First Step to Islamic Economics

7/27/2019 First Step to Islamic Economics

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Module OneAllah Taala has declared in the Quraan Majeed:

(:)Today, I have completed and perfected your Deen for you

Hence, Islam is a complete, comprehensive and perfect system of life designed

by Allah Taala Himself for all of mankind till the day of Qiyaamah.

Just as Islam governs our religious, social and political life, it also governs the

economical sphere of our lives. In fact, Islam governs EVERY aspect of our

life.

Abu Hurairah (radhiyallahu anhu) reports that Nabi (sallallahu alaihi

wasallam) has said:

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Error of Economic SystemsAll other systems are man-made. They are bereft of divine guidance. Hence,

the natural tendencies of man dictate the system. One of the base qualities in

most humans is greed. The Quraan Majeed clearly declares:

(:21)People have been beset with greed

Thus the greed and selfishness of people influences the systems that they

formulate.

To add to the dilemma, religion has been calculatedly removed from business

and economics and has been restricted to practices of worship. Thus, man has

stooped to the lowest and meanest of actions such as gambling, prostitution,

etc. in order to earn money.

History and current statistics bear testimony to the failure of any other

system. The recent economic collapse made many western economists

acknowledge that their system is a failure. While a small minority become

super rich, the poverty among the masses have increased.

50% of the worlds population lives on less than $2.50 a day. Furthermore, 75%

of the worlds income is owned by the richest 20%. In the year 1820, the ratio

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of poor to wealthy was 3:1 whereas in 1992 it shot up to 72:1.

(http://www.statisticbrain.com/world-poverty-statistics

)

This is just a glimpse at the crisis that the world is facing.

Hence, Islamic economics, being divinely guided IS the only solution tosocietys problems provided it is correctly implemented.

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http://www.statisticbrain.com/world-poverty-statisticshttp://www.statisticbrain.com/world-poverty-statisticshttp://www.statisticbrain.com/world-poverty-statisticshttp://www.statisticbrain.com/world-poverty-statistics


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Fundamental DifferencesThe purpose of this section is to portray the vast difference between the

Islamic and Capitalistic systems in order to highlight that these are two

completely diverse systems.

Islamic Economy CapitalismDivinely Guided Man made

Society based Individual based

Equality Monopoly

Money is vehicle Money is objective

Moderation Extravagance

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Preliminary Points regarding the ShareeahsOutlook to EconomicsAbdullah bin Masood (radiyallahu anhu) reports that Nabi (sallallahu alaihi

wasallam) said: (:208)The seeking of halaal income is an obligation after other obligations

Thus after fulfilling the fundamentals of Deen, such as performing of salaah,

fasting etc., it is an obligation (fardh) that a person earns that amount of

wealth that is sufficient to fulfil his basic needs.

The Shareeah has commanded us to earn halaal wealth and has in the

strongest terms condemned begging and depending on others.

Once a Sahaabi (radhiyallahu anhu) came to Nabi (sallallahu alaihi

wasallam) to ask for assistance. Instead of extending assistance to him, Nabi

(sallallahu alaihi wasallam) asked him to bring whatever he had. The Sahaabi

(radhiyallahu anhu) brought a sack cloth and a cup. Nabi (sallallahu alaihi

wasallam) auctioned these two items for two dirhams. He then gave the

money to this Sahaabi and instructed him to buy food with one dirham and

purchase an axe with the other dirham and bring it to him. Nabi (sallallahu

alaihi wasallam) then fixed a handle for the axe with his own hands and sent

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this Sahaabi away. (Sunan Abi Dawood #1643) In this way, He (sallallahu

alaihi wasallam) empowered this Sahaabi.

Not only has Shareeah commanded us to earn halaal wealth, Allah Taala

has also promised us immense rewards for doing so, provided it is done with

the correct intentions.

While halaal economic activity has been encouraged for the purpose of

fulfilling ones needs, at the same time Shareeah clearly teaches us to strike

a balance between the world and the Hereafter. In fact Shareeah commands

us to give preference to the Aakhirah over this world. Hence, nowhere,

absolutely nowhere in the entire treasure of ahaadeeth can we find a single

hadeeth encouraging us to amass wealth, to compete with others or to make

it the primary objective of our life. Nabi (sallallahu alaihi wasallam) hassaid:

(:15)I do not fear poverty befalling you. However, I fear that the material world

will be spread out before you just as it was spread out for the previous

nations. You will then vie and compete with each other (for the materialwealth of this world) just as the previous nations did. It (the world) will

distract you just as it distracted them.

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We have also been warned about being obsessed by wealth. Nabi (sallallahu

alaihi wasallam) constantly emphasised on his Ummah, verbally and

practically, that this world is a temporary abode and our real abode is the

Hereafter. There is no comparison of the world to the Hereafter. This reality

has been eloquently encapsulated in the hadeeth wherein Nabi (sallallahu

alaihi wasallam) is reported to have said:

(:330)

By Allah!The world in comparison to the Hereafter is like the water on your

fingertip in comparison to the ocean.

