 fatalities occurred due to prolonged queuing in extreme
heat conditions. In March 2022, the United Kingdom and Canada
issued advisories to their citizens, cautioning them about Sri Lanka's
current economic situation.
9. Anti-government protests in Sri Lanka
Spontaneous and organised protests by political parties and
nonpartisan organisations had been reported in numerous areas,
criticising the government's economic policies (Silva & Ramasamy,
2024). On 16 March, a significant number of demonstrators,
estimated in the tens of thousands, assembled in front of the
President’ office to demand the President's resignation.
The demonstration initially manifested as a spontaneous, peaceful
protest by citizens. Security forces subsequently employed tear gas
and water cannons against the protesters. In response, the protesters
ignited a bus transporting riot control cadre. The government
consequently imposed a curfew in Colombo. Concurrent protests
were also reported on the Kandy-Colombo highway, where
protesters obstructed the thoroughfare. The government alleged that
the protesters were affiliated with a militant group and initiated
arrests. Candlelight protests persisted in various areas, while
demonstrations involving the sounding of car horns were also
documented.
In May 2022, the Rajapaksas' residence was set ablaze by protesters.
Due to the unending protests, Mahinda Rajapaksa relinquished his
position as prime minister in May 2022. However, Gotabaya
Rajapaksa refused to abdicate his role as president. The protests
continued unabated. On 9 July, protesters seized control of the
president's official residence. Additionally, they set fire to Prime
Minister Wickremesinghe's private residence in Colombo.
10. Nutrition related challenges
According to the United Nations, Sri Lanka is experiencing its most
severe economic crisis since gaining independence in 1948. World
Food Programme (WFP) data indicated that more than six million
people in Sri Lanka, approximately 30 per cent of the population,
face food insecurity and require humanitarian assistance.
Diminished domestic agricultural production, depleted foreign
exchange reserves, and domestic currency depreciation have
contributed to food shortages and an increased cost of living.
Consequently, the availability of nutritious and affordable food for
the population has been constrained. The economic crisis has
exacerbated poverty levels. The World Bank estimates that the
pandemic has pushed half a million people in this country below the
poverty line.
World Food Programme (WFP) data revealed that 86 percent of
households purchase less expensive and less nutritious food. In some
instances, families are compelled to omit meals entirely. Prior to the
economic crisis and the onset of the pandemic, malnutrition rates
were already elevated throughout Sri Lanka. The current economic
circumstances have further exacerbated this situation. Therefore, the
government is responsible for ensuring that the population receives
nutritious food by 2023 and implementing comprehensive food
distribution measures.
11. Climate challenges
In recent years, adverse weather patterns have resulted in major
disasters affecting the population of this country. Natural disasters
like droughts, floods, and landslides have intensified food and
nutrition insecurity. Consequently, Sri Lanka must effectively
address climate challenges in 2023. Anusha Varnasuriya, director of
the Department of Meteorology, stated that the La Niña (rainy
season) climate phenomenon has weakened. He further notes that
this condition has persisted for three years since 2020.
"The attenuation of La Niña has led to climate pressures in the
country. If this trend continues, we anticipate rainfall in January and
February. However, there is a possibility of reduced precipitation.
Normal rainfall can be expected," he stated. Heavy rainfall is not
anticipated in February, March, and April. Nevertheless, he suggests
that rainfall can be expected in May. Currently, the water level in
the country's reservoirs ranges between 55% and 60%.
12. Easter attack and economic collapse
On 21 April 2019, during Easter Sunday celebrations, three churches
in Negombo, Batticaloa and Colombo and three luxury hotels in
Colombo were subjected to a coordinated bomb attack by a local
group purportedly affiliated with a foreign terrorist organisation
(Saujan et al., 2024). It is estimated that more than 250 civilians,
including foreign nationals, were killed and more than 500 injured
in this tragic incident (Kodithuwakku & Samarakoon, 2021).
The government implemented restrictions on major social media
platforms to mitigate the dissemination of misinformation that could
potentially incite inter-community violence. The operations of the
CSE were also temporarily suspended on 22 April 2019.
Approximately two weeks were required for civil society and
economic activities to demonstrate signs of returning to normalcy.
