1/12/2022

ISLAMIC
STUDIES
ASSIGNMENT

PARI WISH (21U00625)

SECTION O
Contents
ISLAMIC CULTURE AND CIVILIZATION..................................................................................................2
CHARACTERISTICS OF ISLAMIC CIVILIZATION...................................................................................2
KHILAFAT-E-RASHEEDA:........................................................................................................................4
SOCIAL DEVELOPMENT UNDER KHALIFAH.......................................................................................6
POLITICAL DEVELOPMENT UNDER KHALIFAT...................................................................................7
ECONOMIC DEVELOPMENT UNDER KHILAFAT.................................................................................8
QURAN AND SCIENCE.........................................................................................................................10
EVIDENCE OF SCIENCE IN QURAN...................................................................................................10
ISLAMIC ECONOMICS..........................................................................................................................12
FUNDAMENTAL FEATURES OF THE ECONOMIC SYSTEM OF ISLAM...............................................12
DIFFERENCE BETWEEN ISLAMIC ECONOMICS AND CAPITALISM:..................................................13
CONSUMER BEHAVIOR IN AN ISLAMIC ECONOMY............................................................................15
ECONOMICS SIGNIFICANCE OF PRINCIPLE OF MODERATION........................................................17
FIRM BEHAVIOUR IN ISLAMIC ECONOMICS.......................................................................................18
PERFECT COMPETITION:.................................................................................................................18
MONOPOLY.....................................................................................................................................19
OLIGOPOLY......................................................................................................................................19
ISLAM AND ECONOMIC DEVELOPMENT.............................................................................................20
GOALS AND PURPOSE OF ISLAMIC POLICY OF ECONOMIC DEVELOPMENT..................................21
ROLE OF ISLAMIC WELFARE STATE.....................................................................................................23
ECONOMIC ROLE OF ISLAMIC STATE IN THE LIGHT OF ITS DUTIES................................................23
RESPONSIBILITIES OF ISLAMIC WELFARE STATE.............................................................................24
PROHIBITION OF INTEREST.................................................................................................................25
ECONOMIC RATIONALE ON THE PROHIBITION OF INTEREST.........................................................25
ECONOMIC IMPORTANCE OF THE PROHIBITION OF INTEREST......................................................26
ROLE OF ZAKAT AS A TOOL OF FISCAL POLICY...................................................................................28
 QUESTION NO 1

ISLAMIC CULTURE AND CIVILIZATION

The Islamic civilization is based on Islamic faith, imbued with its principles and
values.
CHARACTERISTICS OF ISLAMIC CIVILIZATION
Following are the characteristics of the Islamic culture and civilization:
 MONOTHEISTIC CIVILAZATION:
Islamic civilization is a monotheistic civilization as it is based on the belief in
the oneness of Allah almighty, the creator of men and all creatures.
 UNIVERSAL DIMENSION:
Islamic civilization has the universal dimension, and not associated with the
geographical region, race or a historical era.it rather concerns all people and
nations and has echoes that reach different parts of the world.
 GENEROUS CIVILIZATION:
The second characteristic of Islamic civilization is its being the generous
civilization which drew on the human civilizations and cultures experienced by
the people of ancient world, but contributed copiously to the advancement of
the science, knowledge and the values of justice, equality, beauty and virtue.
Its output benefitted humanity at large regardless of race, caste and creed,
colour or even religion. Muslim or non-Muslim, be they Christian, Jewish or
pagans, coexist together within the Islamic civilization.
 WELL BALANCED CIVILIZATION:
Islamic civilization is a well-balanced civilization which secures the fair
equilibrium between materialistic and spiritual sides with exemplary
moderation that has always been the part of Islamic thoughts and a distinct
feature of the Islamic civilization throughout its history.no excess, no neglect,
no ill-founded extremise, no recklessness. It is a moderation built on justice
and equality.
 JUSTICE:
In Islam, justice is a moral virtue and an attribute. In Islamic civilization, justice
denotes placing things in a rightful place. Justice is close to the equality in the
sense that it creates the equilibrium.
  EVERLASTING CIVILIZATION:
Islamic civilization is a perennial (everlasting) civilization which will last as long
as Islam because it is based on the Islamic principle which Allah will preserve
eternally.
CONCLUSION:
Islamic civilization is based on the belief on the oneness of Allah almighty,
justice and the equality of the human. It is an everlasting civilization having
universal dimensions.
 QUESTION NO 2

