Notes on Islamic Economics
309 Pages
English
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Notes on Islamic Economics

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309 Pages
English

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This is the one he wrote "a series of notes about the Islamic economy" consists of 11 chapters, and revolves around, Islamic Economics, What is it and what is it for? .. Further Notes on Definition and Methodology
of Islamic Economics.. The Role of Values, Ethics and Culture in
Economics .. Institutional Structure of the Islamic Economic
System ..Economic Role of State in Islam .. The Role and Importance of the Private Sector ..
The Demand Side or Consumer Behaviour Theory .. Supply Side or Producer Behaviour .. The Institution of Market .. Institutional Guidelines of Market Regulation..Allocation of output to factors of production and the implicit

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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

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

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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

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

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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.

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

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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

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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

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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.

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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

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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.

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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:

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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.

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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

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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

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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

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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.

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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

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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

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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

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

19