Chapter 3: ISLAMIC ECONOMICS

• Introduction of Islamic Economics:

• Definition
• Philosophy
ISLAMIC ECONOMICS - DEFINITION
M.A. Mannan:
“Islamic Economics as a social science which studies the
economics problems of people imbued with Islamic values.”

M. Akram Khan:

“a study of how man can achieve al-Falah (complete happiness
in this world and the hereafter) through his control, ownership
and uses of these worldly resources based on the concepts of co-
operation and partnership”
ISLAMIC ECONOMICS - DEFINITION
Amr Mohd Fayssal al-Saud:
“as a study used by man to fulfill his as well as society’s
wants according to shariah principles”

Islamic economics can be summarized as:

 To study man’s activities in line to shariah.
 Manage the resources – benefit the personal will or ummah/society.
 achieve material & spiritual satisfaction
 Achieve Allah’s blessing.
 The diversity of definitions should not surprise once we remember that Islam's approach to all human issues,
including economic ones, is holistic or multidisciplinary.

 Islamic economics could be a study of choice considering relative scarcity rather than absolute scarcity.
It is apparent that wealth maximization and utility optimization in general may not be a
primary concern in Islamic economics.

Generally, Islamic economics could be defined as:

A social science that studies the economic problems of humanity, and

evaluates their solutions from the perspective of the Islamic world view and
values, as well as human reasoning and experience.
THE PHILOSOPHY OF
ISLAMIC ECONOMICS
Philosophical Foundations of the Islamic Economic System
• The philosophical foundation of the Islamic economic system is derived from the
Qurʾān and Sunnah, in which economic and social policies dealing with economic life
are laid out.
• Human beings as servants of Allah (SWT) are expected to optimize the use of
resources to produce goods and services in order to achieve material and non-material
well-being with the ultimate aim of falāḥ (success or well-being) in this world and the
hereafter.
• In aiming for falāḥ, the Islamic economic system is guided by the following key
concepts:

Tawḥīd ‘Ibādah Khilāfah Amānah

(monoth (worshi (viceger (trustee
eism) pping) ent) ship)
Tawḥīd (monotheism)

• The essence of tawḥīd is total commitment to the will of Allah (SWT) and to Him as the
only sovereign power.
• This involves both submission and mission to pattern human life in accordance to His
will which is the source of value and is the objective of all human endeavours.
• Everything has to start from belief in Allah (SWT) as the Creator, Lord, and Sovereign of
the universe, which entails willingness to submit to His will, to accept His guidance, and
to have complete and unqualified servitude to Him
• Hence, individually and collectively, Muslims shall not imitate or emulate any other
system if it differs from the principles of Islam.
Ibādah (worshipping)

• As the objective of all human endeavors is to seek the pleasure of Allah (SWT), any
activity, whether it be economic or non-economic and is within the boundary of the
Sharīʿah, is an act of ʿibādah.

• Hence, all aspects of a Muslim's life— moral, social, ethical, economic, political and
others—are based on the guidance and obedience of Allah (SWT).

• With the axiom of ʿibādah, economic agents will implement Allah’s (SWT) commands,
abstaining from His prohibitions, and applying everything that He has legislated.
Khilāfah (vicegerent)
• Human beings are created with the role of khilāfah, that is, to be the vicegerent of Allah
(SWT).

• This role outlines the responsibilities and provides the reasons for the existence of
human beings which relate to fulfilling God’s will on earth, prompting what is good,
forbidding what is wrong, establishing justice and promoting beneficence, resulting in
attaining high levels of good life, both individual and collective.

• In fulfilling the responsibilities given as the vicegerent of Allah (SWT), human beings are
also endowed with the free will to make decisions.
Amānah (trusteeship)
• Allah (SWT) has created everything else in the universe for the service of man.
• Every creation is an amānah from Allah (SWT) to human beings; hence, human beings
as economic agents are responsible of society and the environment.
• The trust means that human beings are accountable to Allah (SWT) and have to adhere
to the guidance of Allah (SWT) and that they will be questioned and accountable on the
Day of Judgment as to how the trusted resources were managed.

The use of the entrusted resources by men as amānah, explain the concept of
ownership in Islam.
Anything that is owned is actually what one holds in trust and must be used justly
to achieve the ultimate end of falāḥ (happiness).
PHILOSOPHICAL FOUNDATION
 Nejatullah Siddiqi - Islamic Economy based on
these 4 philosophy:
 Relationship Men – Allah.
 Relationship Men - Men.
 Relationship Men – Nature.
 Meaning of his living in this world.
RELATIONSHIP MEN -
ALLAH
.RELATIONSHIP MEN – ALLAH
o Defined as Tauheed, which is devided into 3:
o Tauheed Rububiyyah.
o Tauheed Uluhiyyah.
o Tauheed Asma wal Sifat.
If you (O Muhammad) were to ask them: ?Who
has created the heavens and the earth and subjected
the sun and the moon (for the benefit of His
creatures)?? They will surely reply: ?Allah.? How
then are they deluded away (by their own desire
from admitting the Oneness of Allah and from
obeying His Commandments)? al-Ankabut:61
Prove our Tauhid by
Perform All Duty
Man – Vecegerent of Allah