KHILAFAT-E-RASHEEDA:
The word Khalifa (caliph) means the successor of the messenger of Allah
almighty, the holy prophet Muhammad (saw). The title Khalifatu Raulillah was
first used for the Hazrat Abu Bakr (RA), who was elected as the head of the
Muslim community after the death of the Prophet. The first four caliphs are:
 Hazrat Abu Bakr (RA)
 Hazrat Umer (RA)
 Hazrat Usman (RA)
 Hazrat Ali (RA)
STEPS BY CALIPH FOR THE ISLAMIC WAY OF LIFE
1. SUPERMACY OF ALLAH:
All caliphs had the belief in supremacy of Allah. They were of belief that the
government is a trust entrusted by Allah and Quran and sunnah are the
supreme law.
2. WELFARE STATE:
During the Rashidun caliphate there was an economic boom in the lives of the
ordinary people due to the revolutionary economic policies developed by
Hazrat Usman and Hazrat Umar (RA).
3. MAJLIS E SHURA (PARLIAMENT):
There was a majlis a shura loosely translated as the consultation of people, to
advise the caliph. The majlis e shura also elect the caliph.
4. DEPARTMENT OF ACCOUNTABILITY:
A special office was established for the investigation of the complaints that
reaches the Caliph. Hazrat Umar (RA) was first to establish this department. It
was for the investigation of the complaint against the officers of the state.
5. JUDICIAL ADMINISTRATION
As most of the administrative structures rashidun empire was set up by Hazrat
Umar (RA). the judicial administration was also set up by him and the other
Khalifa follow the same system without any type of basic amendment in it. the
Qazi were chosen for the integrity and learning in Islamic law.
6. EQUALITY OF HUMANKIND
Islam has a direct bearing on idea of human equality and brotherhood because
it believes in a single creator and sustainer who created all mankind. Islam
does not view life as consisting of separate compartments for religion, state
etc
7. BASIC HUMAN RIGHTS
many reforms in human rights took place under Islam between 610 and 661
including the period of holy Prophet Muhammad (SAW) mission in the rule of
four immediate successors were established the Rashidun caliphat.
8. FREEDOM OF SPEECH
freedom of speech is included in the human rights given Islam to everyone.
there was another reason the Islamic world flourished during the rules of right
Kalafat that emphasize was on the freedom of speech
9. BAIT UL MAAL
Bait ul maal was the department that dealt with the revenues and all other
economic matters of the state. in the time of Abu Bakr (RA) there was not
treasury he made a house where all money was kept on receipt. a separate
account department was also set up and it was required to maintain records of
all that was spent. later provincial treasuries were set up in the provinces
10.SIMPLICITY
while holy prophet adopted simplicity himself, he stressed the same for the
sahabas as well. The caliph also lived a simple life. their food dress livelihood
was as dead of the common man. in Hasrat Umar dress there were 70 mended
there was no watchman at the door of caliph. normally they dealt official
matters in mosque.
 SOCIAL DEVELOPMENT UNDER KHALIFAH
 DEVELOPMENT OF CANAL SYSTEM
To provide a better irrigation system and to uplift the agricultural sector hazrat
Umar RA ordered the excavation of several canals.
the canals were:
 Nehr Abi Musa
 Nehr Muaqqal
 Nehr Sa’ad
 Nehr Amirul Momnin
CONSTRUCTION OF MOSQUES:
Mosques were not only for worship and prayers, but also considered as
centers where loyal followers gathered to discuss social and cultural
problem during the caliphate of Hazrat Umar 4000. Most were constructed
from Persia in the east to Egypt, in the West, massage envy and magic. The
lumber enlarged during the reign of Hazrat Umar and were Beautified
during the reign of Hazrat Usman.
 FOUNDING OF NEW CITIES
Hazrat Umar (RA) in his reign founded many cities of which a brief account is
given below
 Basra
 Kufa
 Fistaat
 Mosul
 Jaiza
 CONSTRUCTION OF ROADS, BRIDGES, JAILS, SHELTER, AND MEAL
HOUSES:
Many buildings were built for administrative purposes. in Dar ul Amarat
quarters, government offices, and. Residences for officers were cited.
Dividends were constructed to house official records. Bait ul maal was used to
house royal treasures. Jails were constructed for the first time in the Muslim
history. Houses were made for traders and merchants. Roads and bridges were
constructed for public use on road to Mecca and Medina. Wells shelters and
meal houses were constructed for convenience of people who came. 4. Food
stables were made to accommodate 4000 horses. Canals were dug to irrigate
fields as well as provide drinking water. Military works were constructed at
strategic points.
POLITICAL DEVELOPMENT UNDER KHALIFAT
The administrative system of Dar ul Islamia was laid down in the day of Hazrat
Muhammad (PBUH). Hazrat Abu Bakar (RA) stated in his sermon when he was
elected
"If I order anything that would go against the order of Allah and his messenger
then don't obey me."
DISTRICTS AND PROVINCES:
 Under the caliphate of Hazrat Abu Baker, the Empire was not clearly
dividend divided into provinces. Though it had many administrative
districts.
 Under the Caliphate of Hazrat Umar, the Empire was divided into
several provinces.
1. Arabia was divided into Mecca and Medina.
2. Iraq was divided into two provinces Basra and Kufa.
3. Jazira was divided into two provinces Tigris and Euphrates.
4. Syria was a province.
5. Palastine was divided into Aylya and Ramlah.
6. Egypt was divided into two provinces Upper Egypt and Lower Egypt.
7. Persia was divided into three provinces Khorsan, Azarbaijan, and Fars.
 During Hazrat Usman reign, the caliphate was divided into 12 provinces.
Madinah, Makkah, Yemen, kufa, Basra, Jazeera, fars, Azerbaijan,
Horasan Syria, Egypt, Maghrib.
 During Hazrat Ali reign with the exception of Syria and Egypt, the
remaining ten were under his control, with no change in administrative
organization.
Provinces were divided into districts each of 100 or more districts with main
cities were administrated by governor. But those officers, at provincial level
were,
1- Katib (the chief secretary)
2- Katib-ud-Diwaan (the Military secretary)
3- Sahib-ul-Khiraaj (the revenue collector)
4- Sahib-ul-bait-maal (the treasury officer)
5- Qadi (the chief judge)
  During Hazrat Umer's time of appointment, every officer was required
to swear an oath:
1. He would not write a Turkic horse which was a symbol of pride.
2. He would not wear fine clothes.
3. He would not keep a Porter at his door.
4. He would always keep his door open to the public.
DEPARTMENT OF ACCOUNTABILITY:
A special office was established for the investigation of the complaints that
reaches the Caliph. Hazrat Umar (RA) was first to establish this department. It
was for the investigation of the complaint against the officers of the state.
ECONOMIC DEVELOPMENT UNDER KHILAFAT
Right guided caliph took several steps for the achievement of economic
progress.
 IN THE REIGN OF HAZRAT UMER (RA):
In caliph Umer RA time, the government extended help and cooperation to the
people to engage in productive ventures. Hazrat Umer RA granted stipend to
the citizens of the Islamic state in ordered maximum amount to be given to
them. those who had fought at Kadsia were granted from 1500 to 2000
dirhams. each child was given 100 dirhams in two jarib of corns per month.
hazrat Umar RA urged people to invest their stipend in goat and lamb breeding
form. next year they should use their stipend to buy slaves input them to work
on their farms in this way this state stipend would help them in achieving
economic prosperity in future.
 IN THE REIGN OF HAZRAT USMAN (RA):
Hazrat Usman was always solicitous about the prosperity and economic
progress of his people.

