Islam is not merely a religion or economic system but a Deen. It provides guidance for all aspects of individual & Collective lives. Islam means peace & submission. Peace acquired through total submission. There cannot be peace without Justice, which is the ultimate objective of sending down all Divine Books & Prophets. Islam allows to earn income in which benefits are enjoyed by all the concerning parties on the just basis & prohibited to earn income through Bribery, Interest, Stealing & Robbery, Gambling, Wine & its business & Fraud. Islam offers a definite economic system based on zakat, usher, Bayt al-mal, dignity of labour, equity, interest-free economy, legitimate income & avoidance of extravagance & observing rights & duties.

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JinnahUniversityFor
Women
Course
Macro Economics
Project
A Report On
“Economics In Islam”
Report Prepared By
Baseera Hashmi
Course Instructor
Miss Urooj Ejaz
Date Of Submission

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16th
February, 2015
ACKNOWLEDGMENT
In the name of Allah, the most Merciful & Beneficial. We Indebted to
ALMIGHTY ALLAH, Lord of our lives & of everything in the universe
& His HOLY PROPHET MOHAMMAD, (Peace Be Upon Him ),
Whose blessings enable higher ideas of life.
We deem it a great honor & privilege to record profound sense of
gratitude to my teacher Miss Urooj Ejaz for her valuable suggestion
throughout the Macro Economics Course & in the preparation of this
report. Her inspiring guidance & consistent encouragement given in
learning, execution of the training will ever shine our mind.
We have tried our best to make this report effective & efficient. Some
quality & informative books helped us very positively to make this
report understandable for readers. We are very thankful to all my
classmates who really helped us & especially my teacher who
maximized our skills in order to make this report effective & very
systematic.

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ThankYou
DEDICATION
I dedicate this report to my parents, friends & my teachers who
have supported me throughout my lifetime & helped me in
achieving my goals & inspired me every single day & motivated
me in every manner they could. I want to thank all of them for
believing in me & encouraging me for everything I did. I love you
all.
Baseera Hashmi

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EXECUTIVE SUMMARY
Islam is not merely a religion or economic system but a Deen. It provides
guidance for all aspects of individual & Collective lives. Islam means peace
& submission. Peace acquired through total submission. There cannot be
peace without Justice, which is the ultimate objective of sending down all
Divine Books & Prophets.
Islam allows to earn income in which benefits are enjoyed by all the
concerning parties on the just basis & prohibited to earn income through
Bribery, Interest, Stealing & Robbery, Gambling, Wine & its business &
Fraud.

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Islam offers a definite economic system based on zakat, usher, Bayt al-mal,
dignity of labour, equity, interest-free economy, legitimate income &
avoidance of extravagance & observing rights & duties.

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ECONOMICSINISLAM
BACKGROUNG
Islam offers a definite economic systembased on zakat, usher, Bayt al-
mal, dignity of labor, equity, interest-free economy, legitimate income &
avoidance of extravagance & observing rights & duties.
DEFINITION
It is the system free from exploitation. It allows every person to earn
his or her livelihood from legitimate sources & discourages concentration
of wealth & extravagance.

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THEECONOMICLAWOFISLAM
The economic law of Islam has been revealed by the Almighty
through His last Prophet (P.B.U.S)for the purification of the economy. It is
based on the Qur’anic philosophy of creation. According to this philosophy:
“The Almighty has created this world as a trial and test for man; every
person has therefore been made to depend on others for his living. No one
in this world can live independently as regards his needs & requirements. A
person of the highest rank must turn to the most ordinary to fulfill them.
In other words, every single person has an important role to play, without
which this world cannot continue. This role depends upon his abilities,
intelligence and inclinations as well as upon his means and resources,
which vary from person to person. In fact, it is because of this variation that
a society comes into being.”

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TRADITIONALISLAMICCONCEPTS
Traditional Islamic concepts having to do with economics included:
1. Zakat—the"charitable taxing of certain assets, such as currency,
gold, or harvest, with an eye to allocating these taxes to eight
expenditures that are also explicitly defined in the Quran, such as aid
to the needy."
2. Gharar—"uncertainty". The presence of any element of excessive
uncertainty, in a contract is prohibited. This applies not only to
insurance but also trading in derivatives, short selling and other
speculative transactions like day trading.
3. Riba—"referredto as usury (modern Islamic economists reached
consensus that Riba is any kind of interest, rather than just usury).