Concurrently, the Central Bank adopted a more accommodative
monetary policy stance in May 2019 in response to sluggish
economic growth, decelerating private sector debt, stagnant inflation
expectations and an inflationary outlook that was further impacted
by the Easter Sunday attacks.
While the series of attacks particularly affected the tourism industry,
they also adversely affected several other sectors, such as aviation,
internal transport, wholesale and retail trade, accommodation, food
and beverage services, leisure and recreation, food and beverage
production, and agriculture. The exchange rate also experienced
pressure as foreign investment was withdrawn from the government
securities market as an immediate consequence of the attacks. The
Colombo Stock Exchange also experienced a setback due to the
price indices and market capitalisation decline.
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Figure: 1 Monthly tourist arrivals before and after the Easter Sunday attacks
Source: Central Bank Annual Report – 2019
However, other major events such as global economic and financial
market developments, adverse weather conditions throughout the
second quarter of 2019 and uncertainties that prevailed in the latter
part of the year until the conclusion of the presidential election
affected the slowing of the affected economy following the Easter
Sunday attacks, so the attacks affected the exact economic impact of
the terrorist attacks, which affected already slowing economic
growth. It can also be concluded that they contributed significantly
to the slower growth of 2.3 per cent in 2019.
Islamic Guidelines for Economic Recovery from the
Crisis
There is no doubt that the economy is a livelihood in Islam. There is
no need to go to the moon in search of food. The Qur'an says that
We assuredly established you in the earth and arranged for your
livelihood in it. Little do you give thanks (Quran 7:10).
1. Interest to be avoided
Usury, gambling, bribery, cheating and fraud are strictly prohibited
in religion. Allah destroys usury. He promotes charity (Al-Qur’an:
2:276). In this verse the word al-mahq (destruction) is used. The
gradual depletion of a substance is called mahk. The word muhaq,
derived from the same root word, is used for the new moon
(Tafseeral Kabir). In the 1930s, there was a great economic crisis on
a global scale. At that time, economists had to rethink their economic
policy. Some experts have opined that interest is the reason for the
economic downturn and it will ruin the economy and the world.
A Western analyst said the economy would only get a boost if it said
goodbye to usury. In a speech in New York on 19 January, 1933,
Lawrence Pinns said that Aristotle, Catholic bishops and the Jewish
Torah forbade usury (Book: Arriba Wa atharuha). However, the
world did not listen to the opinion of these experts.
2. Prohibition of Fraudulent Trade Practices
The Prophet (PBUH) has given good teachings to the society about
giving (selling) and taking (buying), so that no one should cheat
anyone and said that none of you can be a (true) believer unless his
brother loves him and his brother does not love him (Bukhari). The
Prophet (sallallaahu 'alayhi wasallam) said that usury is cheating a
person who knows nothing about the market situation. (Bayhaqi).
3. Decentralization of Fair Islamic Financing System
The Quran's Positive Ways of Earning
It lays down the just means of earning money and the conditions to
be followed in order for a person to earn the economy he needs. They
are,
1. Business: O you who have believed, do not consume one
another's wealth unjustly but only [in lawful] business by mutual
consent. And do not kill yourselves [or one another]. Indeed, Allah
is to you ever Merciful (Al-Quran 4:29). It is said that trade is a
transaction between two persons on a mutual basis. Allah instructs
that the profits of such trade are pertinent. So, the Islamic guidelines
to be followed while carrying on a business are mentioned below:
i. Honesty in business “As for the sky, He raised it ˹high˺, and set
the balance ˹of justice˺ so that you do not defraud the scales. Weigh
with justice, and do not give short measure” (Al-Qur’an 55: 7,8,9).
Islam emphasizes honesty in business. For example, if we look at
the life of the Prophet (sallallaahu 'alayhi wasallam), even before
Allah gave him prophethood, he was popular among the people. The
main reason for this was his honesty in the business in which they
were engaged and the fact that they did not violate the agreement.
Therefore, we who follow their guidance should also behave
honestly in business.
ii. Properly measure and balance: Give in full when you measure,
and weigh with an even balance. That is fairest and best in the end.