ECONOMIC RESOURCES OF THE STATE:

 Zakat:
Zakat is the Islamic equivalent of luxury tax. It was taken from Muslim in
among an amount of 2.5% of their normal well. Whose annual wealth
exceeded. Minimum level was collected from this nisaab did not include one's
primary residence, primary transportation, etc. Card is one of the five pillars of
Islam.
 Jizya:
It's a per capita tax imposed on able bodied non-Muslim men of military age
since non-Muslims did not have to pay the card slaves, women, old monks.
And the powers were all exempt in addition to exemption, some needy non-
Muslims were given statements by the state.
 Fay:
Fay was the income from state land, whether an agricultural land or any land
with any natural mineral resources.
 Khums:
Khums represented war booty. Four fifth of which was distributed among
serving soldier, while 1/5 was alerted to the state.
 Kharaj:
Kheraj was tax on Agricultural land.
 Ushr:
Ushr was a reciprocal 10% on agricultural land, as well as merchandise
imported from states that texted. The Muslims on their products.
Merchandise valued at 200 dirhams was not taxed. In case of non-Muslim this
rate was 5%. In case of Muslim 2.5% the same as that of the zakat.
CONCLUSION:
It is quite clear from the teachings of Quran and hadith the practice of right
guided caliph and the opinions of the jurists that Islam desires economic
progress.
 QUESTION 3

QURAN AND SCIENCE

Islam culminated the ignorance of the world and lit the world with its
injunctions and teaching based on beneficial knowledge.
“Recite, in the name of Allah who created man from clot”

SCIENCE:
Science is often defined as:
“The pursuit of knowledge and understanding of the natural and social world
following a systematic methodology based on evidence.” In Arabic (the
language of the Quran), "science" can simply mean different forms of
knowledge.

We will show them Our signs in the universe and in their own selves, until it
becomes manifest to them that this (the Quran) is the truth” (Quran; 41:53).