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1) ZAKAT
Zakat which literally means growth and purity is a tax on Muslim Capital
owned beyond a certain minimum. Zakat occupies an important place
amongst the Fundamentals of Islam, the observance of which is binding on
Muslims. It is an ordinance. According to the Holy Prophet of Islam (Peace
Be Upon Him):
“It was to be taken from the rich among them in order to be given to the
poor.”
"This beneficial tax is called Zakat".
The Prophet listed the following assets (and sources of income), which were
to be subject to zakat payments (basis of assessment):

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a) Camels, sheep, and cows.
b) Gold, silver, and coins.
c) Wheat, barley, dates & grapes.
d) Buried treasure.
2) GHARAR
The Arabic word gharar means risk, uncertainty, and hazard. Unlike
riba, gharar is not precisely defined. Gharar is also considered to be of lesser
significance than riba. While the prohibition of riba is absolute, some
degree of gharar or uncertainty is acceptable in the Islamic framework.
Only conditions of excessivegharar need be avoided.
The concept of gharar has been broadly defined by the scholars in two
ways.

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a) First, gharar implies uncertainty.
b) Second, it implies deceit.
The Qur’an has clearly forbidden all business transactions, which cause
injustice in any form to any of the parties. It may be in the form of hazard
or peril leading to uncertainty in any business, or deceit or fraud or undue
advantage. Apart from the above simplistic definition of gharar, some
definitions of gharar seem to have a parallel in the concept of uncertainty
in conventional finance. Gharar is defined by the Hanafi jurist al-Sarakhsi
as any bargain in which the result of it is hidden.
3) RIBA
Riba, which means not only usury, but all forms of unearned income,
has been strictly prohibited by Islam. Although the Qur’an did not specify
any particular kind of riba.

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Muslim scholars have categorized it in two types: riba al-nasi’ah, & riba
al-fadl.
a) RIBA AL-NASI’AH: Riba al-nasi’ah refers to the interest on loans; its
prohibition essentially implies that the fixing in advance of a positive
return on a loan as a reward for waiting is not permitted in Islam.
b) RIBA AL-FADL : Riba al-fadl is the excess over and above the loan paid
in kind. It lies in the payment of an addition by the debtor to the
creditor in exchange of commodities of the same kind.
The Shari’ah wishes to eliminate not merely the exploitation that is
intrinsic in the institution of interest, but also that which is inherent in all
forms of unjust exchange in business transactions.
SOURCESOFINCOMEPERMISSIBLEIN
ISLAM

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Every sourceof income in which benefits are enjoyed by all the
concerning parties on the just basis.
Allah in Holy Quran says:
“Do not devour one another’s property wrongfully, nor throw it before the
judges in order to devour a portion of other’s property sinfully and
knowingly.”
(Al-Baqarah: 188)
“Do not devour another’s property wrongfully – unless it be by trade based
on mutual consent.”
(Al-Nisa: 29)

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CHARACTERISTICSOFISLAMIC
ECONOMICSYSTEM
1) INDIVIDUAL FREEDOM
Islam emphasizes human & individual free with tolerance. Un-necessary
restrictions are discouraged. Every individual enjoys the right to work or do
business. Business is disallowed only for prohibited goods & services. Islam
guarantees all human rights.
2) LIMITED NATIONAL PROPERTY
Islam does not prohibit creating state property. The state, if need be, can
nationalize some necessary institutions or industries after paying their
prices.

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3) BAYT AL-MAL
The religion recommends the establishments of the Bayt al-mal, whose
sources of income are as follows:
a) Zakat
b) Jizyah
c) Plunder
d) Gifts
e) Kharaj
4) REASONABLE PROFIT
Our religion allows earning profit through legitimate business to a
proper extent. Profiteering is in no case acceptable & has been prohibited,
since it encourages concentration of wealth as a result of which the rich
gets richer, & the poor gets poorer.

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5) RESTRICTIONS ON BAIT-UL-MAL
Islam specifies & puts conditions on the use of funds of Bayt al-mal.
a) Its management & expenses should be with the advices & counseling
of the people’s representatives.
b) All expenses should be religiously & legally permissible.
c) All the accounts must be maintained & audited.
d) The people enjoy the rights of access to these accounts.
6) TWO-PARTY RIGHTSRECOGNIZED
In any business or activity are involved two parties. Buyer & seller,
Employer & employee, people & government, boss & subordinate, husband
& wife, parents & children, teacher & students are some of examples. I slam
recognizes all rights & duties that must be recognized & practiced by all

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parties involved. If this principle is followed there will be no one exploiter
or aggrieved.
7) DIGNITY OF LABOUR
The religion focuses due attention on labor. Every legitimate work is
recognized & people are asked to do work to earn their livelihood. It stops
them from asking for alms or extending hand out for charity. It loves
laborers not beggars. In short, Islam is champion of dignity of labor.
8) SOCIETY FREE OF EXPLOITATION
Muslim religion has evolved such principles, laws, rules, codes, canons,
jurisprudence, edicts & decrees, that if truly exercised, can render the
society free of exploitation & nobody will have courage to usurp the rights
of others. By following the tenets of Islam the society can be remodeled
into utopia.

