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Notes On Islamic Economics
THEORIES AND INSTITUTIONS
MONZER KAHF
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
ii
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
CopyRights:
AllcopyrightsarereservedtoAuthor
MONZERKAHF
Address: 22Marblehead,Irvine,CA92620USA
Email:monzer@kahf.com
Publishedby:MonzerKahf
Feb.2014
iii
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
iv
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
THISSERIES
PREFACE
ThisisthefirstinaseriesoffourbooksonNotesonIslamic
Economics.Thefirstbookdealswiththefundamentaltheoriesand
institutionsoftheIslamiceconomicsystem.Itattemptstopresenta
completeandcoherentinstitutionalsettingoftheIslamiceconomic
systemwhichputsitatascientificlevelcomparablewithothersystems
andallowsustoderivepoliciesandguidelinesforgradual
transformationofanyeconomyandforadaptingexistinginstitutionsto
thebasicrequirementoftheIslamiceconomicsystem.
Thesecondbookofthisseriesshallfocusonthethirdsector,
thecharitableinstitutionsoftheIslamiceconomicsystem.Itshall
discussthefundamentalprinciplesonwhichtheIslamiccharitable
sectorisfounded.ItwilldiscusstheprinciplesofZakah,Awqafand
InfaqintheIslamiceconomicsystem,theinstitutionstheycreateand
theirhistoricalapplication.Itwillalsodiscussthenecessary
requirementforefficientmanagementofZakahandAwqafin
contemporaryeconomiesandmeansandmethodologiesforfinancing
therevitalizationofdormantAwqafrealestatepropertiesinthe
Muslimsocieties.
BookthreewilltakeuptheissueofIslamicfinanceandbanking.
ItwillpresentthebasicsketchofIslamicfinancefromtheoreticaland
practicalaspects.ItwillfocusonthenewconceptofIslamicfinancial
intermediationandwilldistinguishbetweendepositoryfinancial
intermediaryinstitutionswhichhaveanimportantmonetaryaspectof
theiractivitiesandotherinstitutionswhichconcentrateoninvestment
activities.
BookfourwilldiscusstheIslamicdevelopmenttheoryand
policy.ItwilldealwiththeobjectivesofeconomicpoliciesintheIslamic
economicsystemandtheinstrumentsavailablefortheirachievement.
ItwilllookintothechangesimplicatedbytheIslamiceconomicsystem
intheconceptandapproachestodevelopment.Thisbookwillalso
covertheIslamicapproachtofiscalandmonetarypoliciesaswellas
incomepolicyanddevelopmentalpolicy.
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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
InthesefourbooksIdonotintendtorepeatotherwritings.This
seriesisanattempttopresentIslamiceconomicsinanonͲtraditional
waywithanemphasisontheinstitutionalaspectsandstructure.Iwill
dealwiththefundamentalissuesofIslamiceconomicsandfinanceina
realisticyetinnovativemannerwhileobservingfundamentalrelations,
tiesandinspirationfromthebasicsourcesoftheIslamicreligionandits
Shari’ahrulings;theQur’anandtheSunnah.
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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
Introduction
Chapter1
Chapter2
Chapter3
Chapter4
Chapter5
Chapter6
Chapter7
Chapter8
Chapter9
Chapter10
Chapter11
Conclusion
TABLEOFCONTENTS
NOTESONISLAMICECONOMICS
THEORIESANDINSTITUTIONS
Page
ix
IslamicEconomics,Whatisitandwhatisit
1
for?
FurtherNotesonDefinitionandMethodology
19
ofIslamicEconomics
TheRoleofValues,EthicsandCulturein
47
Economics
InstitutionalStructureoftheIslamicEconomic
61
System
EconomicRoleofStateinIslam
TheRoleandImportanceofthePrivateSector
93
119
TheDemandSideorConsumerBehaviour
145
Theory
SupplySideorProducerBehaviour
TheInstitutionofMarket
177
211
InstitutionalGuidelinesofMarketRegulation237
Allocationofoutputtofactorsofproduction
259
andtheimplicit
295
vii
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
viii
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
INTRODUCTION
ThisisthefirstbookoftheseriesofNotesonIslamicEconomics.
ItpresentsthebasictheoriesandtheinstitutionalsetupofIslamic
economics.Itcoverschaptersonethrougheleven.Theypresentthe
basicideasandtheoriesofIslamiceconomics.Chaptersoneandtwo
attempttoanswerthequestionsof‘whatisIslamicEconomics’and
‘whyweneedtostudyit’,theyalsodiscussissuesofdefinition,scope,
sourcesofknowledgeandrelevance.
Thethirdchapterdealswiththebasicvaluesandethical
questionsofIslamiceconomicsbothasabranchofscienceandasa
studyoftheIslamiceconomicsystem.Itbrieflystudiesethicalvalues
whichaffecteconomicbehaviourofmenandwomenlikeofefficiency,
performance,selfͲreliance,perfectionandbenevolence.Chapterfour
willdiscussthefundamentalinstitutionalsetupoftheIslamiceconomic
system.ItarguesthattheIslamicinstitutionalsetupisbasedonnine
pillarswhichare:1)Propertyrights,2)Exchangeandcontracts,3)
Economicfreedom,4)Marketstructure,5)Wealthandincome,6)State
oflaw,7)Economicactivityofthestate,8)Internalethicalmonitor,
and9)Mercyandcaring.