 Existence of scientific facts in the Quran

All the scientific facts are already provided in Quran 1400 years ago.
 Authenticity of the Quran
 the Quran was compiled very carefully into its present form
 all the facts available in the Quran are authentic and real
 any sort of alteration would disrupt the coherence of the text
EVIDENCE OF SCIENCE IN QURAN
Following are the evidence of science in Quran:
 ASTRONOMY:
- Sun and moon
“He has subjected the sun and the moon (to continue going round)”
- Day and night
“And it is He who created the night and the day and the sun and the moon;
all [heavenly bodies] in an orbit are swimming” (Quran, 21:33)
- Expansion of universe
“And the heaven We constructed with strength, and indeed, We are [its]
expander” (Quran, 51:47).”
  GEOLOGY:
- Mountains
“Have We not made the earth a resting place? And the mountains as
stakes?” (Quran, 78:6-7)”
- Water cycle
“Or [they are] like dark nesses within an unfathomable sea which is covered
by waves, upon which are waves, over which are clouds – dark nesses, some
of them upon others. When one puts out his hand [therein], he can hardly
see it. And he to whom Allah has not granted light – for him there is no light”
(Quran, 24:40).
 EMBRYOLOGY:
In Surah Al-Mu’minun, Allah (SWT) says
“We created man from an extract of clay. Then We made him as a drop in a
place of settlement, firmly fixed. Then We made the drop into an alaqah
(leech, suspended thing, and blood clot), then We made the alaqah into a
mudghah (chewed substance) ” (Quran 23:12-14).
 BOTANY:
“(God is the One who) sent down rain from the sky and with it brought forth
a variety of plants in pairs.”
 THE MEETING OF THE SEAS:
In Surah Ar-Rahman, it states
“He released the two seas, meeting [side by side], Between them is a barrier
[so] neither of them transgresses” (Quran, 55:19-20).
CONCLUSION:
In Quran, Allah almighty has already stated all the scientific matter, which are
still discovering by the western scientists.
 QUESTION NO 4

ISLAMIC ECONOMICS
DEFINITION:
Islamic studies is the science which studies the economic problem of the
people imbued with the values of Islam.
SOURCE OF ISLAMIC ECONOMICS:
The study of men's economic behaviour in light of Allah's instructions is known
as Islamic economics. As a result, the knowledge of Allah's command is the
foundation of Islamic economics. And the sources of his knowledge are:
• Holy Quran
• Sunnah
• Ijtihad
FUNDAMENTAL FEATURES OF THE ECONOMIC SYSTEM OF
ISLAM
Following are the fundamental characteristics of the Islamic economic system
 MAXIMUM UTILIZATION OF THE RESOURCES:
The maximization of boundless resources dispersed across the enormous
cosmos, as well as the application of all God-given talents by men, is the most
significant basic aspect of Islamic economics.
 USE OF LAWFUL MEANS OF EARNING LIVELIHOOD:
Islam motivates people to work to their full potential to make a living. Islam
teaches that man should only work to make a legal living. Illegal earnings have
been outright forbidden, and illegal methods have been thoroughly disclosed.
 INDUCEMENT TO SPEND WEALTH WITHIN LIMITS:
Islam gives right to the men to spend his lawfully earned money and
encourages to spend it on your genuine needs. But for the collective safeguard
of the society Islam restricted man to spend money on the things which are
not for Allah almighty. The wealth should be spent on the way of Allah
almighty not for the showoff and for the things prohibited by Islam.
 PROHIBITION OF AMASSING WEALTH:
Amassing of the wealth means the hoarding and stinginess of the wealth,
which is strictly prohibited in Islam. It closes the many doors of the Allah’s
blessing and become the curse on the society as it stops the flow of the wealth
and cause economic crisis.
 CIRCULATION OF WEALTH:
It is the responsibility of an Islamic economic system to make the effective
measures to prevent the concentration of wealth in few hands and promote
the circulation of wealth among the maximum number of people in the society
to make it prosperous.
 FLEXIBILITY:
In the Islamic economics, the system is fully flexible to absorb the new ideas,
institution, and the organization.
 REGULATING THE MECHANISM OF PRICES:
In the Islamic economy the prices of the commodities are not determined by
the demand and supply. The price mechanism in Islamic economics is not free
or uncontrolled. Islam provides the complete cod e of business and trade.
DIFFERENCE BETWEEN ISLAMIC ECONOMICS AND CAPITALISM:

ISLAMIC ECONOMICS:
Islamic ideology of the economics is distinct, unique, and separate from the
materialistic and capitalistic economy.in Islamic ideology, economy is the trust
of Allah almighty.
CAPITALISM:
Capitalistic economy believes in a private ownership which has started from
19th century.
DIFFERENCES
 IDEOLOGY
the main difference between the Islamic economics and capitalist economy is
the difference of ideology. the ideology of Islamic economy is based on
“FALAH” which means to produce more products, provide to all, and the
maximization of usefulness. whereas and capitalist economy the ideology is
based on the maximization of satisfaction and the maximization of profit.
 RIGHT OF OWNERSHIP
according to Islam all kinds of property are Allah’s trust with the individuals.
this trust can only be obtained in accordance with Allah’s will. Islam does not
recognize the right of individual to own a property which has gain by those
means with shariat declared as unlawful. this situation is quite different from
the right of ownership established under the capitalistic economy capitalism
recognizes absolute right of the individual to earn and utilize the property.

