The Islamic Economy

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Islamic economy is based on divine inspiration, it aims at the welfare of individuals and the whole society

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The Islamic Economy

  1. 1. The characteristics of Islamic economy can beexplained in various ways. I find the following asrepresentative characteristics of a truly functioningIslamic economy or what ought to be in such aneconomy. Basic Characteristics of Islamic Economy1. Freedom of work and enterprise: Islam hasallowed freedom of work and enterprise. A readingof the chapter of any Hadith collection in respect ofagriculture, gardening, business etc. will establishthis. The Quran also clearly states that "Allah hasmade business lawful for you (Sura Baqara, Ayat -275)" www.knowmuhammad.org
  2. 2. Islam essentially allows economy to operate freelyaccording to the market forces subject to Islamicrestrictions and guidelines on production.distribution, marketing, investment trade, exchange,wages etc. The state can also further interfere in thisfree economy to restore equilibrium and establishjustice and other Islamic objectives . In an Islamiceconomy, there is an "allowability constraint" (a termintroduced by Dr. S.N.H Naqvi in his book. (S.N.H.Naqvi: Ethics and Economics. An Islamic Synthesis,First edition, Chapter-5, published by IslamicFoundation, U.K). www.knowmuhammad.org
  3. 3. An entrepreneur can produce only permitted things.Profit should be normal in such an economy aftergiving proper wages to the labourers in accordancewith Islamic principles. Some forms of trade practices,exchange, investment, and land tenancy in agricultureare prohibited in Islam. It also disallows monopoly andhoarding as social evils. The aforesaid restrictionsmake “free economy “in Islam qualitatively differentfrom capitalism. Islam can not be said to be capitalisticonly because it allows forces of demand and supply tooperate in the economy. Forces of demand and supplyare fundamental economic forces, which wereoperational even before capitalism. www.knowmuhammad.org
  4. 4. A special concept of ownership:2- In Islam God is the true owner of all things. The Quransays: "To Allah belongs whatever is in the earth". (Al-Imran). However, Allah in His mercy allows humanbeings to inherit wealth, own it and use it subject to Hislaws as evident from the following verses:i) The land belongs to Allah. He allows it, to be inheritedby whomsoever he pleases. (Sura Araf, Ayat: 128).ii) Do they not see that we have created for them -----among the things fashioned by us----- cattle of whichthey become owners? (Sura Yasin, Ayat: 29).Islam, therefore, allows man as Vice-gerant, to inheritfrom Allah (that is to own) wealth. This is indeed a trustfor proper use. We may call it Trust ownership. www.knowmuhammad.org
  5. 5. Kinds of Ownership:3- In early Islam there were three kinds ofownership: private, communal and state ownership.The books of Hadith are full of accounts ofindividual ownership. This was the standardownership. Some important things like water, canalspastures and graveyards were communal properties.The state owned the mines, rivers and large tracts ofland. After the conquest of Syria and Iraq, theselands were made state lands and were not allowedto go into private ownership.(Tafhimul Quran, Sura Hashr, Syed Abul AlaMaududi) www.knowmuhammad.org
  6. 6. State Ownership:4-There is no bar on state ownership of enterprise in Islam. The basic economic institutions may bebrought under state control, if this is required toestablish social justice or protect the interests of thecommunity.Islam protects lawful property and is in favour ofconfiscation of unlawful property. There are someinstances of taking over of unlawful property duringthe period of Omar, the second Caliph, and Hazrat www.knowmuhammad.org
  7. 7. Omar bin-Abdul Aziz, the last one. Lawfulproperty can be taken over by the state only forvalid social reasons after due compensation.During the last Hajj the Prophet announced theprinciple of protection of lawful property. TheQuran says, "dont eat each others propertywrongfully " (Sura Nisa,Ayat- 29). www.knowmuhammad.org
  8. 8. Prohibition of Interest:5- Islam prohibits interest. This requires a totalreorganization of the economy, banking, investment,exchange, business and international trade. Alreadyin the last 30 years hundreds of Islamic banks andfinancial institutions have been set up and this hasbecome an alternative mode in most Muslim countriesand some non- Muslim countries. Its viability andpracticability has been accepted by economists andbankers and many consider this system superior insome respects.A body of literature has already come up on thissubject. www.knowmuhammad.org
  9. 9. Zakat:6- Islam has made Zakat compulsory on thewealth of rich Muslims. This is spent for theweaker and distressed sections of the society.Zakat not only distributes wealth between therich and the poor of the society, it also influencesinvestment, savings and allocation of income andresources. A detailed study has been made in thisregard by Dr. Monzer Kahf in his book "IslamicEconomy" American Trust Publications, USA,A rich body of literature has come up in recenttimes on Zakat. The Zakat and Ushr ordinance ofPakistan can be particularly referred to in thisconnection. www.knowmuhammad.org
  10. 10. Concern for Poor:7- This is a special feature of Islam. Zakat is oneinstitution which testifies to this. In thisconnection we may refer to ayat 5-6 of Sura Qasas.(We desired to show favour into those who weredepressed in the earth, and to make them leadersand to make them inheritors and to establish themon earth (Sura Qasas, Ayat: 5-6) In these versesAllah, the Almighty has expressed His desire toshow favour on the depressed people. Islamiceconomy shall establish all possible institutionsto carry out this desire of the Almighty. www.knowmuhammad.org
  11. 11. Distribution of inheritance:8- Islam has not left the distribution ofinheritance on the whims of a person, In Islama person can not favour one over the other ofhis relations for temporary or subjectivereasons as is the rule in the West. Islamdistributes inheritable property among severalgroups of people:i) Childrenii) Husband/ Wifeiii) Parentsiv) Brothers and sisters in certain situations. www.knowmuhammad.org
  12. 12. This distribution has taken care of differentgroups keeping in view their social role,requirements and proximity of kinshiprelationships. For those who remain outsidethe list of inheritors. Islam has provided forwasiat (will) for all such relations if they are ina distressed condition. A person can will up toone 3rd of his/her property for distressedrelations or others outside the inheritors.Based on:http://www.shahfoundationbd.org/hannan/article20.html www.knowmuhammad.org

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