Islam is not only a religion; it is a comprehensive code of life which guides its followers in every matter whether petty or important and covers absolutely all facets of human life. Islam, as compared to other religions, does not separate religion and worldly life. It entails that all worldly activities i.e. social, political, economical, etcetera, must be performed and done according to the tenets and guidelines given by Islam through the glorious Holy Quran and Sunnah (sayings and actions) of the Holy Prophet (Sallallahau Allaihaye Wassallam). The Quran says: "My Prayer, and all my (other) acts and forms of devotion and worship, and my living and my dying are for God alone, the Lord of the worlds" [6:162]. The idea of Islam, being a way of life, can be comprehensively understood by looking at the exemplary and ideal life of the Prophet of Islam Muhammad (PBUH) who guided the believers of the religion on all aspects of human life from personal hygiene to social behavior, from family life to work ethics, from business dealings to fulfilling contracts.
When we do precise analysis of the economic system that is based on the laws and principles of the Holy Quran and Sunnah of the Prophet (PBUH), we come to know that it is actually a perfect system of economy that emphasizes universal standards of economic justice, socio-economic welfare and, equitable distribution of wealth/resources to all sections of society. Islam discourages concentration of economic resources in all its forms. Prohibition of Riba, imposition of Zakat and other such obligations play a vital role to prevent this accumulation of wealth in few hands and hence lead towards an economy that benefits both the poor and the rich. The Islamic economic system is perfectly poised and balanced as compared to other economic systems such as Socialism or Capitalism. The economic system derived from the Islamic principles has some distinguished features such as right to ownership (subject to some conditions), free but regulated market forces, Zakat and other levies imposed by the Shari'ah and law of the land, interest-free transactions, and above all, the just and equal distribution of wealth which ultimately mitigates the gap between the rich and the poor and keeps this gap within acceptable natural limits. When this gap widens as a result of economic disparities, the society is threatened by many social evils because the poor consider the rich as their enemy and the sense of deprivation is severe. The Holy Prophet (PBUH) himself sought refuge from poverty. The Islamic economic system emphasizes that an economy should be regulated and administered in such a way that both, the ones who have the primary right (ones who directly contribute in the production process, factors like labor and enterprise etc) to wealth and the ones who have the secondary right (the poor and the needy who do not participate in the production process), as discussed by Muhammad Imran Ashraf Usmani in his book 'Guide to Islamic Banking'[1], must get their due share. When there is inequality and injustice in resources distribution, there will surely be problems like poverty, crime, corruption, etcetera.
To sum up, it can be said that the focal point of an economic system based on Islamic Shari'ah is the equitable and just distribution of wealth and then there are other significant aspects like prohibition of Riba (Interest), Zakat, right to own and operate business, working in support of that focus.
We can list five chief attributes of an Islamic economic system and share the differences with a conventional economic system:
The Ultimate Objective is Not the Fulfillment of Human Desires:
The main objective of Islamic economics is not the satisfaction of human wants through the best utilization of scarce resources, whereas this is the ultimate goal in conventional economics. The whole conventional economic setup revolves around the phenomenon of meeting unlimited human wants with limited resources through efficient resource allocation and consumption. However, the Islamic economic stance is towards another ultimate objective which is of attaining the wishes of God, while meeting the human economic needs are a parallel rather than a secondary objective.
(ii) Collective Welfare:
The Islamic system of economy emphasizes the collective wellbeing of all individuals in a society but the conventional economics only believes in individual welfare or individual interest. The materialistic or conventional economic setup assumes that the individual welfare focus will automatically lead to the collective well-being of all the individuals which is inherently flawed.
(iii) Money has No Value in itself:
According to Islamic economics, money has no value of its own but it is a measure of value and operates as an exchange of value. This feature of money makes forbids it from being a tradable commodity because something which has no value cannot be sold or bought and hence cannot earn anything on its own i.e. any reward or return in any shape like profit or interest. According to both Islamic and conventional economic viewpoints, anything which does not carry any economic value cannot be considered a subject matter of any economic transaction. But the conventional economic stance ignores this fact to earn undue consideration on money.
(iv) Money has No Time Value:
The Islamic system of economy does not recognize the concept of time value of money which is a foundation of interest based transactions. In contrast, a conventional economic system thrives on this concept. As a result of this concept holding primary importance in conventional economics, many ills are inserted into the economy like interest, risk-free earnings and so forth. The kingpin of conventional economy i.e. the interest or 'riba' is based on this very principle of time value of money.
(v) Independent but Regulated Markets:
The conventional economic system operates on the assumption that the interests of individuals will converge by themselves within an economy and encourages free and totally independent operation of market forces, but the Islamic economic system opposes this theory and calls for a degree of regulation to make sure that these market forces are not given as much liberty that they can disrupt the natural and smooth functioning of the whole economy.
About the author
The writer teaches at a well-reputed public sector university in Pakistan.
© Business Islamica 2012
