CHAPTER 1    ISLAM, ITS WORLDVIEW AND       ISLAMIC ECONOMICS1/02/2009   FOUNDATIONS OF ISLAMIC ECONOMICS   1
CHAPTER OUTLINE            1. Why Islamic Economics?            2. Worldview            3. Islamic Economics1/02/2009     ...
1. Why Islamic               Economics?1/02/2009   FOUNDATION OF ISLAMIC ECONOMICS   3
Quest for Alternatives • Renaissance and birth of secularism • Theories replace religion to organize      people’s life • ...
Why not Conventional Economics?• No human endeavor value free  • Schumpeter (1954): Analytic effort is of necessity preced...
Why not Conventional Economics?  • Economics are VALUE-LOADED        • All aspects of human activity are based/influenced ...
Why Islamic Economic System?• Al-sahwah al-Islamiyyah or Islamic revivalism/resurgence inearly 1970s in Muslim countries  ...
2. WORLDVIEW1/02/2009   FOUNDATION OF ISLAMIC ECONOMICS   8
Worldview• Vision of reality and truth that appears before one’s mind    eye, revealing what existence is all about     • ...
Islamic Worldview • Centered on the principle of Tawhid or unity of God • Al-Attas: “Ru’yat al-Islam Lilwujud” or “The vie...
ISLAMIC VS WESTERN WORLDVIEW • Does Islamic worldview different from conventional worldview?       • Since factors affecti...
1. ISLAMIC VIEWS ON RELIGION • Not equivalent to religion as understood by the west       •    Religion reduced to a priva...
1. ISLAMIC VIEWS ON RELIGION • To understand position of religion in the west and its implications on economic discipline ...
SECULAR • Latin: sacculum, meaning space and time, i.e. here and now • Secular activities: deal with the “here and now” or...
SECULARISM • Ideology that says only this world is relevant • When combined with materialism       • It denotes that only ...
SECULARIZATION • A process of gradual decline of religion and its authority over life; separation between life and religio...
SECULARIZATION • Having three components:       •    Disenchantment of nature: nature as an object to be exploited        ...
1. ISLAM VIEWS ON RELIGION• Ideology of secularism and secularization as aphilosophical process is incompatible with Islam...
ISLAM IS DIN• The term “din” used to denote “religion” in the Qur’an   • Comes from root word “dana”      • Mentioned 92 t...
SIGNIFICANCE OF DINThe primary significances of the term ad-Din can be  reduced to four:• Indebtedness• Submission• Judici...
AL-MITHAQ-THE PRIMORDIAL             COVENANT• We did indeed offer the Trust to the Heavens and the Earth  and the Mountai...
Al-Islam & Al-Shari’ah • Al-Islam is the Din of all prophets but shari’ah vary among prophets • Shari’ah of Prophet Muhamm...
Al-Islam                     Al-Shari’ahAl-Aqidah              Al-Akhlaq               Al-Fiqh 1/02/2009   FOUNDATION OF I...
2. ISLAMIC VIEWS ON GOD • Belief in unity of God, Tawhid       •    Oneness of God       •    The core concept /foundation...
2. ISLAMIC VIEWS ON GOD • Thus, as a Muslim (one who submits) is to do as God has directed and for His sake • Beautiful na...
3. ISLAMIC VIEWS ON MAN • Arabic: “Insan” from root word “nasiya” means “he forgot”: (Al-a’raf: 173): “…Am I not your Lord...
3. ISLAMIC VIEWS ON MAN • Created as vicegerent (khalifah) on earth: (al-Baqarah: 30): and remember when your Lord said to...
3. ISLAMIC VIEWS ON MAN • Cannot be khalifah unless you are first and foremost an ‘abd • Nasr (1990): there is no more dan...
3. ISLAMIC VIEWS ON MAN •Man in loss (Al-’Ashr 1-3): By the time; verily, man in loss; except those who believe and do rig...
4. ISLAMIC VIEW ON NATURE • Nature/universe in the Quran:       • Comprise of “heavens and earth and all in between”      ...
5. ISLAMIC VIEWS ON AIM IN LIFE  • Primary aim of life for human as described by Islam     • To achieve happiness (falah) ...
