Dr.-Javed-Jamil1 By Dr.Javed Jamil

Though Islam attaches optimum importance to economy, it does not, like most of the materialistic ideologies, foresee it as the most important aspect of life. In Islam, the economy has to subordinate to social and moral values, which in turn are dependent on the proper perception and inculcation of the Islamic principle of total submission to God, the Lord and the Guardian of the universe. If we look at Islamic socioeconomic system, we find that there are three essential guiding fundamentals: health (physical, mental, social and spiritual), family peace and social order. Economic development, therefore, cannot be permitted at the cost of social or family peace or degradation of any aspect of the health of individuals. The importance of money is undeniable but what is still more important is peace – at the individual level, at the family level and at the social (national and international) level.

 The basic plan of Islam’s economic policy is aimed at maintaining an optimum level of production and ensuring equitable distribution of wealth. To achieve these objectives, Islam strikes a unique balance between economic liberty, restrictions and duties. So, Islam permits an individual to earn (and purchase a property) as much as one likes but it has not to be from the prohibited areas of trading—usury, gambling, commercial sex and the production and sale of prohibited items (like alcohol, pork etc.). It can be said without hesitation that usury has perhaps since always been the biggest cause of human exploitation; it is not only detrimental but almost fatal to the Islam’s objective of keeping the flow of wealth from the rich to the poor, because usury is the easiest way for the rich to multiply their wealth; this multiplication is achieved at the cost of the Poor’s bread and butter. At the international level too, the destructive effects of usury are being witnessed on the Developing Nations; they have almost become economic, cultural and political slaves of the “developed” countries. God cannot be but aware that the usury which was present at the time of the Prophet, only at the individual level, would assume international proportions. He therefore enjoined upon His Apostle to declare a war against this practice; and the earlier the world follows this diktat of God, the better will be for the underprivileged    nations to achieve an honourable place in the world society.

 To further ensure that any disturbance that might arise in the direction of the flow of wealth, gets reverted, Islam imposes certain dues on the rich:

(1) POOR-DUE (ZAKAT), which is a  minimum of two and a half percent of total savings and assets, to be paid at the end of each year to the needy. The distribution of this may be done at individual level or, in an Islamic country, by the government.

(2) USHR, the farmers have to distribute on the day of harvest, ten percent of the produce (five percent, if their fields are not naturally watered) among the needy.

(3) SACRIFICIAL MEAT, which is to be distributed among the relatives, neighbours and the needy, on the occasion of Id-ul- Adha.

(4) FITRA, which  is a specific amount  of money, to be   handed   over  to  the  needy on  behalf  of each member of the well to-do families, to enable them to have   an   honourable   participation   in    Id-ul-fitr  celebrations.

(5) SPOILS, at least,one fifth (Khums) of which has to  be  distributed  among  the  poor and the needy by the Leader of the Community.

