Islamic economics

Islamic Islamic EconomicsEconomics

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Islamic PhilosophyIslamic Philosophy

Individual and communal life is shaped Individual and communal life is shaped by belief in the One God, who sent His by belief in the One God, who sent His Book (the Quran) for the spiritual, Book (the Quran) for the spiritual, social, physical and economic benefit social, physical and economic benefit of mankind. The Quran was inspired of mankind. The Quran was inspired to Muhammed, who provided a to Muhammed, who provided a practical example of the teachings of practical example of the teachings of the Quran in executive, legislative, the Quran in executive, legislative, judicial, social and spiritual spheres of judicial, social and spiritual spheres of life. life.

Islamic PhilosophyIslamic Philosophy

Islam is a comprehensive way of life Islam is a comprehensive way of life that does not distinguish between the that does not distinguish between the material and the spiritual – both are material and the spiritual – both are intertwined and both are important for intertwined and both are important for the well-being of the human. the well-being of the human.

Both private and public interests are Both private and public interests are important, but when they conflict, important, but when they conflict, then public interests have precedence then public interests have precedence even if they go against some even if they go against some individual interests.individual interests.

Early Islamic EconomicsEarly Islamic Economics

To ensure the provision of the basic To ensure the provision of the basic necessities of life to every citizen, necessities of life to every citizen, including food, clothing, housing, including food, clothing, housing, health care, education and security.health care, education and security.

To give practical verdicts or solutions To give practical verdicts or solutions to peoples’ problems concerning to peoples’ problems concerning sales, letting, taxes, loans, sales, letting, taxes, loans, bankruptcy, and so forth.bankruptcy, and so forth.

Goals of Islamic EconomicsGoals of Islamic Economics

1. To safeguard Islamic values regarding:1. To safeguard Islamic values regarding: ReligionReligion LifeLife IntellectIntellect OffspringOffspring Wealth Wealth

These rights are protected for each citizen These rights are protected for each citizen to enable him to enjoy a comfortable life to enable him to enjoy a comfortable life and to maximize his opportunity for and to maximize his opportunity for spiritual development and social spiritual development and social contribution. contribution.


2. Just distribution of wealth resources. 2. Just distribution of wealth resources.

If some members of the community fail to If some members of the community fail to achieve sufficient provision for the achieve sufficient provision for the fulfillment of their basic needs through fulfillment of their basic needs through their own efforts, they have a their own efforts, they have a rightright to the to the earnings and wealth of others. earnings and wealth of others.

The Quran instructs, “And give the relative The Quran instructs, “And give the relative his right, and the poor and the traveler, his right, and the poor and the traveler, and do not spend wastefully.” (17:26)and do not spend wastefully.” (17:26)


3. Optimum use of resources.3. Optimum use of resources.

Islamic teachings enjoin a balanced and Islamic teachings enjoin a balanced and wholesome enjoyment of life for all.wholesome enjoyment of life for all.

“ “O Children of Adam, take your O Children of Adam, take your adornment at every place of worship, adornment at every place of worship, and eat and drink, but be not excessive. and eat and drink, but be not excessive. Indeed, he likes not those who commit Indeed, he likes not those who commit excess.” (7:31)excess.” (7:31)


4. Development of society through 4. Development of society through lawful investment.lawful investment.

5. Protecting the interests of future 5. Protecting the interests of future generations.generations.

6. National independence and 6. National independence and economic stability, so a people are economic stability, so a people are not coerced to act against Islamic not coerced to act against Islamic values for the sake of their economy. values for the sake of their economy.

1. To safeguard Islamic values regarding 1. To safeguard Islamic values regarding religion, life, intellect, offspring & wealth.religion, life, intellect, offspring & wealth.

2. To justly distribute wealth resources.2. To justly distribute wealth resources.

3. To optimally use resources.3. To optimally use resources.

4. To develop society with lawful 4. To develop society with lawful investments.investments.

5. To protect future generations.5. To protect future generations.

6. To enhance national independence and 6. To enhance national independence and economic stability.economic stability.

Summary: Summary: Goals of Islamic EconomicsGoals of Islamic Economics

Five Solutions:Five Solutions:1: Prohibited Earnings1: Prohibited Earnings

From the production, sale and From the production, sale and distribution of intoxicantsdistribution of intoxicants

From gambling and lotteriesFrom gambling and lotteries From theft, falsehood, deceit and From theft, falsehood, deceit and

embezzlementembezzlement From pornography, prostitution & From pornography, prostitution &

pimpingpimping Deceitful use of an orphan’s property Deceitful use of an orphan’s property

is particularly banned.is particularly banned.