Belief is the driving force in man. Man believes that fire burns, hence he

stays away from it. He believes that poison kills, therefore he does not dare

to touch it. Likewise, a Muslim believes that Allah Taala is the provider, and

it is not his efforts that bring wealth. Therefore Shareeah does not encourage

us to spend all our energies amassing wealth and expanding our empires.

Shareeah advocates moderation, contentment and gratitude. Whatever we

have is only the grace of Allah Taala and His gift.

This is the cornerstone of Islamic economics which is diametrically oppositeto the Capitalistic system.

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The inherent differing nature of each system is highlighted by the drastic

difference between the fundamentals and the very cornerstone of both

systems.

The Islamic spirit has been summarised in a hadeeth of Musnadul Bazzaar,

narrated by Huzaifah (radhiyallahu anhu) that Nabi (sallallahu alaihiwasallam) said, Jibreel (alaihis salaam) has inspired in my heart that no

person shall leave this world until he receives his sustenance in full. Even

though that sustenance is received late, one will surely receive his sustenance.

Fear Allah Taala and do not spend much time in earning. If in finding wealth

there is a delay, then do not obtain sustenance with sin and non permissible

means. Indeed the sustenance which is by Allah Taala cannot be acquired by

means of disobedience.(Majmauz Zawaaid #6287)

An Example:An example of the Islamic spirit is like a boat in water. As long as the water

remains around the boat, it is safe. The moment water gets into the boat, it

will sink.

Likewise is the condition of a believer. Wealth should remain around him and

he should never allow that wealth to enter his heart.

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Successful History of Islamic EconomicsBy the end of the 1

stcentury after Hijrah, the Islamic empire had grown to be

the biggest empire, the super-power and the greatest force. Its rule extended

over Arabia, Persia, Transoxiana, parts of Europe and Northern Africa. Hence

the Muslim empire had a thriving economy.

As early as four decades after Hijrah, the Islamic Empire had its own postal

system. It had a naval fleet of 1700 battleships which would launch attacks on

Rome twice every year. In the rule of Haroon Ar-Rasheed (170-194 A.H.), the

income of the Baitul Maal (public treasury) was 7 150 000 gold dinaars!

The economic prosperity and progress can be gauged from the extensive rules

and masaail that were laid down by Imaam Abu Haneefah (rahimahullah)and his panel of Ulama in the early 2nd century.

Likewise, the magnum opus of Imaam Qudoori (rahimahullah), Al-Mukhtasar,

suggests that instruments like bills and cheques which could be drawn in one

country and cashed in another were in existence from as early as the middle

of the 4th century of Islam (9/10 century A.D.).

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Module TwoThe Essentials of a Sale

1. MUTUAL CONSENT (At-Taraadhi)

A sale will be invalid without mutual consent.

Example: The sale of a person who is forced to sell. Such a sale is not valid.

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2. EXISTENCE OF SUBJECT OF SALE (Al-Wujood)

The subject of sale must be existent at the time the sale is concluded.

Example: Selling an unborn calf or the advance selling of crops is not

permissible.

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3. OWNERSHIP (Al-Milkiyyah)

The subject of sale must be in the ownership of the seller at the time of sale.

Example: Ismail Builder wishes to purchase 100 pockets of cement from

Bilaals Hardware. Bilaal did not have cement when Ismail contacted him.However, his brother, Yusufs General Dealer, who is across the road, has the

cement. Bilaal sells the cement to Ismail and thereafter gets the cement from

Yusuf and delivers it to Ismail. This sale is invalid as Bilaal did not have

ownership of the cement when he sold it.

However, there are two exceptions to this. Shareeah has allowed baius -

salam and baiul istisnaa.

Salam (forward sale) there are many conditions regarding baius - salam.However the most important conditions are:

1. The price has to be paid IN FULL at the time of the contract.

2. The subject of salam (commodity) must be available in the market for the

duration of the contract.

Istisnaa (ordering the manufacture of an item)

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4. POSSESSION

The subject of sale must be in the possession of the seller at the time of sale.

Application: Moosas Tile-orama bought a consignment of tiles from China.

The sale was concluded and Moosa paid for the goods as well. Whilst theconsignment is still en-route to South Africa, Moosa begins selling the tiles

(with samples). This sale is invalid. Although Moosa owns the shipment,

however he has not yet taken possession of it.

Ebrahim bought a computer from Ahmad, but the computer is still in the

possession of Ahmad. Ebrahim cannot sell the computer as long as he does

not take possession of it.

Elucidation: Islamically, it is impermissible to sell something until one hasassumed the risk of that commodity. Once possession of an item is taken, risk

passes from seller to buyer. It will now be permissible to sell it.

Solutions:

1. Take possession of the goods or appoint an agent to do so before selling.

2. Act as an agent in selling the goods and request a commission from the

supplier.

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5. INSTANT AND DEFINITE

The sale must be instant. It cannot be attributed to a future date or a future

event or contingent.

Example: A sale is concluded with the following condition, If you aresuccessful in receiving a loan from ABC, then this car is sold to you. Such a

sale is invalid.

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6. UNCERTAINTY

Any transaction wherein there is uncertainty about any of the exchanges is

not permitted in Shareeah.