ATTAINING FALAH/SA’ADAH AL-        HAQIQIYYAH • Al-nafsiyyah – the goods of soul       • Comprising faith (iman) and good ...
ATTAINING FALAH • Al-kharijiyyah – external good       • Useful for happiness       • Wealth, influence, family and noble ...
In conclusion,            Islamic Worldview ≠             Secular Worldview1/02/2009     FOUNDATION OF ISLAMIC ECONOMICS  ...
3. Islamic Economics1/02/2009    FOUNDATION OF ISLAMIC ECONOMICS   35
ECONOMICS AND ISLAMIC ECONOMICS  • Economics: study of human behavior in relation to  the use of scarce resource to fulfil...
ECONOMICS AND ISLAMIC ECONOMICS  • Economics is both an activity and a discipline        • How man interact is determined ...
ISLAMIC ECONOMICS  • Part of din  • Deals with production, consumption and distribution  activities of man according to Is...
ISLAMIC ECONOMICS  • Scarcity and choice        • Conventional economics:           • Unlimited wants           • Limited ...
SCARCITY IN ISLAM    Islam rejects the concept of scarcity of resources, as it implies imperfection    of nature and Allah...
Basic Concepts            Islamic view on Scarcity                   ScarcityExistence                     Availability   ...
ISLAMIC FINANCE • To finance the economic activity in an Islamic framework • Must have institutions using instrument accor...
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Fie chapter1

  1. 1. CHAPTER 1 ISLAM, ITS WORLDVIEW AND ISLAMIC ECONOMICS1/02/2009 FOUNDATIONS OF ISLAMIC ECONOMICS 1
  2. 2. CHAPTER OUTLINE 1. Why Islamic Economics? 2. Worldview 3. Islamic Economics1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 2
  3. 3. 1. Why Islamic Economics?1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 3
  4. 4. Quest for Alternatives • Renaissance and birth of secularism • Theories replace religion to organize people’s life • Human frustration and need for a change1/02/2009 FOUNDATIONS OF ISLAMIC ECONOMICS 4
  5. 5. Why not Conventional Economics?• No human endeavor value free • Schumpeter (1954): Analytic effort is of necessity preceded by a pre-analytic cognitive act, called vision • Acikgene (1994): Nature of human mind cannot but perceive a problem within a scheme of constructive unity • J. S. Mill (1836): Political economy, therefore, reasons from assumed premises 1/02/2009 FOUNDATIONS OF ISLAMIC ECONOMICS 5
  6. 6. Why not Conventional Economics? • Economics are VALUE-LOADED • All aspects of human activity are based/influenced by one’s worldview/vision •Our values are derived from our WORLDVIEW 1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 6
  7. 7. Why Islamic Economic System?• Al-sahwah al-Islamiyyah or Islamic revivalism/resurgence inearly 1970s in Muslim countries • Failure of conventional growth models • Oil boom in 1970s • Muslim countries try to find solutions to “own” economic problems• Continuous intellectual discourse on economic issues andrelated disciplines from Islamic perspectives • Makkah (1976): Birth of Islamic Economics discipline • Islamabad (1983) • Kuala Lumpur (1992) • Loughborough (2000)1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 7
  8. 8. 2. WORLDVIEW1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 8
  9. 9. Worldview• Vision of reality and truth that appears before one’s mind eye, revealing what existence is all about • Governs way people interpret the world • Worldview of Islam encompasses both al-dunya an al- akhirah, in which the dunya aspect must be related in a profound and inseparable way to akhirah aspect and in which the akhirah aspect has the ultimate and final significance. Such worldviews may consist of the following elements: 1. God 2. Religion 3. Man 4. Nature/Universe 1/02/2009 5. Aim in Iife 9 FOUNDATION OF ISLAMIC ECONOMICS
  10. 10. Islamic Worldview • Centered on the principle of Tawhid or unity of God • Al-Attas: “Ru’yat al-Islam Lilwujud” or “The view of Islam about existence” • Man, his aim in life, the universe, the way he interacts are all inter-related • Man’s behavior governed by rules of the Quran and Sunnah • Pursue material gain with a view that existence in this world and hereafter is important1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 10
  11. 11. ISLAMIC VS WESTERN WORLDVIEW • Does Islamic worldview different from conventional worldview? • Since factors affecting worldviews differ, it is natural to also have different worldviews, thus different theories to explain human behaviour • Islamic worldview is based on Islam and its sources of knowledge • A complete worldview at the time of revelation-fundamental concepts in the Quran are not open for changes in meaning1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 11