Thefollowingtwochaptersaredevotedtothediscussionofthe
positionandplaceofthestateandtheprivatesectorinthesystemand
theinterrelationsbetweenthem.Themainargumentofthesechapters
isthatwhiletheIslamicsystemadoresprivateownershipandeconomic
freedom,itassignsanimportantroletothestate,inallitsbranches,
andchargesitwithimportantfunctionsincludingthemanagementof
publicproperties,includingnaturalresources,whichmaybehuge
undercertaincircumstance.
Islamictheoriesofconsumerbehaviourandproducerbehaviour
arediscussedinchapterssevenandeight.Thebasictheoremofthese
twochaptersisthathumanbeingsarenotonedimensional.They
ratherhaveabenevolentfacetoftheirbehaviourswhichispresent
bothintheconsumersandthefirmsaswell.Theanalysisinthesetwo
chapterstriestotakethisbehaviouralelementintoconsideration.
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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
Chapterninerevisitsthemarketanddealswiththestructureof
pricesatthemicrolevel.Itarguesthatthemarketreformsintroduced
bytheProphet,pbuh,himselfwereveryexemplaryinsettingthe
desiredstructureforthemarketonthebasisoffairplayofmarket
forcesofdemandandsupplywithoutelementsofinjusticewhichmay
comefrommonopoly,financialpower,unethicalpracticesbysome
actorsorinsufficientpowerofenforcementofexchangecontracts.At
thesametimetheIslamicmarketstructuredoesnotassumeconditions
ofperfectcompetition.
Thelasttwochaptersaredevotedtodiscussingtheeffectof
marketstructureonthefactorsofproductionandontheallocation
processofresources.Theyalsodiscussregulationsinthemarketand
theirextentandeffect.
x
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
1
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
CHAPTERONE
ISLAMICECONOMICS,WHATISITANDWHATISITFOR?
WhatisIslamicEconomics?Doesitexist?Whatisthesubjectof
IslamicEconomics?Thesearethreeintroductoryquestions
understandingthemwillfacilitateourstudyinthefollowinglectures
anddiscussion.
Tobeginattemptingtoanswerthefirstquestionwemustfirst
knowwhatEconomicsitselfis,asabranchofscience,studiesand
researchsinceIslamiceconomicsisalsoeconomicsanyway.
WhatisEconomics?
Economicsisthestudyofhumanbehaviour,actionsand/or
practicesinutilizinglimitedresourcestosatisfyunlimitedwants.Itisa
socialsciencewhichstudieshumanbehaviourindealingwithwealth,
property,resources,incomeandthelike.
Mainobjectivesofanyreligion
Everyreligionisconcernedwithtwomainobjectives;deedand
creed.Everyreligion,fromthebehaviouralangle(thedeed),isfocused
onformulationorreͲformulationofhumanbehaviourtomake
compliantwiththemannerwhichisdesiredandprescribedbyreligion.
Thus,religion,incontrasttoeconomics,dealswiththeholistichuman
behaviour(doanddon’tdo)inutilizingresourcesofallkinds,notonly
materialresources,tosatisfywants,desiresandotherobjectivesin
humanlife.Religionisthereforefocusedonhumanbehaviourinits
totality,itisbroaderthaneconomicsitself.Itdealswiththeuseof
resourcesefficientlyandcoversotheraspectstoothatarenotcovered
3
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
ineconomics.Inthesecondsourceofreligion,theSunnah,the
prophet,pbuh,isreportedtohavesaid:thetwofeetofaservantof
Allahwillnotmove(remainstanding)ontheDayofJudgmentuntilhe
isquestionedabouthislifehowhespentitandabouthisknowledge
howheutilizeditandabouthiswealth/propertyfromwherehe
acquireditandinwhatwayhespentitandabouthisbodyastohow
ﻢﻴِﻓ ِﺄﺴﻳ ِﺔﻣِ ْمﻮﻳ ٍﺪﺒﻋَ ُ
ِهﺮﻤﻋ ﻦﻋَ َ
heuseditَاﻟﻘﻴﺎل ﺣﺘﻰ ََََُُُْْ ﺎل ﻗﻮلﻟاﲆﺻ ﻪـﺳر ﻪـﻠـﺳﻠﻢ ": واﻟـﻠﻋﻠﻴﻪ ﺎَُﻗَﻣﺪ لَﻻﺗوﺰ
ﺚﻳﺪﺣ لﺎﻗو يﺬﻣﱰﻟا هاور ".هَﻼﺑَأ ﻢﻴِﻓ ِِِﺟَِﻪﺒﺴﺘْﻛا ﻦﻳَأ ﻦﻣ ِﻪِﻟﺎﻣ ﻦﻋو ﻞَﻌَﻓ ﻢﻴِﻓ ِﻪِﻤْﻠِﻋ ﻦﻋو هﺎﻨْﻓَأ
َُْﻪﻤْﺴ ْﻦَﻋو ُﻪَﻘَﻔْﻧأ َﻢﻴﻓَو ََََََََََُُْْْ
ﺢﻴﺤﺻ ﻦﺴﺣ.(alTirmithi,No2417).
