The Principle of Monetary Connection and Fluidity: Implications for the design of a desired Islamic Monetary System

Modern financial crises are rooted in the "decoupling of the monetary sector from the real economy" and the independence of financial markets. Adopting an Analytic-Ijtihadi method with the objective of proposing a stability model for the Islamic economy, this study extracts and explicates the "Principle of Connection and Fluidity" as a foundational principle.

According to this principle, money possesses a nature of flow and must continuously serve to facilitate circulation within the real sector; therefore, any form of hoarding (Kanz) or trapping money in speculative cycles is prohibited. This principle is derived from the synthesis and analysis of two specific jurisprudential rulings:

1. The absolute prohibition of money hoarding (Kanz), which forbids withdrawing money from the useful economic cycle.

2. The obligation of Zakat on currency, which, by imposing a cost on idle money, renders the return on non-productive holding negative and systemically channels liquidity into circulation.

Findings indicate that the optimal Islamic monetary system lacks an independent money market. The policy implications of this principle establish the necessity for the Central Bank to transition from a passive policymaker to an active "Credit Flow Engineer." In this framework, the policymaker is obliged to engineer the flow of credit by eliminating the independent money market and utilizing modern technologies (CBDC) to monitor transactions. Restrictive measures (such as taxes on speculation and idle money, inspired by Gesell’s demurrage) and allocative measures (directing credit solely towards real partnership and trade contracts) serve as operational solutions to realize this principle.