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9) PROHIBITION OF GAMBLING
Islam disallows gambling, speculations, bets, & act of bookies.
Unfortunately, capitalism, an economic system, stands on speculations the
examples of which are stock, cotton, & gold exchanges.
10) ZAKAT/USHER
Zakat refers to a compulsory annual payment by those Muslims
having wealth at least equivalent to worth 7.5 tola gold or 40 tola silver. The
rate of zakat is two & a half percent of the property that must be paid to the
poor annually, mostly in the month of Ramadan. Islam doesn’t allow
deduction of zakat from interest, loans, or monthly salary.
Usher refers to the tenth part which is payable on agricultural property
by the zamindar. The zakat & usher have been imposed on the rich people
& feudal lords. Zakat to be annually paid is at the rate of 2.5 percent &
usher at the rate of 10 percent. Both the payments are instrumental to
discourage the concentration of wealth & the poor deserve to receive zakat
& usher by which they manage to improve their quality life.

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11) DISCOURAGINGWEALTH CONCENTRATION
Quran & Sunnah discard wealth concentration in any form, for it renders
the rich to become richer, & and the poor poorer. They encourage the
circulation of wealth, the examples of which are zakat, usher, spending for
the welfare of a common man & society as a whole.
12) ILLIET INCOME TABOOED
Islam has elaborates in detail all illicit incomes that a Muslim should
avoid. Bribery, extortion, ransom, profiteering, interest, usury, & incomes
from gambling, wine & pork business & casinos are all explicitly prohibited.
13) HOARDINGPROHIBITED

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Hording refers to holding back the goods to create an artificial shortage
in an effort to raise their prices in favor of the stockiest. Islam disallows
such activities because they bring miseries to a common man.
14) FITRA
According to Islamic tenet, fitra should compulsory be paid by every
Muslim. Irrespective of his or her age it should be paid once in a year on
the occasion of Eid-ul-fiter before Eid prayers. Its amount is 2.5 kilo of
wheat or flour or its equivalent in cash. The receiver should be poor.
15) INTEREST-FREE ECONOMY
Islam does not allow interest or usury. Interest is referredto as money
paid for the use of money at a certain rate. Ostensibly, interest & rent look
alike. Both must be paid, are fixed, & obtained without physical or mental
efforts. But one factor separates them from each other. Interest is paid on

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cash, while rent is paid on property other than cash. Hence, rent is
permissible in Islam.
16) TRANSFER OF WEALTH
Wealth can be transferredfromone person to another on certain
conditions which are as follows:
a) Inheritance
b) Work
c) Gift ( Hiba)
In other words, bribery, interest, profiteering, black marketing, hording,
theft, & other illicit sources of income are strictly banned and haram.
CONCLUDINGREFLECTIONS

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“A small wealthy class rules many Muslim nations while the masses
are extremely poor”
(observes George Braswell, Jr)
“In some countries the government collects zakat; many people
resent the zakat and question how the money is used. Islam prohibits usury,
yet this prohibition is seldom followed either on an individual or national
level.”
An Islamic Setup provides a graceful economic and social life. It
distribute the wealth in all family.

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FINALNOTE
As a final note, economic justice requires economic well-being for all
believers. To accomplish this, instituted within Islam are zakat (almsgiving
for the sake of the poor), jizyah (taxes levied against unbelievers within the
Islamic community), & laws regarding inheritance.

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REFRENCES
 “Introduction to business” Mohammad Amin Khalid , chap#3
pg58
 http://www.renaissance.com.pk/marfeart2y3.html
 http://en.wikipedia.org/wiki/Islamic_economic_jurisprudence
 http://www.kas.de/wf/doc/kas_21079-544-2-30.pdf?101110140957
 https://cief.wordpress.com/2006/02/13/definition-of-gharar/
(Source: Obaidullah, 29.)
 http://www.financialislam.com/prohibition-of-riba-maysir-and-
gharar.html
 https://islamiceconomicsproject.wordpress.com/islamic-
economics-in-quran-hadith/
 http://www.allaboutworldview.org/islamic-economics.htm
 http://ahsankhaneco.blogspot.com/2013/02/islamic-economic-
system-with-its.html

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