ThisHadithpointstotheimportanceofeconomics,becauseall
thequestionsinitarerelated
toeconomicsonewayorthe
other,whetherdirectlyin
regardtotheearninganduse
ofresourcesofindirectlyin
regardtotheuseoftime,
humancapabilityanduseof
acquiredknowledge.Practically
everythingwedoinlifedeals
withutilizationofresources,
thereforereligionencompasses
economicbehaviourisallitsformsandaspectsinadditiontoother
areasofhumanbehaviour.
WecanthereforearguethatIslamicEconomicsisalegitimate
fieldofstudy.Andwecanclaimthatallotherfaiths,ideologiesand
doctrineshaveaneffectonhumanbehaviourwithregardstoutilization
ofresourcesandtheyconsequentlyhavetherighttoclaimtheirown
economics.Hence,onecantalkaboutChristianeconomics,Hindu
economics,JewishEconomicsaswellasIslamiceconomics.
Anotherpointisimportantinthisregard,thatisoftheinterͲ
relationbetweenfaithandeconomicbehaviour.Allfaithsand
ideologiesaffecteconomicbehaviour.Buttherearesometimesadirect
relationbetweenfaithandtheeconomicquantum.Takeanexampleof
liquor:Whatarethecostsandbenefitsofproducingandconsuming
liquorinanycountrywheremostpeopledonotbelieveinthe
prohibitionofliquorcomparedwithacountrythatprohibitsthepublic
4
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
consumptionofliquor?Thetotalcostofproducingliquorandofthe
lossofproperties,productivetimeandlivesasaresultofdamages
causedbyconsumingliquorissubstantiallylargeincountriesthatdo
notprohibitit,whileitisnegligibleinMuslimcountrieswhereitis
generallyprohibited.
Butthereareimportantdifferencesbetweenthesedifferent
religions’.Letusbeginwithanexample,takethecaseofRiba.The
threereligions,Christianity,IslamandJudaismprohibitRiba(interest).
ButonlytheIslamicreligiondefinesindetailsthemeaningofRiba,its
actualapplication,italsogivesamanualofoperationalizationofits
prohibition.BoththeoriginaltextsofChristianityandJudaismaresilent
aboutanydetailsregardingtheapplicationoftheProhibitionofRiba.
SomuchsototheextentthatJuristsofthesetworeligionssteppedin
tofillthegapofdefinitionandoperationsbutunfortunatelythese
attemptsdidnotstandthestrongrationalargumentoftheirown
peopletohaveaclearoriginaldefinitionandoperationaldetailsofthe
prohibitionofRiba.Thefinalresultwasalossoftheprincipleitselfin
theChristianandJewishcontemporaryteachingsandpractices.Other
religionsoftengivebasicandgeneralguidelinesaboutissues,desired
orotherwisebutonlyIslamexplainsindetailedandsystematicways
theirapplicationandmethodologiesoftheirimplementation.
Anotherexampleisfromcharity,helpingandfeedingthepoor.
ِ ِِ ِِ َِ ِ
InSurahYasin,Allahsays:“واﻦ ﺬﻳﻟﻠﺮ ﻔَﻛَ ﻣآَُ َﱠ اﻮﻨﻟـﻠـﻪ ََُُزﻗﻜﻢ ﱠﻟَﻳﺬاﻦَ ﻗَلﺎا َُا ﻬﻢْﻟﻗﻴ ﻞَ رَ اﻣﱠﻧأﻮُﻘﻔاَذإ َو
ُ
ٍََِِْﺸﻳﱠﻢِﻌْﻄَ
ٍنِﺒﱡﻣ لَﻼَﺿ ِﰲ ﱠﻻإ ْﻢُﺘﻧأ ْنإ ُﻪَﻤَﻌﻃأ ﻪـﻠـﻟا ُءﺎََ ْﻮﻟ ﻦَﻣ ُُﻧأAndwhenitissaidtothem:‘Spend
ofthatwithwhichAllahhasprovided
you,’thosewhodisbelievesaytothose
whobelieve:‘Shallwefeedthose
whom,ifAllahwilled,He(Himself)
wouldhavefed?Youareonlyinaplain
error."(36:47)
ThisAyahpointstothefact
thattheywereaskedtogivecharityin
aspecificmanner,notinageneral
mannerofjustcaringaboutthepoor
andneedy.Caringaboutothersexists
inallreligionsbutthespecificordinancesthatconnectthedotsare
foundonlyinIslam.
5
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
TheBasicDifference
ThebasicdifferencebetweenIslamicEconomicsandother
formsofeconomicsisthatIslamicEconomicshasmoredetailed
guidelinesandspecificarticulationofeconomicissues.Thegeneral
guidelinesmaybesimilarbetweenallreligionsbecausetheyareall
foundedonmoralityandhumanjustice.Theworkabilityofthese
generalguidelinesisgivenintheShari’ahﺔﻌﻳﴩﻟا.Otherreligionsusually
lackthesedetails.
WhenwelookatacomparisonbetweentheIslamiceconomics
andconventionaleconomicswenoticethattheseculareconomic
thinkingdependsonlyononesourceofknowledgewhichisthehuman
rationaleormind.TheIslamicEconomicSystemhasanextrasourcein
additiontothehumanmind,whichistherevelation(theQur’anand
Sunnah).Forinstance,theconceptofsocialjusticeisgenerally
describedseculareconomicsaswellasinallreligions’economics.But
theShari’ahgoesbeyondjusticeandintroducestheZakahةﺎﻛﺰﻟاasa
formofRahmah ﺔﻤﺣﺮﻟا(mercy),obligatoryonricherindividualsto
poorerones;thepeoplewhowerenotabletoproduceforthemselves.