 DISTRIBUTION OF WEALTH
in capitalist economy there is no effective internal mechanism to transfer
wealth from rich to the poor means of livelihood can only be transferred from
the haves and have nots internally through taxation, but taxes can be imposed
only up to the limit. in this way, a large gap in income always remains as a
prominent feature of this system. in contrast, Islamic economy completely
curbs the possibility of wealth concentrating in a few hands by imposing the
rule that that wealth can be obtained only through lawful means, Islam ensure
the equitable distribution of wealth among all the classes of society by
stablishing a regular system of zakat and sadqat.
 INTEREST
interest is the backbone of capitalist economy. the creation and formation
capital and professional activities depends on it. whereas in Islamic economy
interest is strongly prohibited.
 GOALS AND OBJECTIVES:
the goals in objectives often Islamic economy are the maximization of welfare
as it is a man-oriented economy. whereas the goal of capitalist economy,
belongs to money-oriented economy, is the maximization of profit.
CONCLUSION:
Islamic economy it's totally different from capitalist economy and it is not at all
a compromise between capitalism and socialism. Islamic economy has it's own
objectives and characteristics.
 QUESTION NO 5

CONSUMER BEHAVIOR IN AN ISLAMIC ECONOMY

IMPORTANCE:
Consumer behavior means the productions that help us to allocate resources.
in the Islamic economy, the consumption is the mean not the goal.
ASSUMPTIONS:
according to Islamic economics, the assumption of the consumer behavior are
following:
 concept of wealth
 Believe in hereafter
 concept of rationality
CONCEPT OF WEALTH:
The concept of wealth in Islam is quite different from the concept of wealth in
capitalism. In capitalist economy, man is an absolute owner of wealth. But in
Islam wealth is the trust from Allah.
The Muslim consumer is a trustee of wealth given to him by Allah. Hence, he is
bound to spend it according to the laws promulgated by him.
CONCEPT OF HEREAFTER:
The concept of hereafter affects the consumer behavior in two ways:
The utility of a thing has two aspects: worldly and eternal.
The total utility is the sum of these two aspects.
There is an increase in the alternative use of the consumer income, for intense
Sadaqat, alms, welfare work. This eternal utility may apparently be zero from
the point of view of capitalist economy, form the viewpoint of Islam it would
be positive utility which may be greater than mere worldly utility.
CONCEPT OF RATIONALITY (SUCCESS):
From the viewpoint of Islam, success does not lie in amassing of wealth, but in
achieving the favor of Allah.
The expenses of a consumer behavior are of two kinds:
  Spending on the good and services
 Spending in the way of Allah.
Islamic rationalism has the following effect on the consumer behavior:
 In Islamic society the demand for unlawful goods and services will drop
by zero.
 The demand of luxury goods will become limited.
 The decline in the demand of the luxury goods will release funds which
will spent on works of public goods and welfare such as defense,
education.
EQUILIBRIUM OF THE MUSLIM CONSUMER
The equilibrium of the non- consumer lies in gaining maximum utility,
whereas for the Muslim consumer the concept of equilibrium is to gain the
maximum well-being. The concept of well being combines both temporary
and eternal utilities.

WHY SAVING?
Saving occupy an important place in the allocation of the income. Following
are the four motives of saving:
 For future income
 For future consumer spending
 To meet emergency need.
  For the benefit of heirs
In other words, Muslim consumer divide the total income in two parts: savings
and final spending.
ECONOMICS SIGNIFICANCE OF PRINCIPLE OF MODERATION
Moderation in spending of wealth implies to avoid the two extremes of
extravagance and miserliness and adopt a middle way.
He (SAW) said:
“HE WHO SPENDS MODERATELY NEVER FACES HARDSHIP”
If the entire society indulge in wasteful consumption.
 Low saving
 Low investment
 Low productivity
 Low income
 Vicious circle of poverty
 Inflation
 Inequality of income
 Deficit balance of payment
 Burden of loan
 Deficit budge
 Frustration gap
STABILITY OF ECONOMY:
Moderate spending lends internal and external stability to national economy.
Internally growth in national saving provides capital for productive ventures,
which turns a static economy into a vibrant and dynamic economy.
 QUESTION NO 6

FIRM BEHAVIOUR IN ISLAMIC ECONOMICS

in an Islamic economy, man is vice to Allah. he is a manager of Allah to
maximize the utilization on earth.
MAIN GOAL:
the main goal of the firms in any Islamic economy is the welfare of the society
and the non-exploitation of the labor.
MOTTO OF LABOR:
in an Islamic economy, the motto of the labor is:
 work for Allah
 then for nation
 then for farm
 then for yourself
ISLAMIC FIRM UNDER DIFFERENT MARKET CONDITIONS
PERFECT COMPETITION:
in comparison to monopoly and imperfect competition the perfect competition
market is nearer to demand of justice. but the attitude of Islamic firm under
conditions of perfect competition is formed by moral values of Islam. in
perfectly competitive market the Islamic firm will work to earn a normal rate of
profit. for this purpose, the firm will fulfill the demand of efficiency.