 The system of Zakat is not important just because it makes the rich pay some part of their wealth to the poor. It is important for another important reason. If we properly understand the meaning of Zakat, it implies a form of Assets Tax. Normally, in modern economic systems, it is the income, and not the assets that is taxable. Income tax serves only the interests of the big business, and has devastating effects on the economic interests of the rest of the nation. The industrialists prefer the income tax to the other taxes due to several reasons. First, the income tax envis­ages a tax only on the preceding year’s income and has nothing to do with the cumulative assets which keep on growing. It can be easily noticed that the value of the assets possessed by the affluent is always many times greater than their annual income. Thus, the income tax is the minimum possible amount they have to sub­mit. Secondly, unlike the   expenditure-tax, it has no depressing effect on the purchasing tendencies of people; the annual turnovers of the companies are, therefore, not affected. Thirdly, it is easy to evade income tax through subtle manipulations of the rules, purchase of assets which are    purchased either surreptitiously or are shown to have been purchased at much lower prices than the actual,       display into accounts of much greater expenses than actually incurred, and bribing the tax-collectors. The damaging effects of income tax are multifold. The black money sustains its upward march; the prices keep on soaring; the land, the houses and the other immovable properties become cost­lier. Thus inflation helps the industrialists in strengthening their hold over the economy; for the value of assets amassed by them continues to grow, their annual turnovers increase, and whatever they have to pay as income tax, or as interests on loans, is more or less neutralised. They conceal their own incomes, convert their savings into assets and avail themselves of their re­sources as sureties for taking huge loans from the banks and financial institutions. It means that loans are availed only by those who do not need them; those who are in need of financial support, have little chances of getting their application for loans accepted. It can be seen that all these damaging effects on economy can be reversed by introduc­ing assets tax, which is closer to zakat system. The replacement of the income tax by the assets tax will have far-reaching consequences on the economy. First, people will no longer have to conceal their incomes in order to avoid taxes; they will have no hesitation in depositing their money in the banks or investing in the stock market. Second, people will find it less profitable to create assets. They would prefer to invest, either    directly, through their own enterprises, or through the banks and the stock exchanges. It would be doubly advantageous; it would save the assets tax, and would also increase their income. Third, with the sloping demands for land, houses, gold and precious items (because assets of more than a specified minimum limit will be taxed), the prices of these items will show a downward trend. In fact, the inflation­ary trend will generally be in check. Fourth, the rich will prefer to use their own money rather than take loans from the financing agencies, for it would be more expedient and beneficial. The less privileged will, therefore, have greater chances to get their applications of loan accepted. Fifth, with the generous supply of money, the rates of interest on loans will tend to decrease. Sixth, with the houses available at lower prices, the middle class and the poor will have bigger opportunities.

In the same way, production-tax can be a tax equivalent to Ushr, and may be applied on all forms of production, agricultural or industrial. This should be only in the form of produce, not money, and the items collected in this way must be redistributed among the needy.

This also compels us to take a fresh look at the “interest” given by the banks. Traditionally, the interest given by banks has been described as forbidden by the Islamic scholars on the ground of its being “interest”. But what has to be put into consideration is that banks have become vehicles for the use or misuse of money of the poor by the big business. The businessmen take money from banks and earn huge profits. Out of these, they part a little to banks, and banks give a very small share of their profits to the real owners of money. Banks also earn handsomely because on every hundred units of currency deposited, they can do a business several times. Thus, in the present banking system, it is only the depositor who is in loss. He is not the exploiter but the exploited. He deserves much more. And whatever little he gets, he is told not to take because it has been named “interest”.  So there must be a debate on the subject in the light of the mechanism of current banking. And of course, the banking system has to be revamped in a way that they help the weaker sections of society. Moreover, banks have to reshape their system in a way that there is no fixed term rates for “interests” or “profits”; a system based on sharing of profit and loss is now in practice in several countries. Further, when Islam bans usury, it also implies disapproval of taking loans for avoidable reasons.

 Apart from the obligatory practices enumerated above Islam vigorously exhorts its followers to be charitable. In fact the third most     important and likeable virtue of Muslim is charity, as described in Qur’an, only after faith and prayer. To further reduce the chances of economic exploitation, Islam gives certain guidelines: First, hoarding and profiteering are to be zealously curbed and those involved should be severely punished. Second, an atmosphere has to be developed, through continuous preaching and exhortation, in which simplicity of life becomes a commendable virtue rather than a despised act. Islam loves neither a miser nor an extravagant; it loves the “golden mean” in spending. The fact that Islam does not tax income—if a person earns millions but spends all his money, he is not required to pay any tax—proves that it promotes wealth generation, spending and investment rather than hoarding and accumulation of assets. Third, labourers have to be paid their dues “before their sweat evaporates.”  .