(Al-Quran 17:35). If Allah sent Prophet Shu’aib (a.s.) as a Prophet
to correct the mistakes committed by a people in their business, then
we should understand that Allah condemns the mistakes that take
place in it.
iii. Avoiding fraud: It is not for any Prophet to cheat. The fraudster
will bring the fraudulent item on the Day of Resurrection. Then each
one will be given in full what he did. Thus Allah warns against fraud
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that a person who cheats will be punished for what he has defrauded.
Therefore, adulteration, spurious and fraudulent transactions in
merchandise should be completely avoided.
2. Encouraging Labor: All goods obtained through labour are
acceptable. Islam prescribes certain tasks that can be worked for.
They are,.
i. Wage work: The Qur'an (28:27) says that Moosa (peace be upon
him) worked as a wage worker for eight years for the woman's father
to pay the dowry of the woman he was about to marry. Therefore, if
the mahr is not a commodity but a wage labour, then what can be
obtained by doing wage work is acceptable in Islam.
ii. Fishing: It is He who has made the sea useful for you, that you
may eat fresh flesh from it, and bring forth from it ornaments to
wear, and that you may seek of His bounty, and that you may be
grateful (Al-Qur’an 16:04). From this verse we can understand that
income from fishing from the sea is permissible.
iii. Making of ornaments: Based on the above verse of Al-Qur'an
16:14, it can be known that giving pearls and making money by
selling the pearls thus obtained is permissible in Islam.
iv. Cattle Rearing: ˹so˺ eat and graze your cattle. Surely in this are
signs for people of sound judgment (Al-Qur’an 20:54). The fact that
the Prophet (sallallaahu 'alayhi wasallam) used to herd goats and
camels in his youth, shows that the income earned from herding and
rearing cattle is also correct.
v. Agriculture: Have you considered what you sow? Is it you who
cause it to grow, or is it We Who do so? (Al-Qur’an 56:63 – 64)
Agriculture is the backbone of every country. In India, for example,
70 per cent of the population is engaged in agriculture. If agriculture
does not take place in a country, no matter how big a superpower it
is, it is in the hands of the country that has undertaken agricultural
production. This is what Allah says in His Book, Think about
agriculture! He says, "I make it grow and make it fertile." The
Prophet (sallallaahu 'alayhi wasallam) said: Whoever plants a plant
or a seed and receives food from it by birds, men or animals, his act
is considered righteous.
Guidelines to be followed while making money
Islam instructs people to follow certain principles in earning money.
1. Prohibition of taking bribes: Do not consume one another’s
wealth unjustly, nor deliberately bribe authorities in order to devour
a portion of others’ property, knowing that it is a sin (Al-Qur’an 2:
188). This verse indicates that it is wrong to give or take bribes to
get the goods of others. Therefore, bribery should be avoided in
making money.
2. Prohibition of interest: Those who eat usury will rise mad as if
they had touched Satan. This is because they said, "Business is like
usury." Allah has permitted trade and forbidden usury (Al-Qur’an
2:275). Allah warns us that those who amass wealth from usury will
be Hell forever and they will fight against Me. Therefore, we should
avoid making money with usury.
3. Usurpation of other people's property: O believers! Indeed,
many rabbis and monks consume people’s wealth wrongfully and
hinder ˹others˺ from the Way of Allah. Give good news of a painful
torment to those who hoard gold and silver and do not spend it in
Allah’s cause (Al-Qur’an 9:34). Stealing money from people who
come to you in a wrong way is tantamount to stealing. Thus Allah
refers to the eating of religious leaders and priests.
4. Fraud: O believers! Do not betray Allah and the Messenger, nor
betray your trusts knowingly (Al-Qur’an 8:27). What someone trusts
and entrusts to you, you have to return it to him when he asks for it.
This is what Allah says in the Qur'an.
5. Orphan property: Give orphans their wealth ˹when they reach
maturity˺, and do not exchange your worthless possessions for their
valuables, nor cheat them by mixing their wealth with your own. For
this would indeed be a great sin (Al-Qur’an 4:2). The orphans and
their property entrusted to you must be handed over to him when
they reach the age of majority. Don't try to get anything out of it.
6. Doing business by lying: O People of the Book! Why do you mix
the truth with falsehood and hide the truth knowingly? (Al-Qur’an
3:71). In business, we should not sell a product even if it is not of
the right quality. Such giving is forbidden in Islam and is considered
a major crime.
