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Introduction to Islamic Economic System
Difficulty Level: Basic
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Contents● Zakkah● Public Ownership● Currency● Interest Based Economy & Islam
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Zakkah
● A system to facilitate rotation of money from rich to poor through concept of Zakkah (not like taxes that both poor and rich pays)
● There is no GST, Income Tax etc., (or alike)in Islam
– Income Tax is on earning, GST is on purchasing
– Zakkah is on savings
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Evidences
● Ad-Darimi, Ahmed and Abu ‘Ubayd reported on the authority of ‘Uqbah ibn ‘Amir that he heard the Messenger of Allah (saw) say :
– “The tax-collector will not enter Paradise.”
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Some Taxes: Beyond Today's talk
● Al-Kharaj● Al-Jizya● Al-Ushr● Import and export duty on foreign
traders● Etc.,
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Types of Ownership
● Individual● Public● State
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Public Ownership
● Defined concepts of ownership that stopped rich people from becoming richer only while making poor people becoming more poorer
● Vital commodities, water, source of fuel, and mineral wealth are in sharing and can't be owned by few persons (privatization can't take place in basic needs i.e., rich/poor depends on them)
● Land reforms favoring poor and stopping rich from exploiting poor
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Evidences
● Messenger SAW of Allah said (Abu Dawud)
– "The people are partners in three things: water, green pastures and fire (energy)."
● Messenger SAW of Allah said (Al-Bukhari)
– “Whoever has land let him plant upon it or grant it to his brother. If he declined let him hold his land.”
● Messenger SAW of Allah said (Muslim)
– “Forbade a rent or a share be taken for the land.”
● Messenger SAW of Allah said (Sunan of An-Nisai)
– “The Messenger of Allah forbade leasing the land.We said, ‘O Prophet of Allah, can we then lease it for some of the grain.” He said, ‘No.’ We said, ‘We used to lease it for the straw.’ He said, ‘No.’We said, ‘We used to lease it in return of that on the irrigating Rabee’a.’ He said, ‘No, plant it or grant it to your brother.’”
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Currency
● Concept of currency to be from gold and silver so that no one exploit others
● Controls Inflation, more transparency
● Example
– Consider state of 3 people with each 100 units of currency
– The person from govt. Wants to buy a product costing 150 units
– He makes a future transaction with state over a contract and receives 100 unit by printing paper money
– Now he buys product of 150 units, supply and demand is disturbed now
– Inflation would take place and prices would go higher for products
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Statistics
● Gap has increased a lot in the last 100 years due to absence of Islamic economics
● Microsoft CEO Bill Gates has more wealth than the bottom 45 percent of American households combined
Year Poor: Rich ratio1820 3:11913 11:11950 35:11973 44:11992 72:1
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Interest Based Economy & Islam
● Before Banking● Capitalist Western Banking● Capitalist Banking In Muslim World● Recent capitalist attempt in the Muslim
World● Real Islamic Banking
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Banking System
● Before Banking System
Investor Skilled labour
Inventor
Investor
Investor
Investor
Investor
Investor
Businessman
Entrepreneur
Trader
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Banking System
● Western Capitalist Banking
Investor Skilled labour
Inventor
Investor
Investor
Investor
Investor
Investor
Businessman
Entrepreneur
Trader
Bank
Bank’s Profit = (20-12)%
12%
20%
ProfitInterest
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Banking System
● Capitalist Banking in the Muslim World
Investor Skilled labour
Inventor
Investor
Investor
Investor
Investor
Investor
Businessman
Entrepreneur
Trader
Bank
Bank’s Profit = (20-12)%
12% 20%
Profit Interest
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Banking System
● Islamic Banking under a Capitalist State
Investor Skilled labour
Inventor
Investor
Investor
Investor
Investor
Investor
Businessman
Entrepreneur
Trader
Bank
Bank’s Profit = (20-12)%
12% 20%
Profit Interest
IslamicBanking
$$$
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Banking System
● Islamic Banking under Islamic State
Inventor
Investor
Investor
Investor
Investor
Businessman
Trader
Bank
• Bank is not a part of the financial contract
• Bank is only a financial adviser and facilitator similar to that of a property dealer
• Only introduces the two parties and takes service charges for its effort
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Evidences
● “O you who believe! Squander not your wealth among yourselves in vanity, except it may be a trade by mutual consent.” [An-Nisa: 29].
● “That is because they say: Selling is just like usury. Whereas Allah permitted selling and prohibited usury.” [Al-Baqarah: 275]
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Patents & Copyrights
● According to Islam the buyer after buying a thing becomes the rightful owner of its rights
● A company during selling something cannot dictate conditions, which are not from Qur’an and Sunnah
● Sahih Al-Bukhari and Sahih Al-Muslim, and books of old Muslims Scientist were never copyrighted. Had it been so, the west would still be in dark ages
● Copyright and patent laws are a big hurdle in dissemination of knowledge and in the welfare of the humanity.
● Copyright laws are a tool of scientific colonization of the west
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Evidences
● The hoarding of gold and silver was prohibited explicitly in the Qur’an. Allah (SWT) says: “And let those who hoard gold and silver and do not spend them in the way of Allah know that a severe and painful punishment is awaiting them.” [At-Tauba: 34] This warning of severe punishment for those who hoard gold and silver serves as a clear evidence that the Law Giver has decisively ordered us to refrain from doing so; it is therefore forbidden to hoard gold and silver.
● Islam prohibited pricing absolutely, due to what Imam Ahmad narrated from Anas who said: “Prices increased at the time of the Messenger of Allah , so they said, O Messenger of Allah, we wish would you price (fix the prices). He said: “Indeed Allah is the Creator, the holder (Qabidh), the Open-handed (Basit), the Provider (Raziq), the Pricer (who fixes prices); and I wish I will meet Allah and nobody demands (complains) of me for unjust act I did against him, neither in blood or property.” Also Abu Dawud narrated from Abu Huraira, he said, “A man came and said, O Messenger of Allah, fix prices. He said: “Rather Allah reduces and increases.”
● S’aid ibn Al-Musayyab narrated from Mu’ammar ibn Abdullah Al-‘Adawi in Bukhari that the Prophet (saw) said: “No one monopolises except the wrongdoer.” Al-Athram narrated from Abu Umamah, he said: “The Messenger of Allah (saw) forbade that a foodstuff be monopolised”. And Muslim narrated through his chain of narrators from S’aid ibn Al- Musayyab that Mu’ammar said: “The Messenger of Allah (saw) said: “Whoever monopolised is a wrongdoer.”’ Monopoly is prohibited (Haram) in all things without a difference between the human foodstuff or animals foodstuff, a foodstuff or not, and of the people’s necessities or luxuries. This is because the linguistic meaning of the word monopolised (Ihtakara) is to compile a thing in its absolute sense (without specification). The word monopolised did not come in the meaning of compiling the foodstuff or the people’s necessities, rather compiling the thing, so it should not be confined to other than its linguistic meaning.