MethodologyofIslamicEconomics:TheKhaldounianway
IbnKhaldoun,inhisMuqaddimahﺔﻣﺪﻘﳌا,talksaboutsocial
science.Itcanbearguedthatheisnotonlythefatherofsociologybut
ofeconomicstoo.TheAmericanpresidentRonaldReagan,inhis
inauguralspeech,quotedsomeeconomicideasofIbnKhaldoun.He
mentionedthathewouldliketoapplyaKhaldounianeconomicpolicy
bysupportingthesupplysideoftheeconomy.Enhancingproductionis
amajorelementandfirstconditioninfightingrecessionandunderͲ
development.IbnKhaldounarguedthatthefirststepindevelopinga
societyandcreatingcivilizationistoincreasetheabilitytoproduce
wealth.Helookedtoanalyzethebehaviourofhumanbeingsas
humans,regardlessofrace,religion,ethnicity,colororeconomic
1
background.TheKhaldounianessentialcornerstoneofsocialscience
1
ThishementionedintheearlypagesofhisMuqaddimah,pages60Ͳ70oftheArabic
print,wherehestatedtheobjectiveofhisstudyasattemptingtounderstandthe
6
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
methodologyistostudyhumanbeingsastheyactuallyexistnotasthe
researcherimaginethemorlikesthemtobeandbehave.
ThisisachallengeforIslamiceconomics;tostudyhumanbeings
astheyare,notjuststudyingMuslimsandbehaviourinaMuslim
society.WeshouldbeabletoexplainthebehaviorsofMuslimsand
nonͲMuslimsthroughtheIslamicEconomictoolsofanalysis.Islamic
EconomicsisnotastudyoftheMuslimsocietyalone;itshouldpushus
towardsunderstandingthehumaneconomicbehaviouringeneral.
IslamicEconomistsshouldseektounderstandhumanbehaviour
regardlessofreligiousbeliefitself.
Andafterwardstrytounderstand
theeffectofreligiousteachingsandScopeofeconomicsandreligion
believesonthatbehaviourandhow
wecanchangethatbehaviourx
Religionendeavorstoreformulate
basedonreligiousteachings.humanbehaviorinallitsaspects/areas.
x
Economicsstudieshumanbehavior
Thismethodologyisbased
usingscarceresourcetosatisfy
ontwosources:TheRevelationand
unlimitedhumanwantsanddesires.
2
HumanandHistoricalExperiment.x
Doeseveryreligionhaveitsown
Letustakeanexamplefromhuman
economics?
experience;theideaofgoldand
x
DifferencebetweenIslamiceconomics
silverreservesinthecentralbank.If
andeconomicsofotherreligions
weaskthefollowingandlong
searchedquestion:What
determinestheexternalvalueofa
currency?Thisisthevalueofacurrencyinrelationtoothercurrencies.
Isitsupplyanddemandorreservesinthecentralbank?Inthepast,
peoplewereoftheopinionthatreservesdeterminethevalueof
currency.Thisideawasinheritedfromapreviousmonetarysystem
knownunderthename“GoldStandards.”Inpasttimes,attheearly
periodwhensocietiesstartedchangingtheircurrenciesfromthetwo
preciousmetalstopaper,papercurrenciescontinuedbeingattachedto
gold.Banksguaranteedpapercurrencieswithgoldandpledgeto
exchangepaperbillsforgold.AnhistoricalincidenceinSyriaand
humanbeingasitisandbeabletoexplainhumanbehavior.Headdedthatifhe
succeedsinthatwecandiscoverthereasons,(theSunan),conditionsandlawsof
associationofhumanbeingsandconsequencesoftheirlivingtogether.
2
Insocialscienceandeconomics,wereplaceexperimentsbyunderstandingthe
historicalexperience.Understandingahumanbeingbyanalyzingthemotivesofgiven
observedbehaviorsbasedonthedifferentcircumstances.
7
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
Lebanonchangedthisideology.DuringtheFrenchoccupation1920Ͳ
1945,papercurrencywasimposedtoreplacegoldandsilverwhich
werethedualmetalcurrencyinheritedfromtheOttomanerainSyria
andLebanon.TheFrenchcolonialauthoritiescollectedallgoldand
silvercoinsandtransferredthemtoParisasaformofreserveforthe
SyrianandLebanesecurrency(theyhadonecurrencythen).Afterthe
SecondWorldWar,SyriaandLebanongottheirindependenceand
startednegotiationswiththeFrenchgovernmenttoretrievetheir
reserves.NegotiationsbrokedownbetweenandFrancerefusedto
returnthegoldandsilvertotheirowners.Butamazinglythevalueof
theSyrianandLebanesecurrenciesdidnotbecomezeroanddidnot
declineatallafteritbecamereserveͲless.
Thinkingofthishistoricalexperienceandlearningitslessonwe
realizethatwhatactuallydeterminesthevalueofcurrencyisthesupply
anddemandforthecurrencyagainstothercurrencieswhichis
determinedbyexportandimportsofgoods,servicesandcapital,not
thereserveswhicharestoredinthebasementofacentralbank.