Thus, Islam with its unique blend of liberty and restriction succeeds in inculcating the merits that capitalism and socialism, the two conflicting ideologies dominating the modern world, can boast of while having none of their demerits. Capitalism gives undue importance to the rights of individual, which results in a sharp rise in tendencies of profiteering and hoarding, corruption and distribution of harmful   (physically and socially) materials  in the society. This results in the rich becoming richer and the poor becoming poorer. In Socialism, particularly Communism, on the other hand, the rights of individual are completely trampled upon. There is therefore a likelihood of a sharp decline in enterprise and total production though he is much more equal than in capitalism. Islam’s economic policy is therefore greatly superior to both and is the only hope for an end to the global economic “development” sans exploitation and glorification of evils.

Fundamentals of Islamic (Peace) Economics

On the basis of above mentioned principles, the experts in Islamic Economics have been busy in developing an alternative model for the economy. The prohibition of usury in Islam has led to the development of a unique interest-free banking system, based on share in profit and loss. It is now successfully working in many countries. But to think that “Islamic finances” is the whole Islamic economics is a big blunder. Islamic economics is much bigger which includes:

 1.      Wealth generation within the limits imposed by Islam

2.      Total ban on what can be called Prohibited Economics; (commercialisation of forbidden goods and practices)

3.      Establishment of a tax system based on Zakah, Ushr and Khhums;

4.      Establishment and running of financial institutions in a way that they do not simply become a vehicle of flow of money from less moneyed to more moneyed;

5.      Effective measures against exploitation of the weaker sections;

6.      Welfare policies for the weaker sections;

7.      Involvement of women in economics in a way that it does not adversely affect family peace.

 Modern versus Islamic Economics

 The development of modern economy has been mainly the result of aggressive economic fundamentalism, an ideology with emphasis only on economics in general at the cost of health, family peace, and social order, and on the interests of the big business in particular. The economic fundamentalists have grown in power by following well-defined     objectives which may be enumerated as follows:

1.   To increase demands of goods in the market by:

(a) Changing perceptions of the people;

(b) Creating false standards of life;

(c)  Fanning human desires;

(d) disinformation;

(without, of course, caring for their adverse impact on individual, family or society);

2.   To monopolise supplies through extensive advertising and friendly governmental policies that give them the right to use specific brand name;

3.   To monopolise assets and money by (a) saving their own money and converting it into long-lasting assets (that  would  continue  to  increase  in value); and (b)using public money for their own business;

4.   To attract public money by encouraging them to (a) squander whatever they earn; (b) to invest whatever they save in banks or stock market;

5.   To recover whatever they have to part with either as taxes or interests to financial agencies by regularly increasing prices;

6.   To pay to their employees much less than what they  deserve;

7.   To throttle all those sectors (agricultural and small scale industry) that are doing business without the involvement of the big industrialists;

8.   To mastermind welfare programmes that do not  adversely affect their interests and /or help their cause—directly or indirectly;

9.   To commercialise every strength, weakness and need of human beings without caring for their effect on health, family or society.

In contrast, the objectives of the economic setup, envisaged in accordance with Islamic principles and spirit, may be named “Healthy Economics”, or “Peace Eco­nomics”, and may be summed up as follows:

1.         To visualise economics as not the only, but one of the important parts of human life;

2.   To ensure that all the social and economic developments must be aimed at safeguarding the health of all individuals, family peace and social order;

3.   To ensure that the industrialists do not earn at the cost of labour and consumers;

4.   To ensure that the money of the rich is so used as to benefit the common people, and not the vice versa by:

(a) changing the tax structure (imposing assets tax rather than income tax); (b) giving due representation to the small share- holders in policy decisions; (c)   distributing the profits among all those who have    contributed in the success of the company;

5.   To guarantee that the susceptibilities and weaknesses of human beings are not misused for commercial    purposes: (a) by banning commercial exploitation of all forms of addiction and sex; (b) by strengthening the legal system so that the exploiters and oppressors find it impossible to continue their activities; (c) by        continuously preaching the need to support the good against the evil;

6.   To ensure that political and legal setups promote healthy economics;

7.   To ensure that social values are shaped in accordance with their impact on health and social conditions, and religion plays an effective role in reducing tensions at all levels.