This diagram Indicates lines of short-term expenditure firm which after a

certain level assume horizontal shape. For the various reasons general firm
does not yield of output. but an Islamic form will yield output when the
number of firms is small. In an Islamic economy, firm only earn normal profit.
MONOPOLY
monopoly is the condition of the market in which a firm is a sole producer or
supplier of the things and no near substitute of that thing is available. the
monopoly firm fixes its own price.
The attitude of Islamic firm will be quite different from the general firm. in the
view of demand of justice, benevolence, abstention from injustice and social

welfare, the Islamic firm will not assume the role of an exploiter. the
exploitative character of a general firm end the just and benevolent character
of an Islamic firm are illustrated by the following diagram:

OLIGOPOLY
In oligopoly there are a few firms in the market. each has the power and
capacity to influence the market. and entry of new firms in the market is either
impossible or extremely difficult.
In the Lights of precepts of Islam, It would be obligatory upon these firms to
renounce their exploitative practices and charge just price, keeping production
of goods at a proper level and stop false advertising or using exploitative
methods. they should unite not a negative, but on positive basis in such a way
as to increase the piece of social progress and social welfare.
CONCLUSION:
every firm should earn reasonable profit and place no impediments in the way
of new firms entering in the market.
 QUESTION NO 7

ISLAM AND ECONOMIC DEVELOPMENT

the term economic development generally refers to a process whereby a
continues increase takes place in gross national product or in per capita
income over a long period of time.
CONCEPT OF DEVELOPMENT IN ISLAM
Islam is Dean and a complete system of life. it offers to man a cord of life in the
light of which an individual or a nation can easily make spiritual and material
progress. the goal of Islam is the welfare of mankind. this concept of welfare
comprehends both the worldly and the eternal life. the achievements of well-
being in worldly life depends on economic progress hence Islam empirically
urge its followers to participate in economic struggle eliminate poverty and
ignorance.
“In Islamic economics development refers to a process in which along with the
growth of countries real income in per capita income, there is an increase in
self-respect, freedom of action and religious activity of the people so that they
may find themselves materially and spiritually in a better condition than in the
past.”
SELF RESPECT
Islam creates self-respect in its believers. it urges men to accept slavery to 1
Allah and refuse submission to the fake deities. it accords an equal status to
every member of the society.
FREEDOM OF ACTION
Islam concede to every individual the right to adopt any course of action in life,
subject of course to the regulation of right and wrong. Islam declares all
professions as respectable. Islam regards earning by one's labor as the best
form of income.
RELIGIOUS ACTIVITY
One result of economic prosperity will be that people will have more leisure in
which they would be better able to perform their religious duties.
 GOALS AND PURPOSE OF ISLAMIC POLICY OF ECONOMIC
DEVELOPMENT
Islam promises man goodness and well-being in both Worlds the present in the
hereafter. Following are the objectives of the Islamic policy of economic
development.
DEVELOPMENT OF HUMAN RESOURCES
this is the first and foremost objective. it means the building up in
development of sound human attitude. character and personality as well as
the development of means of education, scaling training opportunities so as to
raise the level of product and employment.
GROWTH IN PRODUCTION OF GOODS AND SERVICES
Islam lay emphasis on the provision of those goods and services which are the
basic needs of men. Islam urge that the production of necessities of life should
be raised two adequate level and there's supply should be maintained without
a break.
RISE IN THE STANDARD OF LIVING
it is essential duty of Islamic state to raise the standard of life of its citizens at
every level so that it may be possible for them to attain well-being on every
plane. For the rise in the standard of living they should provide
 Provision of employment
 social securities
 public health facilities
 provision of good environment
 transport and housing facilities
 source of energy
BALANCE DEVELOPMENT
one of the goals of Islamic policy of economic progress is it balanced
development in all the region of country. at the same time balance progress of
all the sectors should also be kept in view.
PROMOTION OF NEW TECHNOLOGY
it is necessary for economic progress to acquire new technologies. the need is
to train various individuals and equipped institutions to invent new
technologies and make innovation so the outmoded technology of production
may be replaced by new technologies.
PROMOTION OF COOPERATION AMONG MUSLIM COUNTRIES
Allah almighty has enriched Muslim countries with all sorts of resources the
best mineral resources in the world are found in Muslim countries. in the light
of these facts, it is absolutely essential to promote close relations
incorporation among the Muslim countries
EFFORTS FOR THE PROPAGATION OF RELIGION
it is the duty of every individual Muslim to bid good and forbid wrong and to
convey the call of religion to every citizen of the world. and economically
advanced Muslim nation will command the careful attention of the non-
Muslim. This will facilitate the formation of international brotherhood.
CONCLUSION:
In an Islamic economy, developments not only means the increase in national
income but also the welfare of people.
 QUESTION NO 8

