Monetary Policy is the deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy. This policy is to further the achievement and maintenance of price-level stability, full employment and economic growth.
In the modern reality, the mechanisms affecting the monetary policy, the degree of freedom of government in using the “waiting the monetary asset” is restricted by the prohibition of Riba’. This tool is used to rate the discount and the open market operation. In contrast, Islam has different approach in dealing with this issue by using it through Zakat and a strict requirement of the business transactions. The wisdom behind the prohibition of Riba’ because individual does not willingly pay the interests unless he really needs the money.
The Holy Qur’an rules out:
“…God hath permitted trade and forbidden usury” (2:275).
“If ye do it not, take notice of war from God and His Apostle: but if ye turn back, ye shall have your capital sums, and deal not unjustly and ye shall not be dealt with unjustly” (2:279).
The basis for the prohibition of Riba’ is because the nature of the interest itself which is putting the burden to one side party such as customers not to the lender themselves. Here comes the State’s role in helping these indebted people by providing the interest-free loan by principle of mutual aid and cooperation.
Unfortunately, in the modern days, the degree of freedom of the government is keep increasing in the monetary policy but here where the Zakat plays its role because of its flexibility that is guided by the ethics and values.
Indeed, the monetary policy is got to do with the government’s role as the insider to the system, but not the stranger to it, which as the owner of the natural resources and al-hisbah with distributive justice is built into the system of Zakat, the State’s insurance and the inheritance system.
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