ISLAM &

ECONOMICS
PREPARED BY
FATHIYYATUNNUR IDRIS

Definition

Concepts

CONTENT Purpose

Principles

Wealth Management & Distribution

 DEFINITION
CONVENTIONAL ECONOMICS
a. The sciences of wealth. (Adam Smith)
b. A study of mankind in the ordinary
business of life. (Alfred Marshall)
c. It deals with human behaviour that
concerns with money getting and
money spending. (Modern Economist)
DEFINITION
GENERAL
The study of human behaviour in using
resources to satisfy wants. It deals
with human management of resources
of the earth about consumption,
production & distribution.
ISLAMIC ECONOMICS
a. A social science that studies the economic
problems of a people imbued with Islamic
values. (M.A. Mannan)
b. Administration of scare resources in human
society in the light of an ethical conception of
welfare in Islam. It concerns the material &
immaterial welfare subject to the Islamic
prohibition on production, consumption &
distribution. (Ibn Khaldun, Al-Tusi)
CONCISE
The knowledge & application of
Shariah that prevent injustice in the
attainment & disposal of material
resources. It provides satisfaction to
human & enables them to perform
their obligations to Allah & society.
 CONCEPTS

1. Belief: governed by QS to achieve the falah & a good life

within the framework of Shariʿah.

2. Ownership: Allah is the absolute owner of everything (2:29).

3. Earning: He is obliged to earn an honest livelihood by his

own labour.
4. Equity & justice: socio-economic rights - to access factors of
production; land, labour, & capital to ensure economic justice.

PURPOSE: AL-FALAH

• Islam requires man to co-ordinate his life in the most balanced

way of his economic (material needs) & spiritual aspects of
attaining real success.
• Rules & conditions of al-Falah:
• The fulfilment of the objectives of Shari’ah: religion, life, intellect,
posterity, & property.
 CONT.

• Social utilities (maṣalih) : three-level hierarchy of needs:

1. Necessities
2. Complementary
3. Luxuries / Refinement

Imam Ghazali

2 TYPES OF AL-FALAH

1. To achieve material well being :

• Reduce of poverty & create conditions for full employment.
• Development of training & education to progress the individual's
abilities & to be independent.
• Construction of comfortable housing.
• Promotion of Infaq.
• Free from riba.
 CONT.
2. To reshape human behaviour in the light of Islamic norms &
values.
A. Consumption - five principles as a consumer:
1. righteousness
2. moderation
3. cleanliness
4. beneficence/generosity
5. morality

CONT.

B. Production - achievement of the following :

• Increase of income resulting from the increase of only beneficial
goods & services through the maximum utilization of resources.
• Increase in the volume of production according to the priorities
in the hierarchy of needs.
• Quality of goods & services produced subject to Islamic
injunctions.
• Maximum participation of people in the production process.
 6 PRINCIPLES OF IES

Tawhid Right to
Individual liberty
& Brotherhood property

Economic
Social justice Social security inequality within
natural limits

1. TAWHID & BROTHERHOOD

• Man has been appointed as the vicegerent of God on earth & entrusted with the
responsibility to use & distribute the resources justly.
• It teaches man how to relate & deal with other men in the light of his relationship
with God.
• Social justice is the fundamental truth behind the workings of an economy based
on market exchange, resource allocation, maximisation of utility, & profits.
 2. INDIVIDUAL LIBERTY

• Everybody has a right to earn a living through decent labour.

• An individual is free to involve in any profession within the laws of
Islam.
• Nobody has the right to undermine the status of honest working men
based on the kind of work they are doing for a living.
• The Prophet S.A.W. said:
• “It is far better for one even to take his rope, cut wood, pile it up and sell it in
order to eat and give charity rather than to beg of other whether they give him
or not”.

3. RIGHT TO PROPERTY

• Whatever the individual makes or earns through lawful means is his

private possession.
• Allah S.W.T. reveals in Surah al-Nisá; 4: 32:
• “And do not crave what Allah has given some of you over others. Men will be
rewarded according to their deeds and women ˹equally˺ according to theirs.
Rather, ask Allah for His bounties. Surely Allah has ˹perfect˺ knowledge of all
things.”
• This verse explicitly recognizes the individual's right to own, inherit, &
sell the property as and when he likes.
 3. RIGHT TO PROPERTY

• Nobody even the state could jeopardise this right if he does not
involve in unlawful transactions e.g. selling wine, pork, or taking other
people’s property by force.
• Hence, he is responsible for fulfilling certain obligations to society &
paying certain taxes to the state.