IslamicEconomicscanthereforebestudiedorunderstoodfrom
twoangles.toputitindifferentwords,the
subjectofIslamiceconomicshastwo
branches:1)thestudyofhumaneconomic
behaviourasitistoobserveandunderstand
theSunanofGod(lawsofnature)inregards
tousingmaterialresourcesinproduction,
distributionandconsumptionofgoodsand
serviceswhichareusedtosatisfyhuman
wantsanddesires;and,2)thestudyofthe
IslamicEconomicSystemthatishowisthe
economyorganizedundertheIslamiclaw,
valuesandbehaviouralpatternsandhowdo
individualeconomicunitsundertaketheir
decisionindealingwithuseofresources.
TheIslamicEconomicSystem
ThefocusofthestudyoftheIslamiceconomicsystemistwo
folds:
8
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
a.UnderstandingtheeconomiclawsthroughtheSunan(lawof
nature)madebyAllahtoHiscreatures(PositiveEconomics)
b. Howcanweimplementallthecommandsthatcameinthe
Shari’ahandtheeffectofthisimplementation?(Normative
Economics)
AsaverybriefoverviewoftheIslamicEconomicSystemcan
concentrateontwomainandfundamentalareas;thephilosophical
foundationorprinciplesofthesystem;and
theoperationalguidelinesorrulesof
behaviourwitchIusuallycallthemtherules
Thebasicdifference
ofthegameortherulesof
operationalizationofthefundamental
x
Islamiceconomicshasmoredetailed
principlesoftheIslamiceconomicsystem.
guidelinesandspecificarticulationof
economicissues
x
Islamiceconomicsdependsontwo
ThephilosophicalfoundationorPillarsof
sourcesofknowledge:humanmind
andrevelation(Qur’anandSunnah)theIslamicEconomicSystem
Therearefivebasicpillarsofthe
Islamiceconomicsystemwhichmakeits
foundationsandaffectallitsvalues,lawsandnorms.
x
OnenessofGod:GodistheonlySupreme,thenhuman
beingsareequalinthesightofGod.Therulesofoperationalization
emphasizeourequalityanddonotallowanyprivilegesbeassignedto
anybodyoverothers.Opportunitiesareopentoallhumanbeings.
x
AccountabilityontheDayofJudgment:EconomicͲwise,
everythingwedoiscalculatedforusandtherewillbeaneffectonus
eitherintheshorttermorinthelonger,evenaneffectintheeternity
afterdeath.Accountabilitymeansthatafterdeath,therewillbe
ResurrectionandJudgmentwithrewardandpunishmentforevery
economicactionaneconomicunittakes.
x
TheMessage:ThemessageisaDivineguidancebyAllah
whichismeanttobefollowed.Thisshouldmakeageneralframework
forhumanbehaviourindealingwithresources,usingthemand
distributingthem.
9
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
x
Worship:thisisauniqueprinciplethatyoudonotfindin
otherreligions,faithsandideologies.Allnormalactionsoflife,including
usingresourcesforproduction,distributionandconsumption,canfall
underthedefinitionof‘actsofworshipingGod’iftheyarecoupledwith
theintentionofobeyingHiminbenefittingone’sownselfand/orother
people.Accordingly,withtheintentionofobeyingGodinlinewithHis
ordinances,productionofbeneficialgoodsandservices,sellingthem
forprofit,provisionoffinancefacilities,consumption,etc.areallforms
ofworshipastheyarenomorethanusingbountiesgivenbyGodfor
thebenefitofthecreaturesofGod.
x
Humanbeingsare
vicegerentsofAllahonearth:The
earthiscreatedformanandhe/she
isgiventheadvantageofbenefitting
fromallresourcesonearthby
workingtoobtainthem.This
assignmentistoallhumanity,notto
anyrace,color,religionandspecial
people,noadvantagegivenbyGod
toanyoneoveranyother.
TheOperationalandBehaviouralGuidelines
Thebehaviouralguidelinesarethosemattersthatrelateto
rulingsinShari’ahofdo’sanddon’t’s.InIslam,therearemanydetails
thatgiveacompletesetoflegalsystemwhichbecametobeknownas
theShari’ah.Butwemustnoticethatthesedo’sanddon’t’smayrelate
toactions,feelingsandsentimentandtonormsofbehaviour.They
comealsoatvaryingdegreesofcommandment,sothattheymaybe
onlyapreferredactionorbehaviourortheymaybeverystrongand
strictordertodoortoavoid.Theseoperationalguidelinesaresortedin
thefollowingsixcategoriesorareas:
Rovingtheearthisawaytogainingsustenance
Menandwomenareurgedtotraversetheearthandseek
sustenancefromresourcesAllahbestowedonthemthroughoutthe
wholeearth.IntheQur’an(67:15)itismentionedclearly“ItisHeWho
10
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
hasmadetheearthmanageableforyou,sotraverseyethroughits
tractsandenjoyoftheSustenancewhichHefurnishes:butuntoHimis
ِﻪﻴِ ِِْرِ اﻮُﺸﻣﺎَﻓ ًﻻﻮُﻟَذ ضرَْﻷا ﻢُﻜَﻟ َﻞﻌﺟ يِﺬﱠﻟا ﻮﻫ
theResurrectionﻣِ ﻦﻗز ﻪﻠُاﻮَُﻛوَﻣﻨﺎ ََﺎ ِﰲﻛﺒِﻬُﱡ رﻮُﺸﻨﻟاإﻟوََْﱢََََُُْْ.”Also
intheHadith“ifyoudependonGodinatruewayHewouldgiveyou
sustenancetheWayHegivesittobird,theygointhemorninghungry
رﻄﻟا قزﺮﻳ اﻛ ﻢﻜﻗزﺮﻟ ﻪﻠﻛﻮﺗ ﻖﺣﻪـﻠـﻟا ﲆﻋ ﻢﺘﻠﻛﻮﺗ ﻢﻜﻧأ ﻮﻟ
andcomebackintheeveningfull
ﺎ حوﺮﺗو ﺎﺻاﺧ وﺪﻐﺗ
ﻧﺎﻄﺑ.”ThisHadithshowsthatifmanhastrustinAllahand
dependsonHimwithutmostconfidence,Allahwillprovideforhimas
Heprovidesforthebirds;theysetoutinthemorninghungry(andwork
alldaylong)andreturnintheeveningfilled.Soifmanseekssustenance
fromtheprovisionsofAllahonearth,hewillbeprovidedforwithhis
ownworkandeffort.Allhumanbeingsareequalinseeking
opportunitiesandthereshouldbeeconomicfreedom.Manisfreetodo
allhewantsaslongasitisnotprohibitedanddoesnotinfringeonthe
freedomofothers.