  12. 12. 1. ISLAMIC VIEWS ON RELIGION • Not equivalent to religion as understood by the west • Religion reduced to a private matter between individual and God • No role to play in determining public affairs • Science replaced religion as authority • Religion for infantile man; science for modern/mature man • Watt (1979): “Religion means a way of spending an hour or so on Sundays in practices which give him support and strength in dealing with the problem of daily life, and encourage him to be friendly towards others…; has little impact or nothing to do with commerce / politics / industrial relationships”1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 12
  13. 13. 1. ISLAMIC VIEWS ON RELIGION • To understand position of religion in the west and its implications on economic discipline and activity, need to understand three aspects: • Secular • Secularization • Secularism1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 13
  14. 14. SECULAR • Latin: sacculum, meaning space and time, i.e. here and now • Secular activities: deal with the “here and now” or activities just for this world and during/in our lives • Secular worldview concerns with only life in this world • Islamic worldview encompasses this life and hereafter • Not “anti this world”: in fact, Islam has very clear guideline on how to undertake life in this world • Various aspects of living, including economics1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 14
  15. 15. SECULARISM • Ideology that says only this world is relevant • When combined with materialism • It denotes that only this world is real • Hence, any reference to the ‘hereafter” is irrelevant • Economics should be conducted purely on “costs and benefits” of this world • Islam would not be able to accept this ideology1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 15
  16. 16. SECULARIZATION • A process of gradual decline of religion and its authority over life; separation between life and religion • Experience of Christian/western civilization since 17th century - in the age of enlightenment as elaborated by Cox (1965) and al-Attas (1978) • Elliade (1987) in Encyclopedia of Religions • Dichotomy between religion and remainder of human life is a western product and concern • Distinction between the sacred and profane, between religion and other aspect of human endeavor is a result of process of secularization1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 16
  17. 17. SECULARIZATION • Having three components: • Disenchantment of nature: nature as an object to be exploited by man. In Islam, nature as a sign of Allah’s existence, to be utilized by man • Desacralization of politics: ultimate authority given to man. In Islam, the ultimate authority and power belongs to Allah • Deconsecration of values: all norms, values, laws can be changed according to man’s preferences. In Islam, man cannot over-rule God1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 17
  18. 18. 1. ISLAM VIEWS ON RELIGION• Ideology of secularism and secularization as aphilosophical process is incompatible with Islam and itsworldview• Islam cannot accept secularization (dealing with only hereand now): contradictory, incoherent, meaningless • Islam has no problem with involvement of man in secular pursuits • In Islam, religion is not human creation, but it represents a “way of life” - Din1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 18
  19. 19. ISLAM IS DIN• The term “din” used to denote “religion” in the Qur’an • Comes from root word “dana” • Mentioned 92 times in the Qur’an • Meaning debt, obedience, judgement / way / custom; inter- connected to explain “religion”• Does not limited to rituals/faith • A way of life • Detailed code of conduct • Willing and conscious submission to Allah in all aspects of life • Economics and its related activities are potentially ibadah or acts of worship• Based on revealed knowledge, man uses his intellect toorganize life on earth: Intention, action according to shari’ah1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 19
  20. 20. SIGNIFICANCE OF DINThe primary significances of the term ad-Din can be reduced to four:• Indebtedness• Submission• Judicious Power –becoming strong, powerful, mighty and elevated in rank when man enslaves himself to God and make the right choice• Natural Inclination –the natural tendency of man to form societies and obey laws and seek a just government.1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 20
  21. 21. AL-MITHAQ-THE PRIMORDIAL COVENANT• We did indeed offer the Trust to the Heavens and the Earth and the Mountains; but they refused to undertake it, being afraid thereof: but man undertook it;- He was indeed unjust and foolish (AL-ahzab, 72)• And [mention] when your Lord took from the children of Adam - from their loins - their descendants and made them testify of themselves, [saying to them], "Am I not your Lord?" They said, "Yes, we have testified." [This] - lest you should say on the day of Resurrection, "Indeed, we were of this unaware.“ (al-’Araf, 172)1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 21