4. ECONOMIC INEQUALITY WITHIN

NATURAL LIMITS

• Islam admits the economic inequalities among people within

reasonable and natural limits, as they are different in their ability,
intelligence, & other qualities.
• “And it is He Who has made you generations coming after generations, replacing each
other on the earth. And He has raised you in ranks, some above others that He may try
you in that which He has bestowed on you. Surely your Lord is Swift in retribution, and
certainly He is Oft-Forgiving, Most Merciful.” (Surah al-An’am 6:165)
 4. ECONOMIC INEQUALITY WITHIN
NATURAL LIMITS

• “Is it they who would portion out the Mercy of your Lord? It is We Who
portion out between them their livelihood in this world, and We raised some
of them above others in ranks, so that some may employ others in their
work. But the Mercy (Paradise) of your Lord (O Muhammad SAW) is better
than the (wealth of this world) which they amass.” (Surah al-Zukhruf; 43:32)

4. ECONOMIC INEQUALITY WITHIN

NATURAL LIMITS

• These Qur’anic ayat explains three fundamental realities visible in the

life of man:
1. Everything on the earth & the universe belongs to Allah. Man as the
vicegerent on the earth has been entrusted with many things for his
use.
2. Allah has assigned different ranks to His representatives regarding His
trusts. Some are entrusted with huge fortunes & the more remarkable
ability for work; and some with lesser fortunes & lesser ability to work.
3. Life is merely a trial.
 4. ECONOMIC INEQUALITY WITHIN
NATURAL LIMITS

• The economic inequality provides chances for human beings to

develop noble qualities & struggle for betterment in their lives.
• However, vast economic inequality among people will cause chaos &
enmity.
• Thus, Shariʿah imposes Zakah & ’Afw (charitable funds from the surplus
wealth of people) to maintain equitable differences in people basic
needs.

5. SOCIAL SECURITY

• The maintenance of public benefits & welfare by the state.

• The responsibilities of the state:
• to provide adequate means to the poor to enable them to meet their basic
needs.
• to reduce the gap between the rich & the poor within natural limits.
• to provide a complete shelter to address all misfortunes by helping older
people, unemployment, sudden calamity, & hereditary deformity.
• to impose taxes on the wealthy to meet the requirements of those in
need, irrespective of their creed, colour, & religion.
 6. SOCIAL JUSTICE

1. Production- related to individual liberty & right to property.

• It involves the right to acquire wealth through lawful manner & right to
own the wealth without abusing other people’s rights.
2. Distribution- related to economic inequality within natural limits &
social security.
• Prevention of wealth from merely circulated in few hands only but
continue circulating in the community (59:7).

6. SOCIAL JUSTICE

• 3. Consumption
i) Balance in spending; neither excessiveness nor miserliness.
• “And those, who, when they spend, are neither extravagant nor
niggardly, but hold a medium (way)those (extremes).” (Surah al-
Furqan; (25:67)
ii) The surplus wealth of people is better spent in the service of
virtue, righteousness, public welfare etc., instead of on luxuries.
 WEALTH MANAGEMENT&
DISTRIBUTION

WEALTH MANAGEMENT

• It is the process on how the assets being organised & managed

objectively & ethically according to Shariʿah.
• It begins with the method of generating income, utilising &
managing it.
• E.g. generating income from the job, then utilise it for household
needs, investing for generating long term wealth & ensure that
Zakah is fulfilled accordingly.
 WEALTH MANAGEMENT
• In the wider perspective, wealth management can be categorised in five aspects
of their purposes which are:
1. W. creation: to get money & assets through lawful means (23:51).
2. W. accumulation: to generate more wealth & productive economic activities in the
society e.g., investments, unit trusts etc.
3. W. protection: to guard & protect one’s wealth from risks e.g., takaful (5:2).
4. W. purification: to purify the wealth through different means e.g., zakah, sadaqah &
waqf. Besides, to purify the business (from riba) & purify the self (by good
deeds and from unlawful things).
5. W. distribution: wealth should be widely circulated among members of the society
instead of being confined to few hands.

