Topic 2: Introduction to Islamic Economics

1MFK ISB544 Topic 2

2MFK ISB544 Topic 2

3MFK ISB544 Topic 2

At the end of the lessons, students should be able:

To explain the worldview of Islam.

MFK ISB544 Topic 2 4

Do not incorporate an inherent belief in human brotherhood, socio-economic justice and the trust nature of resources.

Overly exaggerated emphasis on “survival of the fittest” or “material conditions of life”.

Do not motivating system to induce human being to work in the interest of society.

5MFK ISB544 Topic 2

Unable to realise simultaneously the goals of both efficiency and equity by means of strategies based on the secularist Enlightenment worldview.

Muslim countries need a different economic system – a system able to provide all the elements necessary for human well-being in accordance with the demands of brotherhoods and socio-economic justice.

6MFK ISB544 Topic 2

7MFK ISB544 Topic 2

Since factors affecting world views differ, different world views exist, leading to different “systems” for different peoples.

Theories explaining human behaviour also differ.

Islamic world view based on ‘Islam’ and its sources of knowledge.

8MFK ISB544 Topic 2

9MFK ISB544 Topic 2

Literally means peace and submission Muslim - one who submits

10MFK ISB544 Topic 2

Not equivalent to religion as understood in the west.

Watt (1979)… means a way of spending an hour or so on on Sundays in practices which give him some support and strength in dealing with the problems of daily life, and which encourages him to be friendly towards other persons and to maintain the standards of sexual propriety; it has little or nothing to do with commerce or economics or politics or industrial relationships … or may even look on religion as an opiate developed by exploiters of the common people in order to keep them in subjection.


Religion reduced to a private matter between and individual and his/her God(s).

no role to play in determining public affairs science replaced religion as authorityreligion for infantile man; science for

modern/nature man Nietzsche proclaims “God is Dead”This understanding of religion is not necessarily

applicable to all societies and civilizations.


Religion reduced to a private matter between and individual and his/her God(s).

No role to play in determining public affairs.

Science replaced religion as authority.

Religion for infantile man; science for modern/nature man.

Nietzsche proclaims “God is Dead”.

This understanding of religion is not necessarily applicable to all societies and civilizations.


Watt (1979)… whole way of life … covers both the private and

public/societal lives of man, it permeates the whole fabric of society, and includes theological dogma, forms of worship, political theory and a detailed code of conduct, including even matters which the European would classify as hygiene or etiquette …


Watt (1979). No shunning this world. Din is for this world. Use this dunya to achieve akhirah.

Al-Qasas : 77 “But seek with the (wealth) which Allah has

bestowed on thee, the home of the Hereafter, And do not forget thy portion in this world. But do good as Allah has been good to thee and seek not mischief in the land, for Allah loves not those who do mischief


Tawhid or Unity or God.

Kalimah Shahadah.

Beautiful Names of God.Implications for economics.Al- Razzaq (the Provider).Malikal Mulk (the eternal owner of Sovereignty).Al-Muqsit (the equitable).


Insan. Created good. Body and spirit.

Al-Hijr : 28-29 “Behold! Thy Lord said to the Angels : I am

about to create man, from sounding clay from mud moulded into shape. When I have fashioned and breathed into him of my spirit, fall ye down in obeisance to him”


Given aql and knowledge.(Al-Baqarah:31)“…And He taught Adam the manes of all things…

Best of creations.(Al-Tin:4)“We have indeed created man in the best of moulds”


Role of abd and khalifah.(Al-Dhariyat:56)“I have only created Jinn and Man that they may serve me…”

(Al-Baqarah:30)“Behold! Thy Lord said to the angels: I will create a vicegerent on earth…”

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”.


Creation of God for man.(Al-An’am: 95-103)Talks of vegetation and fruits, night and

day, heaven and earth, human being, rain.Material world and world of ghayb.Man as trustee to manage nature.Natures as a sign of God.


Ibadah to achieve falah (ultimate success).

Develop earth to achieve God’s pleasure.

To attain falah we must have knowledge and action


Ilm and derivatives appear 750 times in the Qur’an.

Fundamental requirement for all Muslims life-long.

Obligation (fard).



Good action is ibadah.

Good economic action is ibadah.

Good action requires correct intention, correct knowledge and observance of all shari’ah requirements.




Sub Systems For Various Aspects of Human Life

Political System

Economic System

Social System

Philosophy Principles Goals

TawhidKhilafahAmanah

Tazkiyyah

OwnershipFreedom

Social-Econ. Justice

Economic well – beingUniversal brotherhood

Equitable distribution of income

Employment generation

Worldview


According to M. Akram Khan:-“Islamic economics aims at the study of human falah achieved by organizing the resources of the earth on the basis of cooperation and participation”

Key concepts in the above definition are the following:-a. Falahb. Resourcesc. Cooperation and participation


a. Falah Literal meaning; -

to become happy, to have god luck or success, to be successful.

