Economic System of

Islam:
1. Introduction:

 The supremacy of God is the basis of everything in Islam, no matter of

what nature, whether spiritual, economic, or political.

 The Islamic economic system is a collection of rules, values and standards

of conduct that organize economic life and establish relations of
production in an Islamic society.

 Justice remains an integral part of the aforesaid system as it strictly forbids

the exploitation and using unfair means in the conduct.
 It provides equal and ample opportunities to all to grow and prosper in life.

 “He is the sovereign of the heavens and the earth, and all affairs are
referred back to Him.” (57:5)
2. Fundamentals of Islamic Economic
System:
 1. Golden Mean (Between two extremes of capitalism and communism):

The Islamic economic system is neither communist nor capitalist. In fact, it has
its own distinguishing system based on equity, justice, and level-playing field.

It includes the virtues of both and disdains their shortcomings.

It allows neither unrestricted freedom to damage the interest of a community

and the individual, nor does it recommend totalitarian regimentation that
destroys the egoism of the individual.
 2. Individual liberty and social nature:

Islamic economic system gives complete freedom to individual to earn his

livelihood.
But, fair means should be used so that society’s interests remain protected.
 3. Obligation of lawful earning:

Life of a believer in the world is a temporary phase of his eternal life in the
hereafter.

Man will be held accountable for all his actions and deeds.

There’s no room for any sort of exploitation and usurpation.

 4. Humans to exploit natural resources only for betterment in the world and
success in the hereafter:

“It is He who has made you vicegerents (delegates) on the earth, and raised
some of you above others in rank so that He may test you in what He has given
you. Indeed, your Lord is quick in punishment, yet He is also forgiving and
merciful.” (6:165)
 5. Islam forbid asceticism (severe self-discipline/self-denial) and unchecked
materialism:

One should neither give oneself entirely to spiritual activities while disregarding the
needs of the body, nor should one judge everything by its economic benefit while
ignoring the moral value of life.

6. Welfare of individual and society:

“Do your work in the world in such a way as if you were going to live forever, and
work for the hereafter as if you were going to die tomorrow.” Prophet PBUH.
In collective welfare, lies the individual welfare.
 7. Duties of Employer and Employee:

Islam imposes moral duties on both the employee and the employer. The
employee is commanded by God to do his work diligently, efficiently and
honestly. On the other hand, employer is commanded not to oppress and
exploit the employees.

Today, rights of labors violated.

Violence on child labor.
3. Characteristics of Islamic Economic
System:
1. Absolute liberty to individual:
No unfair means and exploitation of fellow beings.

2. Right to property:
Islam has recognized individual’s right to own property, but subjects it to such
limitation as to render it absolutely harmless to the common good of the
society.
Today, land mafia in Pakistan.
 3. Economic inequality within natural limits:
This is indispensable for growth and development as it creates healthy
competition.
But, this inequality shall be in natural, reasonable and equitable limits. i.e. So
long as differences in wealth and rank do not lead to emergence of class
system, the rulers and the ruled, the masters and the servants etc and all are
treated alike before the law of the land, it is permissible and lawful in Islam.

It is often said that inequitable distribution of wealth can be remedied through

equal redistribution. But, this hypothesis as has been proven by communism
system is unnatural and impractical.
 4. Social security of citizens (concept of a welfare state):

The Islamic state is legally and morally responsible for the provision of basic
needs to its members.
It ensures and safeguards the society’s security and its well being of the public
i.e. inalienable rights of health, education etc.
 5. Social justice:
“We surely sent our Messenger with clear signs and revealed with them the book
and the Balance (of right and wrong), that man may stand forth in justice and we
sent down iron, in which is (material) for might ways and many uses for men.” 57:2.

6. Riba (Interest) free economy:

Fixed interest rates are exploitative in nature.
The Council of Islamic Ideology (CII) says in a seminar that the ideal alternatives to
interest in an Islamic economic system are profit-loss sharing mechanism and qard-
hasanah.

For this, they suggested the reorganization and restructural reforms in banking
sectors. (USA-1.5pc; China-2pc; Japan is in negative; Pakistan 13.25pc.)
4.Specific Islamic guidelines:

 1. Production:
No sort of exploitation, misuse or usurpation and no use of unfair means.

2. Consumption:
It forbids both miserliness and extravagance and suggests a middle-course
between the two.

“And they who, when they spend are neither extravagant nor miser and there
is ever a just mean between the two.” Surah Al Furqan.
 3. Distribution:
The levy of zakat is a strong preventive measure against those who hoard their
wealth.

4. Exchange:
Islam enjoins fairness in transaction and urges to keep record of the exchanges
to ensure transparency.

It forbids undocumented economy. Money-laundering and offshore business.

Likewise, benami properties. 36pc of the undocumented economy in Pakistan.
5. Conclusion:

 To sum up, the economic system of islam is based upon the complete
harmony between the individual and societal good.
 It neither separates the individual from the society nor does it regard his
welfare and wealth as conflicting with that of society.

 Thus, Islamic economic system forms the basis of an egalitarian and

progressive society.