Man submit & obey to Allah

Man maintain good
Man manage the
relationship with other
resources to achieve
man.
goodness
RELATIONSHIP
MEN - MEN
RELATIONSHIP BETWEEN MEN – MEN
(MATERIAL/DUNIA ASPECT)
• Man as a Trustee (Vicegerent).
• As a trustee – we need to manage the resources
in order to satisfy man’s needs & wants:
• To change.
• To Recreate.
• To Rebuild.
• To Reconstruct.
• A Trustee cannot_______ the resources:
• Misbehave
• Misuse
The Implementation of Khilâfa Principle as a Task and Role of Man on Earth

• Allah created man as a vicegerent on earth. He intentionally created man to be a creature who is assigned to represent

Him managing the earth. Becoming caliph, human equipped with all the necessary tools such as senses, physical strength,

brain, instinct, conscience, and science. With a variety of devices, human can build and prosper the earth. Until now, it has

not been found a sophisticated creature as human beings in doing development on the earth and universe.

• As the caliph of God, man was given a mandate to empower the whole universe as good as possible for the welfare of all

beings (The Qur’an, 22:41). According to Shihab (2000), as the caliph of Allah, man has an obligation to create a society

that is on good terms with God, and foster a harmonious community life as well as maintain the religion, reason and

culture. In relation to the economy, the principle of caliphate, according to Chapra (2002), deals with four factors;

universal brotherhood, resource are a trust, humble life style, and human freedom
RELATIONSHIP BETWEEN MEN – MEN
(SPIRITUAL/AKHIRAT ASPECT)
o As vicegerent, man need to cleanse themselves. Why??
o Tend to make mistakes after mistakes (Sins).
o The concept of Tazkiyah.
o Purification of one’s soul.
o To achieve al-Falah.

o Wealth Cleansing:
o Zakat
o Waqf
o Sadaqah.
Allah Gave Man Spiritual (Qalb) & Mental (Aql) To
Think & Choose:
Right or Wrong.
Fair or Unfair.

We are the nobles creation of Allah:

“We Have indeed created man in the best moulded”
(at-Tin:4)
RELATIONSHIP
MEN - NATURE
 In Islam the purpose of nature is for man
• to study nature in order to discover God and
• to use nature for the benefit of mankind’.

Nature can be used to provide food for mankind and its bounty is to be equally distributed among all
peoples.

• All activities that cause harm to mankind and in turn destroy nature are forbidden. Destruction of the
natural balance is discouraged, for example, unnecessary killing of animals or removal of vegetation
may in turn lead to starvation due to lack of food. This view is an extension of the idea that ‘Man’ has
been placed on earth as God’s representative (Faruqi, 2006a; Zaidi, 1991; Said, 1989).
• The Islamic view of nature has its roots in the Quran, the very word of God and
the basis of Islam. The following passages from the Quran illustrate the
relationship between nature and man and how this relationship inspires Muslim
scholars to study natural phenomenon, in order to understand God (Wersal,
1995).

• The following verses also show the way the Quran presents the whole universe

We created not the heavens, the earth, and all between them, merely in (idle) sport; we created
them not except for just ends. But most of them do not understand (Surah AlDukhān 44: 38-39,
[Ali, 1989, p. 1289]).
Man managing the resources…
Muslims OR Non-muslim must undertake in
economics activities.

WHY???
Because of Scarcity of
resources
Dan Ia telah memberi kepada kamu sebahagian dari tiap-tiap apa jua yang
kamu hajati. Dan jika kamu menghitung nikmat Allah nescaya lemahlah kamu
menentukan bilangannya. Sesungguhnya manusia (yang ingkar) sangat suka
menempatkan sesuatu pada bukan tempatnya lagi sangat tidak menghargai
nikmat Tuhannya.

(And He giveth you of all that ye ask for. But if ye count the favours of Allah,
never will ye be able to number them. Verily, man is given up to injustice and
ingratitude.
Resources are not ready
made…
• Allah obligate human to: WHY??
• Working hard.
• Industrious.
• If Allah made it ready, human will be:
• Ungrateful.
• Wasteful.
• Abusive utilizing the nature.
• To satisfy individual or society needs or wants:
• Hardworking & industrious.
• Innovative to exploit the resources.
Limited ability & human managing resources…
• Human able to decide…
• What to produce – limited resources.
• How to Produce – the goods & services.
• Who get the goods & services?
• Quantity of resources acquired
determined by skill to exploit the
resources, influenced by:
• Education level.
• Skill.
• Technology
Dan bahawa seseorang itu tidak memperolehi
balasan selain balasan dari amalan yang telah
diusahakannya. an-Najm:39
 Industrious & hardworking human, will be
rewarded accordingly!
 Fortunate human must not selfish &
stingy but:
 Help society
 Otherwise they will be punish by Allah
(ungrateful)
TOTAL SUBMISSION TO
ALLAH SWT.

• Submit to Allah in all our aspect of life:

• Economic, business, religion, etc…
Katakanlah sesungguhnya solatku,
ibadahku, hidupku, dan matiku adalah
untuk Allah Tuhan semesta alam. al-
An’am;162.