Justicetoallhumanbeings
PracticallyeverythingprohibitedinShari’ahisprohibited
becauseitisaformofaggressiononothersorinjusticetothem.The
caseofinterestisagoodexample;itisanunfairchargeonthe
borrowerbecauseitisasumofmoneyoverandabovetheamountof
thedebtwhilethedebtitselfasthepropertyofthecreditorcannot
produceanyincrement.Theftisalsoprohibitedbecauseitviolatesthe
principleofprivateownership.Thereshouldbenoaggressionandno
forcefulsale.Theprohibitionofanyformofcheating,Riba,fraud,
confiscation,ect.,i.e.,allmatterswhichfallintheareaof
establishmentandprotectionofeconomicjustice.
Mercyandcareaboutotherhumanbeingsandothercreatures
TheIslamiceconomicsystemrealizesthatjusticealoneisnot
sufficienttoestablishfruitfulsocialrelationsandtoalloweachhuman
beingandeachcreatureonthisearthadequatemeansofsurvivaland
dignity.Therearemanyreasonstoarguethatthereisnoinvisiblehand
whichassuresthatifeverypersonpursueshisowninterestthe
interestsofallwillalsobeassured.Inrealitysomepersonsmaynot
havebecauseofmanyreasonsandfactorssufficientequipmentand
11
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
qualificationtoproducesufficientsustenanceforthemselvesandsome
personsmayfacecertainexternaladversecircumstancesthatmake
themfallbehind.Forallthesematterstheremustbemercyandcaring
forotherstopreservetheirdignityandfulfillmentofbasicneedsofall
humanbeings.ThisisdoneintheIslamiceconomicsystemthroughthe
institutionsofZakah,SadaqahﺔﻗﺪﺻandAwqafفﺎﻗوأ.Theseinstitutions
createsnotonlyaminimumobligatorylevelofhelptoothersbutalsoa
spiritofcaringandrespectofhumanbeingsastheyarehonoredand
dignifiedbyGod.TheQur’an(17:70)says“Wehavehonoredthe
childrenofAdam;carriedthemonlandandsea;giventhemfor
sustenancethingsgoodandpure;andconferredonthemspecial
ﺮﺤﺒﻟ ﱪْﻟا ﰲ ﻢﻫﺎﻨْﻠﻤﺣو ﻲِﻨَ
favours,aboveagreatpartofourcreationَْْ َﺎوﻨاﻣْﺮِ ﺪَﻘﻟوﺑ َدمَآﻛََْ ﱠَََََُْﱢَِ
َ
ًﻼﻴِﻀْﻔَﺗ ﺎﻨْﻘَﻠﺧ ﻦﻤﻣ ٍرِﺜَﻛ ﲆَﻋ ﻢﻫﺎﻨْﻠﻀَﻓوِﻄﻟا
ََْﱠﱢَُْﱠَ تﺎَﺒﱢﻴﱠ َﻦﱢﻣ ﻢُﻫﺎَﻨْﻗَزَرَو.”Zakah,charityandAwqafare
platformsandchannelstohelpotherhumanbeingsandallother
creatures.CaringforothersisacommandfromAllah.Itisbasedon
brotherhoodandloveforeachother.Itisdignifyingtohelpthosewho
areinneed.Islamistheonlyreligionthatraisesthishelptoothers
throughtheobligationofZakahtothelevelthatitbecomesofonethe
basicfivepillarsofthereligionandamoralnorminthesociety.
Balancebetweenprivateandpublicownership
TheShari’ahdefinescertainpropertiesascanonlybeownedby
thesocietycollectively.Therearewelldefinedboundariesbetween
propertieswhichcanbeownedbyprivateindividualsandproperties
whichcanbeownedbythewholesociety.Thereisalsoabalance
betweenpublicandprivateownership.Forinstance,pastureand
grazingLand,forests,abovegroundorundergroundminerals,sources
ofwatersandenergyarepropertiesofthewholesocietytogetherand
shouldbeusedtothebenefitofthewholeUmmah ﺔﻣﻷا.The
governmentisonlyatrusteeontheseproperties.