ROLE OF ISLAMIC WELFARE STATE

STATE
The state is an institution which has sovereign powers in which can enforce its
will. the aim of the state is to build a society which helps the individuals to
realize their potential.
ISLAMIC STATE
Islam is not merely a complex of metaphysical doctrine. but a complete code of
individual and collective life of man. the Islamic concept of state is a midway
between two extremes the state steers a balanced in moderate course. Islam
establishes a relationship between the state and the individual in which the
individual renders complete obedience to the state and the state becomes the
servant and well-wisher of the individual.
MEANING OF ISLAMIC STATE
Islamic state is a state in which sovereignty belongs to Allah. in this state a
Allah’s will is a supreme law. the duty of citizens, as a vicegerent and deputies
of Allah.
AIMS AND FUNCTIONS
the basic aim of an Islamic state is to establish and maintain Islamic way of life
by enforcing the law of Allah. it is also aims at creating a society which is the
home of justice and equality.
ECONOMIC ROLE OF ISLAMIC STATE IN THE LIGHT OF ITS
DUTIES
ESTABLISHMENT OF NAMAZ
the first and foremost duty of Islamic state is to establish the system of namaz
in the territory. namaz is a center in pivot of Islam. it is the most effective
means of bringing man nearer to the creator and Lord.
the establishment of salat promotes capital investment by building mosque
and their proper maintenance. the mosques are the principal means of
assisting helpless poor, the needy, the strangers and the travelers.
ESTABLISHMENT OF THE SYSTEM OF ZAKAT
the mass establishes man bond with Allah. zakat links men with men. the God
transfer wealth from the rich to the poor. it increases the purchasing power of
the poor and make it easy for them to get necessities of life. even if the zakat is
paid and received add individual level, much economic good in well-being
flows from it. However Islam has basically given it a collective form and has
assigned its administration to government.
the system of zakat provides employment to several people employed by the
state to collect and disperse the zakat. effective organization in planning of
zakat systems stabilize the economy of the country.
RESPONSIBILITIES OF ISLAMIC WELFARE STATE
following are the responsibilities an Islamic state
 PUBLIC MAINTENANCE
it is incumbent upon the Islamic state to provide the basic needs of life to all
the citizens. Muslims and non-Muslims living in the territory.
 MEASURES OF ECONOMIC DEVELOPMENT
it is a duty of an Islamic state to take all the necessary measures to promote
the economic construction and development in its jurisdiction.
 ESTABLISHING A SYSTEM OF EQUITABLE DISTRIBUTION OF WEALTH
equitable distribution of wealth is not only necessary for the stability of the
state because it eliminates the class conflict between rich and poor. but it is
also essential for the achievement of economic prosperity in carrying forward
the process of development.
 PROTECTION OF LABOR RIGHT
it is one of the economic responsibilities of an Islamic welfare state to protect
the rights of the factors of production.
 SUITABLE STANDARD OF PRICES
the prices of the goods and services deeply affect the economic condition of
the people. the Islamic states strive to raise the standard of economic
progress. at the same time, it must take effective steps to check the
inflationary rate.
 ACHIEVEMENT OF FULL EMPLOYMENT
one of the duties of Islamic state his two adopt measures for the full utilization
of human resources along with the natural resources.
QUESTION NO 9

PROHIBITION OF INTEREST
INTEREST
interest is the price of capital. the holy Quran used the word RIBA to denote
interest.
ECONOMIC RATIONALE ON THE PROHIBITION OF INTEREST
according to western economics, there are four factors of production.
 Land gets rent as a reward
 Labor gets wages as a reward
 Capital get interest
 organization receive the profit
but according to the Islamic economy there are only three factors of
production.
 land received rent as a reward
 labor get the wages
 risk capital receive profit
JUSTIFICATION
the term organization means management and risk. the task of the
management is done by the managers and directors which is the part of Labor
indeed get the wages. and the risk is divided into the shareholders only part of
their capital invested. risk and capital cannot be apart from each other. and the
shareholder gets the profit on their capital invested.
empirical evidence: in the whole world profit is divided to the shareholder not
the interest.
 ECONOMIC IMPORTANCE OF THE PROHIBITION OF INTEREST
From an economic point of view Pinterest results in even more serious losses:
 INTEREST AND INVESTMENT
the capital investment is dependent on the rate of interest. investment will
continue on only if the interest rate is reduced. if the interest rate is decreased
to zero the process of investment will continue till the level of full employment
is achieved.
 INTEREST AND PRICE
when interest is used as a factor of a production it become the part of cost of
production. its burden is consequently shifted to the consumer interest rate
increasing the real price manifold causes inflation.
 INTEREST AND DISTRIBUTION OF WEALTH
the distribution of wealth in a society become inequitable due to the interest.
Interest is an overhead charge which does not form part of any course of
production. mainly because of interest the rich in the society get richer and the
poor poorer.
 TRADE CYCLE AND INTEREST
interest creates trade cycle also. it plays a special role in bringing about a
slump in the society.
 INTEREST AND ALLOCATION OF RESOURCES
financial institutions operating on the basis of interest evaluate the resource of
the applicant for a loan. They demand proper security to ensure that the
borrower will not only return there capital but also the additional charges. if
interest is abolished investment will be available for every sector and project
without any discrimination.
 INTEREST AND BUSINESS
the capitalist fixes his share at the time of investment in business. since his
profit is guaranteed under all the circumstances he has no active interest in the
business. he does not care if the business earns profit and sustain a loss. if the
interest were abolished the financial class will take an active part in economic
struggle.
 INTEREST AND EFFICIENCY
interest will ill affect on the efficiency of the people in general. the people who
take long ones to fulfill private need are specially burdened with a constant
anxiety and mental depression. this condition has adverse effect on the
efficiency
 INTEREST AND ECONOMICS INSTABILITY
interest destabilize the economy. high rate of interest creates condition of
extreme uncertainty in the investment market.
CONCLUSION:
Interest has been declared unlawful by all the great religions and moral creed.
Islam lays so much emphasis on the prohibition of interest that on behalf of
Allah and his prophet it declares an open war on those who gave and receive
interest in despite warning do not desist from it.
 QUESTION NO 10