Means for life: Generation of wealth

* It is He Who hath created for you all things that are on earth; (2: 29/A)

* It is We Who have placed you with authority on earth, and provided you therein with means for the fulfilment of your life: small are the thanks that ye give! (7: 10/A)

* It is He Who has made the earth manageable for you, so traverse ye through its tracts and enjoy of the Sustenance which He furnishes: but unto Him is the Resurrection. (67: 15/A)

Right to earn

 * O ye who believe! Give of the good things which ye have (honourably) earned, and of the fruits of the earth which We have produced for you, and do not even aim at getting anything which is bad, in order that out of it ye may give away something, when ye yourselves would not receive it except with closed eyes. And know that God is Free of all wants, and worthy of all praise. (2: 267/A)

 Poor and other taxes: Rules

 * ..practise regular charity………….(2: 43/A)

 * They ask thee how much they are to spend; Say:  “What is beyond your needs.”(2: 219/A)

 * What God has bestowed on His Messenger (and taken away) from the people of the townships,- belongs to God,- to His Messenger and to kindred and orphans, the needy and the wayfarer; In order that it may not (merely) make a circuit between the wealthy among you. So take what the Messenger assigns to you, and deny yourselves that which he withholds from you. And fear Allah. For Allah is strict in Punishment. (59: 7/A)

Forbidden economic activities

* Do no mischief on the earth, after it hath been set in order, but call on Him with fear and longing (in your hearts): for the Mercy of God is (always) near to those who do good. (7: 56/A)

* Say: the things that my Lord hath indeed forbidden are: shameful deeds, whether open or secret; sins and trespasses against truth or reason; assigning of partners to God, for which He hath given no authority; and saying things about God of which ye have no knowledge. (7: 33/A)

 No bars, no casinos

 *Forbidden to you (for food) are: dead meat, blood, the flesh of swine, and that on which hath been invoked the name of other than God, that which hath been killed by strangling, or by a violent blow, or by a headlong fall, or by being gored to death; that which hath been (partly) eaten by a wild animal; unless ye are able to slaughter it (in due form); that which is sacrificed on stone (altars); (forbidden) also is the division (of meat) by raffling with arrows.(5: 3/A)

 * They ask thee concerning wine and gambling. Say: “In them is great sin, and some profit, for men; but the sin is greater than the profit.” (2: 219/A)

 No usury

 * Those who devour usury will not stand except as stand one whom the Evil one by his touch hath driven to madness. That is because they say: “Trade is like usury,” but God hath permitted trade and forbidden usury. (2: 275/A)

No hoarding

* And there are those who bury gold and silver and spend it not in the way of God; announce unto them a most grievous penalty…(9: 34/A)

The Evil one threatens you with poverty and bids you to conduct unseemly. God promiseth you His forgiveness and bounties. And God careth for all and He knoweth all things…(2: 268/A)

O ye people! Eat of what is on earth, lawful and good; and do not follow the footsteps of the evil one, for he is to you an avowed enemy. (2: 168/A)

Say: Who hath forbidden the beautiful (gifts) of   God, which He hath produced for His servants, and the things, clean and pure, (which He hath provided) for sustenance? Say: They are, in the life of this world, for those who believe, (and) purely for them on the Day of Judgement. Thus do We explain the signs in detail for those who understand. (7: 32/A)

(Saying): “Eat of the good things We have provided for your sustenance, but commit no excess therein, lest My Wrath should justly descend on you: and those on whom descends My Wrath do perish indeed! (20: 81/A)

Right to inherit and bequeath

* From what is left by parents and those nearest related there is a share for men and a share for women, whether the property be small or large,-a determinate share. (4: 7/A)

Honesty in trade

* Give just measure and weight, nor withhold from the people the things that are their due..(7: 85/A)

Moderation in spending

·        This is the Book; in it is guidance sure, without doubt, to those who fear God; who believe in the Unseen, are steadfast in prayer, and spend out of what We have provided for them…  (2: 2-3/A)

·        Those who, when they spend, are not extravagant and not niggardly, but hold a just (balance) between those (extremes)… (25: 67/A)


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