Thegovernmenthasanactiveroletoplayintheeconomy
accordingtotheIslamiceconomicsystem
Themanagementofpublicpropertiesistheresponsibilityofthe
government.Thegovernmentisnotonlyaregulator,enablerand
supervisor.Itisalsoaplanner,aproducer,alogisticsupporteranda
12
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
distributor.TheIslamiceconomic
havingapositiveimpactonthe
economicunitinthesociety.
لﺎﳌا
TheconceptofMal
systemenvisionsgovernmentas
economicactivitiesasanactive
InabulletͲpointsform,mal
Includesbothwealthandincome,itisnotonlythestockof
o
property
obutalsotheflowofcreatedwealth
CoversonlyatͲtayibat تﺎﺒـﻴﻄﻟا,i.e.,thingsthatarebeneficialor
o
goodandpure.InthedefinitionofShari’ah,abottleofliquoror
cigaretteisnotmalbecausetheyare‘badsnotgoods’.Tobe
consideredamalathingmustbeusefuloratleastnotharmful.
Impliesasocialroleand
o
responsibilitywithout
sacrificingthefullprotectionPillarsoftheIslamicEconomic
ofprivateownership.Thisis
System
delineatedintheQur’anitself
(4:5)“Tothoseweakof
x
OnenessofGod;allhumanbeingsare
understandingMakenotover
equal
yourproperty,whichGodhath
x
AccountabilityontheDayofJudgment
madeameansofsupportfor
x
TheDevineguidancefromGod
you,butfeedandclothethem
(Message)
therewith,andspeaktothem
x
WorshipisobedienceofGodinall
wordsofkindnessandjusticeَ وﻻ َ
ِ َِ
ًﺎ ﻣﺎَﻴﻗ ْﻢُﻜَﻟ ﻪـﻠـﻟا ﻞََﻌَﺟ ﻲﺘﱠﻟا ُﻢُﻜَﻟاَﻮْﻣأ ءﺎَﻬَﻔﱡﺴﻟا ْاﻮُﺗْﺆُﺗwalksoflife
ًﻻْﻮَﻗ ْﻢُﻬَﻟ ْاﻮُﻟﻮُﻗَو ْﻢُُﻛاَو ﺎﻬﻴِﻓ َُُx
ﻫﻮﺴَْ ْﻢُﻫﻮﻗزْراوVicegerencyandauthorityoverearth
andothercreatures
ﺎًﻓوﺮْﻌﱠﻣ.”TheQur’anusesthe
ُ
pluralpronouninreferringto
thepropertywhichisprivately
ownedbypersonsofweak
judgmentandindicatesthatithelpsthewholesocietybutatthe
sametimedidnotallowusingitexceptforthebenefitofthe
ownersthemselves.
13
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
ObjectivesofShari’ahﺔﻌﻳﴩﻟا ﺪﺻﺎﻘﻣ
TheobjectivesofShari’aharediscoveredthroughcriticalsurveyͲ
typeanalysisofthetextsoftheQur’anandtheSunnahwhichrelateto
theShari’ahrulingsofthedo’sanddon’t’s.Bycriticallystudyingthese
texts,scholarscametotheconsensusthatthesetextsweresentto
makelifebetterforhumanbeingsinallaspects(Religion,Life,Property,
MindandPosterity).
ThegeneralobjectiveofShari’ahisthus
“thepreservationofmankindandthe
continuationofitsgoodnessindividuallyandin
groups”.Thisisachievedbyseekingtoachieve
whatisgood,knownasMaslahah ﺔﺤﻠﺼﳌا,and
avoidingwhatisbad,Mafsadahةﺪﺴﻔﳌاinrespect
toreligion,stateofmind,anddeedsandactions.
Deedsandactionsareeitherwithself,with
otherpersons,orwithotherthings.
Thelevelsofbenefits(Maslahah)
TherearethreelevelsofMaslahah:
x تﺎﻳروﴬﻟا
Necessities(Daruriyyat)
x
ConveniencesorRemovalofhardship
)
(Hajiyyatتﺎّـﻴﺟﺎﺤﻟا
x تﺎﻴﻨﻴﺴﺤﺘﻟا
Beautifications(Tahsiniyyat)
TheselevelsofMaslahahshouldnotbeconfusedwiththe
standardShari’ahrulingswhichare:
x
Obligatoryﺔﻀﻳﺮﻓ
x
Advisableبوﺪﻨﻣ
x حﺎﺒﻣ
Permissible
x
Undesiredهوﺮﻜﻣ
x مﺮﺤﻣ
Forbiddenorprohibited.