ROLE OF ZAKAT AS A TOOL OF FISCAL POLICY

ZAKAT:
“The term zakat refers to the purification of wealth”.
FISCAL POLICY:
“All actions and administrative measures of the government which are
related to revenue and expenditure are called Fiscal policy”.

ZAKAT AS AN INSTRUMENT OF FISCAL POLICY

1. EQUITABLE DISTRIBUTION OF WEALTH:

In Zakat, Islam has a built-in redistributive mechanism. Islam
disapproves of concentration of wealth. It prescribes several
measures for the promotion of circulation of wealth and elimination
of concentration of wealth and incomes may be equitably
distributed among members of the society. F.R Fareedi suggests that
the people below line poverty line should subject to a negative tax.
Zakat is a similar mode of transferring wealth from the rich to the
poor.

2. ACHIEVING FULL EMPLOYMENT WITHOUT INFLATION:

Stability in the value of money is essential for the success of
economic system of Islam. Along with the Islamic State aims at
achieving full employment and provision of decent employment to
every Muslim citizen.
In order to stabilize the value of money the current capitalist system
uses such instruments as changing the interest rate and open
market system.

3. ZAKAT AND ECONOMIC STABILITY:

The economies of the developing countries of the Third World do
not face the trade cycles internally. Recession and inflationary gap in
these countries arise in consequence of their trade with for foreign
countries.
In the furtherance of this policy among other instruments Zakat will
also play an important role as a stabilizing agent. Zakat will act as in-
built fiscal stabilizer as well as a discretionary fiscal stabilizer in the
economy. A survey of the impact of Zakat on consumption, savings
and investment is presented below.

I. Impact of Zakat on consumption:

In Keynesian theory consumption is the real income. This may
be shown in the form of an equation as: C=f(y). The shift the
rate of consumption may be shown in the following diagram:

II. IMPACT OF ZAKAT ON INVESTMENT:

Payment of Zakat is obligatory on capital investment in a
business, merchandise, agricultural produce, hoarded money
and gold and silver holdings Islam severely condemn hoarding
money of wealth.
III. IMPACT OF ZAKAT ON SAVINGS:
Zakat is not a tax or levy on savings in the conventional sense.
The believer, by paying the Zakat, fulfils Allah’s commands in
two ways:
1. The believer purifies his wealth by paying Zakat on it.
2. The believer thereby fulfils the rights of the poor on his
wealth.
 IV. IMPACT OF ZAKAT ON ECONOMIC DEVELOPMENT:
Human development through economic and social progress is
the duty of an Islamic state. It is the main responsibility of the
state to ensure the provision of basic necessities and facilities
of life to all the citizens.
For this purpose it is imperative that:
 Human and material resources should be utilized to
the full
 Production and rate of employment should grow
The high level of economic development in Islamic
Economy may be illustrated by the following
diagram:

ZAKAT AS A SOURCE OF REVENUE OF THE BAIT-UL-MAL

This is the most important source of revenue of the bait-ul-mal. The Quran and
Hadith lay great emphasis on the duty of paying Sadqat so that the Muslims
may show sympathy for each other in concrete paper terms. But the matter
was not left at that. The Holy Prophet (S.A.W) was commanded to take a step
further and fix a rate on possession of wealth above a certain level and enforce
its collection and disbursement under the Islamic State.
“O PROPHET, ACCEPT PROPRIETARY OFFERINGS FROM THEIR
POSSESSIONS.”