  22. 22. Al-Islam & Al-Shari’ah • Al-Islam is the Din of all prophets but shari’ah vary among prophets • Shari’ah of Prophet Muhammad s.a.w. is the most comprehensive and complete • It is guidance in all aspects of the Muslim’s life, private and public, individual and social, spiritual and material, and political and economics1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 22
  23. 23. Al-Islam Al-Shari’ahAl-Aqidah Al-Akhlaq Al-Fiqh 1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 23
  24. 24. 2. ISLAMIC VIEWS ON GOD • Belief in unity of God, Tawhid • Oneness of God • The core concept /foundation of Islamic worldview • Other aspects of Islamic worldview are the logical extensions • Expressed in Kalimah shahadah •3 aspects of tawhid • Oneness of the lordship of Allah: to believe that there is only one lord for entire universe • Oneness in the worship of Allah: to believe that none has right to be worship but Allah • Oneness of the names and the qualities of Allah: none can be qualified with the Names/qualities of Allah1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 24
  25. 25. 2. ISLAMIC VIEWS ON GOD • Thus, as a Muslim (one who submits) is to do as God has directed and for His sake • Beautiful names of Allah which have implications for economics • Al-razzaq (the Provider) • Al-malikul mulk (the eternal owner of sovereignty) • Al-muqsit (the equitable)1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 25
  26. 26. 3. ISLAMIC VIEWS ON MAN • Arabic: “Insan” from root word “nasiya” means “he forgot”: (Al-a’raf: 173): “…Am I not your Lord? They said: Yes! We testify, lest you should say on the day of resurrection: ‘verily, we have been unaware of this’.” • The best of creation, created good, comprising of body and spirit: (At-teen:4): “verily, we created man of the best stature (mould)” • Given ‘aql and knowledge: (al-Baqarah: 31): And He taught Adam of all things1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 26
  27. 27. 3. ISLAMIC VIEWS ON MAN • Created as vicegerent (khalifah) on earth: (al-Baqarah: 30): and remember when your Lord said to the angels: ‘I am going to create a vicegerent on earth…” • Created as ‘abd (worshipper) of God: (ad-Dhariyat: 56): “I created not the Jinns and human except to worship Me” • Implications of roles: • As khalifah: nature, universe and other creations are entrusted to man for his utilization • As ‘abd: man does not have the ultimate authority other than to follow the will of God1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 27
  28. 28. 3. ISLAMIC VIEWS ON MAN • Cannot be khalifah unless you are first and foremost an ‘abd • Nasr (1990): there is no more dangerous creature on earth than a khalifah Allah who no longer considers himself to be an ‘abd Allah. •At-Tin (4-6): “Verily , We created man in the best stature (mould); Then We reduced him to the lowest of the low (As- falasafilien); Save those who believe and do righteous. Then they shall have a reward without end (paradise)…”1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 28
  29. 29. 3. ISLAMIC VIEWS ON MAN •Man in loss (Al-’Ashr 1-3): By the time; verily, man in loss; except those who believe and do righteous good deeds….” •Al-’Araf, 179: “And surely, We have created many of the jinns and mankind for Hell. They have hearts wherewith they understand not, they have eyes wherewith they see not, and they have ears wherewith they hear not (the truth). They are like cattle, nay even more astray; those! They are the heedless ones”1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 29
  30. 30. 4. ISLAMIC VIEW ON NATURE • Nature/universe in the Quran: • Comprise of “heavens and earth and all in between” • Mention about vegetation and fruits, night and day, heavens and earth, human being, rain • Another sign to direct man to worship Allah, the Creator • Nature is a bounty from God • Must be utilized in the best way possible, in accordance with God’s will, remembering that it is part of God’s creation • Man as trustee to manage nature • 2 types • Material world (visible) • Unseen world (ghayb or invisible): believe in the existence of God, angels, hell and paradise1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 30
  31. 31. 5. ISLAMIC VIEWS ON AIM IN LIFE • Primary aim of life for human as described by Islam • To achieve happiness (falah) • Ultimate success and pleasure of Allah • Al-Ghazali describes means through which man can prepare for happiness in this world and hereafter (sa’adah) • Al-nafsiyyah – soul • Al-jismiyyah – body • Al-kharijiyyah – external good • Al-tawfiqiyyah – divine grace 1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 31
