It's All About The Money.

9/07/2015 11:52:00 pm

Assalammualaikum everyone. I have recently posted an article on I-Finance Journey FB page:
As promised in my FB page I will translate what was written in this article for the benefit of my readers who are not malay readers.

As we all know, money is very important in order to purchase goods and services, unless were are in the period where barter trade still exist. 

Money aka paper money gets affected by Macro-economic and Micro-economic factors such as:
1) Inflation
= Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency if falling. Central banks attempt to limit inflation,a and avoid deflation, in order to keep the economy running smoothly. (Investopedia)

2) Political Issues
= Political unstability affects the currency due to uncertainty of the country's economies as some foreign companies are either afraid to enter the country's market or they pull themselves out from the market, in order to cut loss.

3) Natural Disasters/Man-made Disasters
= This affects the import and export of the country.

4) Foreign Exchange
= With all the above points, the currency tends to weakens, thus causing a domino effect. Which will be explain below..

As per the article, 10 Factors that Happens When A Country's Currency drops in value:
1) Prevention of using the country's currency by diverting to other country's currency.
2) Hyper-inflation happens, resulting in the paper money being worthless.
3) Failure of the country making payment to industrial areas.
4) Different methods of currency exchanges happens.
5) Citizens rush to purchase their basic necessities.
6) Banks tend to close to minimize large amount of withdrawals of money.
7) High unemployment and poverty rates due to companies not being able to pay their employees.
8) Restriction on currency exchange outside the country.
9) Barter trade replaces paper money.
10) Others: High net worth people tends to park their money in other countries in the form of savings or investment, in hopes that their money will grow in another country. Money laundering happens during this time.

How to solve this problem is to have some physical assets/commodities that can be used in times where money is worthless. It all goes back to the sunnah money, dinar (gold) and dirham (silver).


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