ISLAMIC ECONOMY

PED2133

INTRODUCTION TO ISLAMIC ECONOMICS

CHAPTER 1

LECTURER: HANISSAH BINTI HAMZAH

SEMESTER: 12334
Outline:
• Definition, scope and significance of economics
• History of economic
• Comparison between Islamic and conventional economics
• The need for Islamic economics
The Islamic versus Secular Worldview
ISLAMIC WORLDVIEW SECULAR WORLDVIEW
• Belief in a dual worldviews which • Contrast between the religion and
are the world and hereafter other aspects of life
• Religion is not limited to personal • Man made laws governing other
rituals and faith. aspects of life
• Ultimate goal is for perfect • Man pursuing own self interest only
contentment with Allah’s will or
decree.
• Maslahah of the ummah (public • Materialism
benefit) • Individualism
• Accountability • Secularism
• Trustworthiness • Focus on the world, less concerned
• Transparency about hereafter
• Islamic worldview is shaped by the understanding,
appreciation and acceptance of the concept of
Islam, Iman, Amal and Ihsan. It is comprises the
relationship between Allah, man, nature and
religion. And also the nature and characteristics
of man who plays a roles as ‘abd or khalifah.
What is Economics?
• The study of how people allocate their resources to satisfy their
wants

What is economics about?

• The study of about how people make CHOICES

THE WORLDVIEW
Fundamental of Islamic worldview
• Tawhid (divine unity)
• Khilafah (vicegerency)
• Adalah (justice)
• Tawhȋd (theism) : Allah, as the one and only God, the only
creator and Supreme Lord of the universe.
• This concept can also be seen in the primary declaration of
Islamic faith (syahadah): “There is no god but (one) God and
Muhammad (PBUH) is the messenger of God.
• Unity of Allah sums up the Islamic way of life and presents it in a
nutshell, the essence of Islamic civilization. It is the one term
which describes the process of the Islamic transformation of an
individual or a society.
Khilāfah (Vicegerency or Caliphate)
• Sovereignty belongs to Allah alone.
• Anyone who holds power and rules in accordance with the laws of
Allah would undoubtedly be the vicegerent of the Supreme Ruler
and would not be authorized to exercise any powers other than
those delegated to him.
• The Caliphate granted by Allah to Man is popular vicegerency and
not a limited one. There is no reservation in favour of any family,
class or race.
• Every believer is a Caliph of Allah in his individual capacity. By
virtue of this position, he is individually responsible to Allah.
• Man and all other creations owe their existence, to Allah alone.
• The universe is created and administered in accordance with the
regulations set by Almighty Allah, known as “Laws of Nature”
(sunnatullah).
• Whole universe is subservient to Man for his use and benefit.
• Life of the humankind in this world in a place of trial, on which
depends his life of the Hereafter.
• Allah alone is the Sovereign.
• Everyone is equal according to Islam.
• Qur’ân repetitively invites and encourages humankind for judicious
thinking about every phenomena.
Adâlah (Justice)
• Justice is a concept of moral rightness based on ethics,
rationality, law, natural law, religion, or equity, along with the
punishment of the breach of said ethics.
• Justice denotes placing things in their rightful place.
• It is also a moral virtue and an attribute of human personality.
• Justice is close to equality in the sense that it creates a state
of equilibrium in the distribution of rights and duties, but they
are not identical.
• Al-Qur’ân, considers justice to be a supreme virtue. It is
next to belief in Allah
• God declares in the Quran:“God commands justice and fair
dealing” (An Nahl, verse 90)
• In another passage, God says: “you who believe, be upright
for God, and (be) bearers of witness with justice! (Al
Maidah, verse 8)
• Justice is an obligation of Islam and injustice is forbidden.
Islam
• Root word from salama – means peace or submission
• Muslim refer to the one who submit
• As Ad Din – root word from Dana which means debts, judgement,
way of custom. Obedience or conscious submission.
• Unique system covers all needs in human life,
• Islam is a way of life, guided by Al Quran and As Sunnah.
God
• The creator and the ultimate owner of the whole universe
• Beautiful names of Allah related to economic implications:
-Al Razzaq: the Provider
-Al Malik al Mulk: the eternal owner of sovereignty
-Al Muqsit: the equitable

Man
• Nasiya – Insan : means forgetfulness
• Create in good shape and pure spirit
• Given Aql and knowledge
• Best of creations
• Role of servant and vicegerent
Nature
• Creation of Allah for man
• Existence in physically and unseen (ghayb)
• Example: man, vegetables, fruits, animal, day and night, rain, heaven, earth.
• As a sign of the existence of God

Action
• Good action is ibadah (worship)
• Correct intention, correct knowledge, observance of all Islamic
rule.
Aim for Muslim life
• To achieve Allah’s pleasure (al falah)
• Tool to achieve the aim of life:
i. Al Nafsiyyah- iman, character
ii. Al Jismiyyah- health, strength, long life
iii. Al Kharijiyyah- wealth, influence, family
iv. Al Tawfiqiyyah- divine grace

Knowledge
• An obligation and fundamental requirement for all Muslims life long
• Sources of knowledge:
i. Revelation – primary source
ii. Reason – secondary source
iii. Universe - secondary
The Significance of Economy in Islam
• Quran stated about wealth and economics so many times
• Mention in Hadith
• Economy is part of Ad Din
• Fardhu Kifayah – a needed knowledge and skill required to be mastered by
Muslim
• Important key towards a great civilization
• Human attempts to fulfill their satisfaction
• Allocation of economic resources that are limited
• Issue of efficiency
• Wealth creation due to returns to entrepreneurial activities
• Distribution of wealth and equity
• Issue of inequitable income distribution
Quranic verses related to wealth and
economics
• Al Iqtisad – Islamic Economics
- Surah Al Maidah: 66
- Surah Luqman: 19

• Al Amanah – Trust: guiding principle for economic behavior

- Surah Al Ahzab: 72
- Surah Al Shura: 26,105,106,107,124,125,142,143,161,162,177,178,193

• Al Adl – Adil: Economic justice in consumption, production and distribution

- Surah Al Maidah: 8,95,106,107,108
- An Nisa: 3,58,129,135
Background of Islamic Economics System
History of the Development of Islamic Economics
Thought and Knowledge
Prop
het
Yus
of
A.S
Prophet Muhammad
S.A.W

The era of Khulafa’ al Rashidun

The era of Imams (Imam Hanafi, Imam Maliki, Imam

Syafie, Imam Hanbali)

The fallen of the Islamic Government

Colonialism

Reformation

Malaysia and its Islamic economics activities

Famous Muslim Economic Scholars in the
History

1. Ibn Khaldun (1332M)

2. Ibn Taimiyyah (1263M)
3. Ibn Hazm (994M)
4. Al Ghazali (1058M)
5. Nizam al Mulk al Tusi (408H/1017M)
 Definition of Islamic Economic
• There are many definition on Islamic economics from a group of scholars.
• Islamic economics is a study of how a society decides what, how, and for
whom to produce, but the decisions and actions must be in accordance to
Islamic teachings
• An approach to interpreting and solving man’s economic problems based
on the values, norms, laws and institutions found in and derived from the
sources of knowledge in Islam (Mohamed Aslam Haneef)
• A study of the process and the suspension of human activities related to
production, distribution and consumption in Muslim society (Monzer Kahf)
• Islamic economics is the knowledge and applications and rules of the
Shariah that prevent injustice in the requisition and disposal of material
resources in order to provide satisfaction to human being and enable
them to perform their obligations to Allah and society.