According to Raghib al-Isfahani:-Falah is a both-worldly concept.


a. Falah In this world it represents three things:-

i. survival,ii. freedom from want,iii. power and honour

In the hereafter it stands for:-i. eternal survivalii. eternal prosperityiii. everlasting gloryiv. knowledge free of all ignorance


a. Falah According to Qu’ran , the ultimate goal of

human life should be the achievement of falah in the hereafter, but it would be reward for one’s deeds during his stay in this world

Conformity to the Islamic way of life is a means to achieve falah both in this world and hereafter


Micro-level Macro level

Falah Survival Biological survivali.e. Physical health, freedom from disease

Ecological balance, hygienic environment , and medical aid for all

Economic survivali.e.Having means of livelihood

Management of natural resources to generate employment for the entire population

Social survival i.e.Brotherhood and harmonious inter-personal relationship

Inner social cohesion; absence of conflicts among different groups

Political survivali.e. freedom and participation in the affairs of the state

Independence and self-determination as an entity

Freedom from want

Alleviating poverty Provisioning for the entire population

Self-reliance i.e. work rather than parasitic idleness

Generating resources for the coming generations

Power and Honour

Self-respect Economic power and freedom from debt

Civil liberties, protection of honour and life

Military power33MFK ISB544 Topic 2

a. Falah In Qur’an the uses of the term falah

its derivatives occur at forty places

A perusal of these verses leads us to determine the conditions of falah i.e.i. Spiritualii. Economic iii. Culturaliv. Political


a. Economic Conditions of Falahi. Infaqii. Prohibition of interest iii. Fulfillment of covenants and trustsiv. Justicev. Enterprise


b. Resources of earth Studies human behavior towards

resources of earth and investigates those modes of utilisation which may lead to falah

Resources of earth are meant to provide livelihood to the creatures of God


b. Resources of earth The Qu’ran informs us that God has

created sufficient resources for his creatures (41:10)

Hence, scarcity may be either due to lack of proper utilisation of natural endowments or an imbalanced distribution


b. Resources of earth IE studies resources from the point of view

of ‘adequacy’ rather than scarcity

It starts from the premise that the resources of earth are adequate to achieve falah

If some scarcity is being encountered man must be doing something wrong, and ways and means should be found t restore the natural state of adequacy


b. Resources of earth This may be broadening the productive

base, improving technical know-how, and re-distribution of resources

There is moral dimension to this question as the man is accountable for his deeds in the akhirah.


c. Cooperation & participation Inter-personal relationship in Islam are

based on the universal brotherhood (ukhuwah) of all human being (4:1).

The Qu’ran has explicitly ordained Muslims to help one another in furthering God-consciousness (taqwa) and virtue (birr) (5:2).

Thus mutual help rather than conflict should be the basis of all economic relationship.



i. Tawhid Foundation of Islamic faith Oneness and Unity of God It means that universe has been consciously

designed and created by the Supreme being Quranic verse

(3:191; 38:27; 23:15) Everything created by Him has a purpose which

gives meaning and significance to the existence of Universe

After creating this world, the Supreme being did not retire


ii. Khalifah (Vicegerancy) Quranic verse:-

(2:30; 6:165; 35:39; 38:28; 57:7) Man endowed with:-

a. Spiritualb. Mental characteristicsc. Material resources


As a khalifah man is free which enable them to think and reason to choose between right ad wrong

By nature man is good and noble(15:29; 30:30; 95:4)


iii. Amanah


iv. Tazkiyah


IE is further supported with the following principles:-i. Ownershipii. Freedomiii. Social-economic justice



i. Ownership A social (including legal) relationship of an individual

or group with an object involving a system of rule of access to, and control of resources.

86 times in the Qu’ran. Absolute owner is God. Man as khalifah and ‘abd has relative and

conditional ownership. Man is responsible to society and accountable to

God for his property. Labour and need are both legitimate bases of

property ownership.


ii. Freedom In Islam, man is free but still subject to the

guidelines in the form of shari’ah


iii. Social-economic justice


With proper understanding of definition, philosophy and principle Islamic economics outline to achieve the following goals:-i. Economic well-beingii. Universal brotherhoodiii. Equitable distribution of income and wealthiv. Employment generation



i. Economic in general.


Sub Systems For Various Aspects of Human Life

Political System

Economic System

Social System

Philosophy Principles Goals

TawhidKhilafahAmanah

Tazkiyyah

OwnershipFreedom

Social-Econ. Justice

Economic well – beingUniversal brotherhood

Equitable distribution of income

Employment generation

Worldview


THANK YOU…


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Topic 2: Introduction to Islamic Economics