Five Solutions:Five Solutions:2: Prohibited Expenditure2: Prohibited Expenditure

Hoarding, which destabilizes Hoarding, which destabilizes currency value and leads to false currency value and leads to false shortages and inflationshortages and inflation

Extravagance and wastefulness, Extravagance and wastefulness, which deprives the poorwhich deprives the poor

Extreme frugality, which cripples Extreme frugality, which cripples consumption, production and overall consumption, production and overall wealth. wealth.

Five Solutions:Five Solutions:3: Required Expenditure3: Required Expenditure

ZAKATZAKAT

A 2.5% alms tax on savings that have A 2.5% alms tax on savings that have accumulated for a year. It applies to cash, accumulated for a year. It applies to cash, stocks, crops, precious metals, livestock stocks, crops, precious metals, livestock and “circulating assets.” If wealth is and “circulating assets.” If wealth is hoarded, it will be eaten by zakat.hoarded, it will be eaten by zakat.

It channels wealth from the rich to the poor, It channels wealth from the rich to the poor, instills a sense of responsibility, lessens instills a sense of responsibility, lessens economic gaps, and promotes goodwill.economic gaps, and promotes goodwill.

Recipients of ZakatRecipients of Zakat““Zakat is for Zakat is for the poor and the needy, the poor and the needy, and for those who collect and administrate it, and for those who collect and administrate it, and for those whose hearts are to be and for those whose hearts are to be

reconciled,reconciled, and for freeing captives, and for freeing captives, and for those in loss or debt, and for those in loss or debt, and for the cause of God, and for the cause of God, and for the [stranded] travelers. and for the [stranded] travelers.

It is an obligation from God. And He is Knowing, It is an obligation from God. And He is Knowing, Wise.” (9:60)Wise.” (9:60)

Five Solutions:Five Solutions:4: Zero Interest Rate4: Zero Interest Rate

Interest (simple & compound) is strictly Interest (simple & compound) is strictly prohibited.prohibited. It channels wealth from the poor It channels wealth from the poor to the rich, encourages exploitation of the to the rich, encourages exploitation of the poor and widens economic gaps.poor and widens economic gaps.

The receiver, giver, witness and scribe are The receiver, giver, witness and scribe are all cursed, according to prophetic sayings. all cursed, according to prophetic sayings.

Gaining “profit” by investment is allowed, as Gaining “profit” by investment is allowed, as it encourages development projects. In it encourages development projects. In modern terminology, it is called venture modern terminology, it is called venture capital. capital.

A fixed “finance charge” is allowed.*A fixed “finance charge” is allowed.*

Five Solutions:Five Solutions:5: Inheritance Laws5: Inheritance Laws

Fixed distribution of inherited wealth to Fixed distribution of inherited wealth to offspring, parents and siblings after the offspring, parents and siblings after the payment of debts.payment of debts.

Up to 1/3 of wealth can be bequeathed to Up to 1/3 of wealth can be bequeathed to recipients not covered by inheritance laws.recipients not covered by inheritance laws.

Eliminates the concentration of wealth on Eliminates the concentration of wealth on a single person.a single person.

Eliminates court battles over related Eliminates court battles over related issues. issues.

Summary of the Five SolutionsSummary of the Five Solutions

Earnings from vice is prohibited.Earnings from vice is prohibited. Moderate enjoyment of wealth is Moderate enjoyment of wealth is

encouraged.encouraged. Tax on superfluous wealth is required.Tax on superfluous wealth is required. Interest on loans is banned.Interest on loans is banned. Inheritance is regulated.Inheritance is regulated.

Result: Wholesome, comfortable living for Result: Wholesome, comfortable living for all inhabitants of the earth, in an all inhabitants of the earth, in an atmosphere of mutual responsibility and atmosphere of mutual responsibility and goodwill.goodwill.

More informationMore information

http://www.quranenglish.com/http://www.quranenglish.com/

Economic System of IslamEconomic System of Islam

The Economical Problem of ManThe Economical Problem of Man

Islamic Islamic EconomicsEconomics

AWARE Center DiwaniyasAWARE Center Diwaniyas

Economy & Finance

Islamic economics