Chapter# 4Islam and

Distribution of Wealth

Prepared by Kokab Manzoor

Chapter`s outlines

Rent Definition, & Islamic Doctrine

ProfitJustification of profit, limits, Definition and Islamic principle of fixation of profit

WagesDefinition, theories & Islamic view point of wage determination.

Measure to stop concentration of wealth1) Legal Measures 2) Optional Measures

Meaning and importance

N.I is produced by cooperative efforts of F.O.P, and then is distributed among the same factors.

Eco system of Islam makes utmost efforts to maintain the distribution wealth on just and benevolent basis and to provide means of sustenance to every member of the society in a dignified manner

RENT

Islam recognizes the right of private ownership of property.One of the lawful form of profitable use of property is to let it out on rent.

Those goods which are Lawful and durables i.e land, house machinery etc

Definition of Rent)

Rent is the surplus produce of the land which is given to the owner of the land due to permanent and durables qualities of the land.

(David Ricardo)

Islamic Doctrine of Rent

The Islamic doctrine of rent is so framed that the wealth flows in the direction of the poor rather than the rich.Fixing the rate of Rent

JusticeBenevolenceNo injustice

Fixing the rate of Rent & the State

1 Nature of Land

Higher rates of Rent from more fertile and productive lands and vice versa.

“Allah does not place more burden upon a person than he can bear” [Al-buqra ;286]

Cont`d….

2 Nature of Crops

Higher rate of Rent on good crop and low on bad or inferior quality crop.

Cont`d….

3 Nature of irrigation The nature of irrigation shall be

taken into consideration while fixing the rate of Lagan.

10% on rain fed land and 5% on that land which is irrigated through artificial means.

Cont`d….

4 Allowance for cultivator`s Labor

A low rate of rent shall be levied in the land which require heavier labor and which are difficult to irrigate, and vice versa.

PROFIT

Justification of Profit

Limits of profitable business

Definition of profit

Principles of fixing the Profit Rate

Justification of Profit

Justification of profit is established by the Quran and the Sunnah.

The Holy Prophet (sws) himself was engaged in trade and his companions also carried out various business activities and earned profit.

2 Limits of Profitable Business

Islam forbids adoption of unethical behavior in business.Fraud, deception, misinterpretationUnjust weights and measuresAdulteration in foods, Hoarding and creation of artificial shortageTo buy or sell at higher or lower price by

taking undue advantage of the dire need of other party

Limits of profitable business….

Undue influence to carry through transactionTo sell defective goods without informing the buyerMonopolies, Cartel etc are forbiddenTo buy goods from the farmer midway to market on lower than the prevailing market rates.

3 Definition of Profit

“The share of the National Income which is given to risk capital for its services in the process of production is called profit.”

4 Principles of fixing the Profit Rate

Islam has not established any fixed rule for fixing the rate of profit, however Profit should be fixed on the basis of;

JusticeEqualityPrevailing circumstancesCustom and conditions of work

Definition of Wages

Theories of Wages

Determination of Wage-Rate -The Islamic Viewpoint

WAGES

1 Definition of Wages

In economic terms, wages means the compensation, which a person receives for his mental and physical work.Wages are of two kinds

Nominal WagesReal Wages

2 Theories of Wages

1 Marginal Productivity theory

2 Subsistence theory of wages

3 Modern theory or demand and supply theory

Islamic viewpoint of Determination of wages

1 Just Wage

And Allah created the heavens and the earth with (a strategy based on) Truth in order that every soul is rewarded for the deeds that it earns and they will not be wronged. [Al-Jashiya: 22]

Cont`d….

2 Standard of wages

And he will talk to the people (alike) both in the cradle and in ripe years, and he will be one of the pious servants (of Allah).’[Al-Imran: 161]

Cont`d…

3 Minimum wage Rate

There is no living being in earth but its sustenance is the responsibility of Allah [Al-Hood: 6]

Rights and Duties of Labor

Fraternal rights

Settling the wage rate

Prompt payment of wages

Adherence to settled Terms

Workload according to his capacity

Kind treatment

The right to withdraw from work

Assignment of Lawful work

Loyalty

Capability

Trust

Honesty

Abiding by the contract

Avoiding negligence

Avoiding carelessness

Rights of worker Duties of worker

Measures to stop concentration of wealth

Legal Measures

1 Zakat

2 The law of Inheritance

Optional Measures

1 Sadaqat and Alms

2 Charity of surplus3 Auqaf

LEGAL MEASURES

1 ZAKAT1 Meaning of Zakat2 Purpose of zakat3 Nisab and the Rate of zakat4 Eight Heads of Expenditure of Zakat5 Difference between Zakat and tax6 Importance of Zakat

The meaning of Zakat

The word “Zakat” is derived from the word Zaka which means “ increase or growth”. In addition it also implies purification, enlargements etc

In Fiqh terminology Zakat means “financial devotion” every Muslim who own a certain amount of wealth, should give away a specific amount of wealth to those who are entitled to receive that amount, in the eyes of Shariah.

Purpose of Zakat

The purpose of Zakat is not only to support the poor and to effect a division of wealth, but as an obligatory act of worship.It also purifies heart and soul.Its an expression of gratitude for the bounties of Allah.

Kinds of wealth on which Zakat is levied….

a)Animalsb)Gold and silver c) Trade Goodsd)Cashe)Mines and Treasures

Eight Heads of Expenditure of Zakat

1 The poor2 The indigent (تنگدست)3 Functionaries of the Zakat Department4 Reconciliation of Hearts5 Ransom for Slaves6 Debtor7 In the way of Allah8 Ibn Al-Sabeel or Traveler

Economic Importance of the Zakat System

Circulation of wealth

Just distribution of wealth

A remedy for unemployment

National Assistance

Eradication of poverty

Economic expansion

Difference between Zakat & Tax

ZAKATReligious obligationLevied only on MuslimsPayment is mustRate is fixedHeads of expenditure is fixedCollected from rich and spent on poor

TAXAn economic need of stateImposed on AllIt can be remittedRates are changed subject to conditionsTax revenue are spent for the benefit of all, rich and poor

2 Islamic Law of Inheritance

The Islamic law which contains the details of distribution of a deceased`s property among his/her heirs is known as Law of Inheritance.

The purpose of this law is to break the estate of deceased into prescribed shares and distribute them among near or distant relatives.

Economic Importance of the Law of Inheritance

Elimination of concentration of wealthGrowth in circulation of wealthElimination of Feudal systemGrowth in agriculture productionEquitable distribution of wealthMeans of better economic conditions of the survivors.

OPTIONAL MEASURES

Sadaqat & Alms

Charity of surplus

Auqaf

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