ThereisnodirectcorrespondencebetweentheseMaslahah
levelsandthestandardShari’ahrulings.Ifwetaketheexampleof
14
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
clothes,fromthecontextofMaslahah,theyareTahsiniyyat;aformof
beautificationformenand
women.ButbasedonShari’ah
rulingsthereareobligatorycodes
ofdressingwhichapplytomenConceptofMal
andwomen.Thisimpliesthat
x
whatisobligatoryintermsofInclusiveofwealthandincome
Shari’ahrulingsdoesnotCoversonlythingsthatarebeneficial,
x
necessarilyconnotenecessityingoodandpure
x
termsofMaslahah.Impliesasocialroleandresponsibility
withoutsacrificingthefullprotection
Thereislittleemphasisonofprivateownership
theeconomicnecessitiesinthe
textofShari’ahbecausemost
economicnecessitiesarehuman
instinctandinborn.Theydonotneedbeingtaught.TheQur’an
emphasizesverylittleoneatingandtakingmedicinesbecausetheseare
innerdesiresandinstincts;meneatswhentheyarehungryandtake
medicinewhentheyareill.Weneednopressurefromanyonetoact
forfulfillingtheseneeds.Thereareotherformsofnecessitieswhichare
meanttobeaprotectionagainstaggressionsfromothers.Theseforms
eitherfallinthecategoryofobligatoryorforbiddeninthestandardsof
Shari’ahrulings.
Protectionofmal(property)
AnexampleoftheobjectivesofShari’ahistheprotectionof
mal.Protectionofmalfallsunderbothobligationandprohibition,forit
isprohibitedtotakeotherpersons’propertywithouttheirconsent.Itis
alsoanobligationtoprotectone’sownpersonalpropertyfromwastage
andspendingitinvain.Infact,aspreviouslymentioned,theprotection
3
ofwealthisoneofthedirectobjectivesofShariah.Protectionof
privatewealthisjustasimportantastheprotectionofpublicwealth.
Alongwiththeprincipleofprotectingwealthcomestheprincipleof
promotingandprotectingtherightofownertomakeherwealthgrow
andincrease;therightofinvestment.Withitalsocomestheprotection
3
AgoodpercentageofliteratureinFiqhfocusesonmuamalat.Muamalatmainly
discussestheprotectionofwealth.ThelongestverseintheQur’andealswith
protectingdebtanditsrepayment.
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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
ofearnings.Themostimportantprotectionofearningsisprotectionof
entitlement;anindividualisentitledtoanyincrementthatoccursonor
inher/hispropertyevenifshe/hedoesnotputanyefforttoward
increasingit.
Shari’ahObjectiveswithRegardtoProperty
WemaylookattheobjectiveofShari’ahinregardstoproperty
asbranchedinfourareasasfollows:
x
PromotionandProtectionofPrivateProperty
x
PromotionandProtectionofPublicProperty
x
PromotionandProtectionofRighttoGrow
x
PromotionandProtectionofEarnings.
Thesefourbranchesmustbeunderstoodwithanotethatthe
lasttwoapplytoeachofprivateandpublicrightsofownership.Ifwe
focusontheprivateownershipwefindthatthisShari’ahpromotion
andprotectionismanifestedinthefollowingareas:
x
Freedomofdisposition:Anindividualisatlibertytodowhateverhe
likeswithhisproperty.Hecandecidetoeitheruseitasamediumto
earnoranyotherformofutilization.
x
Protectionfromaggression:Anindividualshouldbeprotectedfrom
unjustacquisitionofhispropertybyotherindividualsorbythe
government.Heshouldbeprotectedfromtheftandotheraggressive
actionsbyotherindividualsaswellasfromtaxesonhisproperty
becausetaxesareessentiallycuttingawayonhisproperty.Forthis
reasonShari’ahtakesgenerallyanegativeattitudetowardtax
impositionandrequiresthattaxesshouldbeattheirminimumwhich
isnecessaryforrunningthegovernmentactivitieswhenthereareno
otherresources.
x
Balanceofrightsandobligations:Allrightsarebalancedwith
obligations.Thisruleappliesbetweenindividualsaswellasbetween
individualsandgovernment,orbetweenfamilymembers.
x
RightofGod:Thisisbasicallytheconceptofmercy.Tohelpothersis
consideredarightofAllahintheIslamicreligion.Wealthyindividuals
16
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
arecalledontohelpthepooreronesthroughZakahandCharities.
FurthermoretheIslamicAwqafsystemprovidestheinfrastructure
andflowofrevenueandservicestothecharitablevoluntarysector.
EconomicandFinancialSpecificObjectivesofShari’ah
InadditiontothegeneralobjectiveofShari’ahofpromotingand
protectingprivateownershipandpublicownershiptherearemore
specificobjectivetowardtheirachievementtheShari’ahrulingsworkat
theirmicrolevel.Forinstance,theprohibitionofRibatriestoachieve
justiceandrespectofprivateownershiprightsandtheirrelated
entitlementrights.Thesespecificobjectivescanbesummedupinthe
followingpoints:
x
Promotingthecreationofwealth/propertywithinthelimitsofthe
basketofwhatisbeneficialtohumanbeingwithoutinfringingon
theenvironmentandotherothercreatureswhoareallcreatedto
glorifytheCreator.
x
Wealthcirculationbetweenindividualandavoidanceon
concentratingitisafewhands.Thisismanifestedinthepublic
financebehaviourortheIslamicgovernmentasestablishedbythe
Prophet,pbuhaswellasintheinheritancesystemandVerse59:7
oftheQur’an.
x
Encouragingwealthutilizationforbenefitstoyourselfandothers
anddislikinghoardingit,usingitwastefullyorkeepingitidle.
x
Enforcingaminimumlevelofmercy,careandbenevolencewhile
inspiringindividualstogiveasmuchmoreastheycan.
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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
18
MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS
19
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