CONCEPT OF WEALTH DISTRIBUTION

3 Tools and
Objectives sources
 1 ST OBJECTIVE

1. The establishment of a practical system of economy

• aims to establish a system which is natural, practicable &
allows everyone to function in a normal way according to
his ability, choice & liking, so that his activities may be more
fruitful, healthy & valuable.
• It is secured through healthy relationship between the
employer & the employee, & properly utilizing the natural
force of supply & demand.

2 ND OBJECTIVE

2. Enabling everyone to get what is rightfully due to

him.
• Aims to enable everyone to get what is rightfully his.
• Under materialistic economic systems, there is only one way of
acquiring the right to wealth, & that is a direct participation in
the process of production.
 CONT. 2 ND OBJECTIVE

• On the contrary, in Islam, the wealth is the property of Allah

& He alone can lay down the rules as to how it is to be used.
• Not only those who have directly participated in the
production of wealth but those whom Allah has made it
obligatory upon others to help, are the legitimate sharers in
wealth.
• Hence, the poor, helpless, the needy & the destitute – they
too have a right to wealth.

3 RD OBJECTIVE

3. Eradicating the concentration of wealth.

• ensures that the wealth is circulated in the society as widely as
possible instead of becoming concentrated in a few hand.
• the distinction between the rich & the poor could be
narrowed down within the natural limit.
• Islam does not permit any individual/group to have a monopoly
over the primary sources of wealth but has given every
member of the society an equal right to derive benefit from
them.
 TOOLS & SOURCES

• There are 2 kinds of heads relating to the distribution of wealth in

Islam:
1. Primary heads – refers to distribution of wealth among the factors
of production those participate in the process of production
directly i.e., land, labor & capital. Their rewards are rent, wage &
profit respectively.
2. Secondary heads – It is called redistribution of wealth to those
people who do not participate in the process of production
directly & do not meet their needs themselves.

TOOLS & SOURCES

• Among the tools and sources of redistribution of wealth are:

1. Zakāh is a financial obligation and worship on Muslims.
• aims for purification of self & wealth
• motivates an individual to continuously strive to work productively
to further improve his standard of living.
• Zakāh is a major instrument of restricting excessive accumulation
of wealth & reducing the inequality of income & wealth among
people.
• modes of spending of Zakāh are targeted towards the needy &
vulnerable class of the society.
 TOOLS & SOURCES

2. Wirathah: inheritance.
• A long list of inheritors selected in accordance with the degrees of
relationship, because of which the inherited wealth gets a very wide circulation.
• In contrast, the system of inheritance that is generally prevalent in Europe is
the rule of primogeniture –all the property of the deceased goes to the eldest
son & all the other children are totally deprived of it.
• In certain places, a man may distribute his whole property by will to any
person, thus depriving even his male offspring of a share in the inheritance.
• As a result, wealth gets concentrated instead of being circulated.

TOOLS & SOURCES

3. Waqf:
• refers to an Islamic endowment of property to be held in
trust & use for a charitable or religious purpose.
• It is an important tributary of social, cultural & economic life.
• It is based on compassion, social takaful & empathy among
Muslims.
• It keeps the flow of wealth from the rich to the members in
the society & benefits them continuously.
 TOOLS & SOURCES

• The Islamic system of redistribution tries to facilitate &

assist the non-active participants of economy.
• The tools are useful to reduce poverty & the concentration
of wealth.
• Thus, it is proved that the tools & ingredients of the Islamic
system are the best sources of distribution of wealth, which
solve a lot of deficiencies of other economic systems.

CONCLUSION

• Wealth and property in Islam are both responsibility &

accountability.
• It is a trust from Allah to be utilised & managed in accordance
with His Will; befitting one’s position as a Khalifah.
• With wealth, a person can rise to become the best humanity if
he spends his wealth for the good of many.
• However, if he dominates his wealth over others by exploiting
& spending on evil works, it will be a curse, as Qarun & Fir’awn.
THANK YOU