7. Measurement and installation fraud: And to the people of
Madyan, we sent their brother Shu’aib. He said, “O my people!
Worship Allah—you have no other god except Him. A clear proof
has already come to you from your Lord. So, give just measure and
weight, do not defraud people of their property, nor spread
corruption in the land after it has been set in order. This is for your
own good, if you are ˹truly˺ believers. The consumer who buys a
product should be given the correct quantity and the correct stop
while weighing. Otherwise, what can be obtained by cheating is not
properly earned.
8. Prostitution: And let those who do not have the means to marry
keep themselves chaste until Allah enriches them out of His bounty.
And if any of those ˹bondspeople˺ in your possession desires a
contract ˹to buy their own freedom˺, make it possible for them, if
you find goodness in them. And give them some of Allah’s wealth
which He has granted you. Do not force your ˹slave˺ girls into
prostitution for your own worldly gains while they wish to remain
chaste. And if someone coerces them, then after such a coercion
Allah is certainly All-Forgiving, Most Merciful ˹to them˺ (Al-
Qur’an 24:33). Women belonging to their family should not be taken
to prostitution for the sake of wealth. Allah will never forgive this
deed.
Not only that,
1. Adulteration and sale of goods (Qur'an 2:42)
2. Showing the religion and amassing wealth (Qur'an 10:72)
3. Deceiving your brothers of wealth by not giving them
what is due to them (Qur'an 38:23, 24)
4. False oaths and begging for wealth (Qur'an 16:95)
5. Allah has also forbidden us in the Qur'an to be miserly of
what we have earned.
Recommendations and Conclusions
One of the main reasons for Sri Lanka's economic decline is the
avoidance of interest free lending relations with Middle Eastern
countries and transactions with usury lenders such as Russia and
China. That is why Sri Lanka should avoid such tendencies at home
and abroad; If so, Sri Lanka will be put on the path of development.
Therefore, the following recommendations can be made to solve the
economic problem through the Islamic economic system. The most
devastating economic downturn in Sri Lanka is increasing the level
of poverty in Sri Lanka. Sri Lanka was particularly badly hit by
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MSI Journal of Economics and Business Management; Vol-1, Iss-1 (December- 2024): 17-24
©Copyright 2024 MSI Publishers. All right reserved.
poverty among South Asian countries. However, it cannot be denied
that this level of poverty has had an unprecedented social, economic,
political, cultural and cultural impact on Sri Lanka. This economic
downturn is seen as a web woven behind the tendencies of
politicians and religious people.
In order to address this, international financial institutions such as
the International Monetary Fund and the World Bank have tried to
help Sri Lanka, but they are only found with the intention of
exploiting the resources of Sri Lanka and earning profits through
interest. Yet, like a frog in the shade of a snake in the heat of the
desert sun, Sri Lanka is forced to be at the mercy of the international
economic centers. But Sri Lanka can reap various benefits and
benefits when it adopts Islamic finance and banking systems.
Especially when Sri Lanka is trying to implement the Islamic
economic system, there are opportunities for many countries in the
Middle East to help Sri Lanka. However, Sri Lanka ignored this and
surrendered to the International Monetary Fund. In reality, Sri
Lankan politicians expect only the votes of the people, i.e., the
majority Sinhalese people. Therefore, the rulers do not want to
implement the Islamic economic system in Sri Lanka and thereby
earn the opposition of the Sinhalese people. As a result, only the
goals of the parties are considered here and not a national goal.
When Islamic banking or Islamic economic system is implemented
in Sri Lanka, the producers and entrepreneurs of Sri Lanka will be
freed from the subject of interest and they will liaise with the bank
on the basis of profit and loss motive. Due to this, their money is not
wasted in the banks. Not only this, there is a situation in the Islamic
economy where governments can put their investments in banks and
make profits from them. Not only this, the interest system will be
eliminated in Sri Lanka when various types of Islamic business such
as renting, partnerships and collective partnerships are introduced.
As a result, poor people will be forced to withdraw their money and
pay it in installments. As a result, there is an opportunity to avoid
suicidal activities and family problems in the future due to inability
to pay interest. As a result, the social condition of Sri Lanka will be
brought to a proper level. Therefore, the conclusion of this study is
that it is better to implement the Islamic economic system to address
the economic crisis in Sri Lanka.
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