This is precisely the reason for gambling being prohibited. Allah Taala has

condemned gambling or maysir in the strongest of terms, declaring it to be

filth from the works of Shaytaan. (Surah Maaidah v90)

Some examples in contemporary times:

1. Competitions where a fee is charged (raffles, etc.).

2. Insurance.

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Module ThreeThe Essentials of a Sale (continued):

7. FIXED PRICEThe price in a sale has to be fixed without any ambiguity. It can be fixed

verbally, or in any other manner, provided it is certain.

Examples:

1. Ahmad concludes the purchase of a watch from Bilaal in exchange of

whatever he paid for it. This sale is invalid.

2. Ebrahim buys a computer from Ismail. The price is whatever you want to

pay. This is also invalid.

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Having different cash and credit prices is correct provided the sale is

concluded in a definite manner (either cash or credit) and no additional

amounts are added for late payments, etc.

Early settlement discounts are impermissible. In the terminology of the

Fuqaha, this is known as.

The reason for its impermissibility is thatthis is riba (interest) in reverse. Usually interest is charged in this manner:

Actual price: R10

Payment after 10 days: R15



In an early settlement discount the price is fixed at R25 payable within 30

days. If paid in 20 days, then the price is R20 and so forth. However, if the

seller gives the buyer a discount without any previous clear or tacit

arrangement or condition, then it will be permissible. This is purely the

prerogative of the seller. The buyer is not entitled to make any claim for a

discount.

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8. SUBJECT OF SALE MUST BE KNOWN

The subject of the sale has to be specified (mutaayyan). It cannot be

ambiguous.

Example: Ahmad buys a sheep from Bilaal which has not been specified.This sale is incorrect.

The golden rule that generally governs ambiguity is:

Any ambiguity which normally could result in a dispute, invalidates a sale.

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9. CREDIT TERM MUST BE FIXED

In the case of a credit sale, the credit period has to be fixed in a definite

manner.

Example: Ebrahim buys a book from Ismail, for which he will pay when his

father returns from Timbuktu. This sale is incorrect.

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10. SUBJECT OF SALE MUST BE PERMISSIBLE

The subject of the sale must be permissible in Shareeah.

Example: The sale of wine, pork, carrion, musical instruments, musical

cds/DVDs etc. will not be permissible.

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11. FREE OF INVALID CONDITIONS

Any condition which is against the Sharee demands of a sale and wherein

there is benefit to either the buyer or seller will render the sale invalid. If the

condition is of such a nature as described but that condition has become

prevalent as a general norm, then making such conditions will be correct

provided it does not conflict with any clear injunction of the Quraan or

hadeeth. An exposition of this is as follows:

Taking possession of the purchased item is the sole responsibility of the

purchaser as it has entered in his ownership. However, it is the prevalent

norm that the buyer demands delivery from the seller, which in actual fact is

not his obligation. However, since such a condition does not contradict any

clear verse of the Quraan or hadeeth, it will be valid and binding.

On the other hand, for example, the condition of paying interest will never

be permissible as it opposes the clear prohibition of riba (interest).

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InterestAllah Taala says in the Quraan Majeed:

):)

Those who consume interest will not rise up before AllahTaalaexcept like

those who are driven to madness by the touch of Shaytaan. That is because

they say: Trading is no different than usury, but Allah Taalahas made

trading lawful and usury unlawful. He who has received the admonition from

his Rabb and has mended his way shall be pardoned for the past; their case isfor Allah Taala(to judge). Those who repeat this crime shall be the inmates

of the Hellfire wherein they will remain forever.

):178)If you fail to do so then take notice of a warfrom AllahTaalaand His

Rasool.

):17)Allah deprives usury of all blessings but will give increase for deeds of

charity.

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Nabi (sallallahu alaihi wasallam) is reported to have said: Abstain from

seven things which will destroy you.The Sahaabah (radhiyallahu anhum)

asked, And what are those seven things?Nabi (sallallahu alaihi wasallam)

replied, Shirk, black magic, unjustly murdering someone, consuming

interest, usurping the wealth of orphans, fleeing from the battlefield and

falsely accusing chaste innocent Muslim women. (Saheeh Bukhaari #2766)

Ibnu Masood (radhiyallahu anhu) narrates that Nabi (sallallahu alaihi

wasallam) cursed the giver and taker of interest. (Saheeh Muslim #4092)

Ibnu Masood (radhiyallahu anhu) also narrates that Nabi (sallallahu alaihi

wasallam) said, There are, seventy three levels of interest, the lowest is like

committing incest with ones mother. (Haakim #2259)

According to another hadeeth, consuming one dirham of riba (usury) isworse than fornicating thirty three times. (Majmauz Zawaaid #6574)

In a narration of Tabraani, Nabi (sallallahu alaihi wasallam) is reported to

have said, Before Qiyaamah, usury, fornication and intoxicants will become

common.(Majmauz Zawaaid #6582)

These are just few of the many ahaadeeth on this important topic.

It is not possible for us to extensively cover all the rulings regarding interest.We will conclude with a golden rule: Any loan that draws benefit is riba

(interest).Please forward your feedback and queries to:

[email protected]

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First Step to Islamic Economics