  32. 32. ATTAINING FALAH/SA’ADAH AL- HAQIQIYYAH • Al-nafsiyyah – the goods of soul • Comprising faith (iman) and good character • Achievable through action (‘amal) • Iman = Amal : soul can only be improved if man has the knowledge • Good character comprise of: • Temperence - repression of desire and anger • Justice – observing of moderation in all actions • Application to economics: Ethical requirements in business activities • Al-jismiyyah – the goods of the body • Second important • Health, strength, long life and pleasant appearance1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 32
  33. 33. ATTAINING FALAH • Al-kharijiyyah – external good • Useful for happiness • Wealth, influence, family and noble birth (family in which knowledge and piety are instilled to all members) • Al-tawfiqiyyah – divine grace • Essential for happiness • Comprise of divine guidance (hidayah), divine direction, divine leadership and divine strengthening • Primary means of achieving falah are goods of the soul, that can be acquired with help of bodily and external goods, if he is given divine grace1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 33
  34. 34. In conclusion, Islamic Worldview ≠ Secular Worldview1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 34
  35. 35. 3. Islamic Economics1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 35
  36. 36. ECONOMICS AND ISLAMIC ECONOMICS • Economics: study of human behavior in relation to the use of scarce resource to fulfill unlimited wants • Economics is a field that deals with management of scarce resources (production, consumption and distribution) • Due to scarcity, we have to make choices • Man interacts with other human beings and nature to make these choices1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 36
  37. 37. ECONOMICS AND ISLAMIC ECONOMICS • Economics is both an activity and a discipline • How man interact is determined both by natural laws and social laws/culture in a system, i.e. economic and financial systems • Social laws/culture based on worldview of people • Systems are products of society •The discipline is derived from one’s worldview1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 37
  38. 38. ISLAMIC ECONOMICS • Part of din • Deals with production, consumption and distribution activities of man according to Islamic worldview • Make choices according to Islamic description, analysis, prescription • Approach to and process of interpreting and solving man’s economic problems based on the values, norms, laws and institutions found in and derived from the sources of Islam1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 38
  39. 39. ISLAMIC ECONOMICS • Scarcity and choice • Conventional economics: • Unlimited wants • Limited resources • Achieving the highest utility • Islamic economics: • Economic pursuit must be derived from Islamic worldview • Economic goals do not contradict the shari’ah • Shari’ah constraints to be observed in making choices • Resources are unlimited1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 39
  40. 40. SCARCITY IN ISLAM Islam rejects the concept of scarcity of resources, as it implies imperfection of nature and Allah. Allah says: “It is Allah Who hath created the heavens and the earth and sendeth down rain from the skies, and with it bringeth out fruits wherewith to feed you; it is He Who hath made the ships subject to you, that they may sail through the sea by His command; and the rivers (also) hath He made subject to you (Ibrahim: 32). And He giveth you of all that ye ask for. But if ye count the favours of Allah, never will ye be able to number them. Verily, man is given up to injustice and ingratitude (Ibrahim: 34) And He has subjected to you, as from Him, all that is in the heavens and on earth: Behold, in that are Signs indeed for those who reflect (al- Jathiyah: 13). It is We Who have placed you with authority on earth, and provided you therein with means for the fulfillment of your life: small are the thanks that ye give! (Al-‘Araf: 10)”. In Islam, scarcity exists because of: improper use of resources; unequal distribution of resources; and lack of knowledge
  41. 41. Basic Concepts Islamic view on Scarcity ScarcityExistence Availability Factors Choice •Knowledge •Con. •Effort •Prod. •Time •Distr. 41
  42. 42. ISLAMIC FINANCE • To finance the economic activity in an Islamic framework • Must have institutions using instrument according to rules and regulations which are all bound by the shari’ah • Observe basic prohibitions in business transaction: riba, gharar and maysir • Products involve must be halal • Profit must come from trading transactions1/02/2009 FOUNDATION OF ISLAMIC ECONOMICS 42
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