Islamic Economics AWARE Center Diwaniyas www.dawahmemo.com

Islamic Philosophy Individual and communal life is shaped by belief in the One God, who sent His Book (the Quran) for the spiritual, social, physical and economic benefit of mankind. The Quran was inspired to Muhammed, who provided a practical example of the teachings of the Quran in executive, legislative, judicial, social and spiritual spheres of life.

Islamic Philosophy Islam is a comprehensive way of life that does not distinguish between the material and the spiritual – both are intertwined and both are important for the well-being of the human. Both private and public interests are important, but when they conflict, then public interests have precedence even if they go against some individual interests.

Early Islamic Economics To ensure the provision of the basic necessities of life to every citizen, including food, clothing, housing, health care, education and security. To give practical verdicts or solutions to peoples’ problems concerning sales, letting, taxes, loans, bankruptcy, and so forth.

Goals of Islamic Economics 1. To safeguard Islamic values regarding: Religion Life Intellect Offspring Wealth These rights are protected for each citizen to enable him to enjoy a comfortable life and to maximize his opportunity for spiritual development and social contribution.

Goals of Islamic Economics 2. Just distribution of wealth resources. If some members of the community fail to achieve sufficient provision for the fulfillment of their basic needs through their own efforts, they have a right to the earnings and wealth of others. The Quran instructs, “And give the relative his right, and the poor and the traveler, and do not spend wastefully.” (17:26)

Goals of Islamic Economics 3. Optimum use of resources. Islamic teachings enjoin a balanced and wholesome enjoyment of life for all. “O Children of Adam, take your adornment at every place of worship, and eat and drink, but be not excessive. Indeed, he likes not those who commit excess.” (7:31)

Goals of Islamic Economics 4. Development of society through lawful investment. 5. Protecting the interests of future generations. 6. National independence and economic stability, so a people are not coerced to act against Islamic values for the sake of their economy.

Summary: Goals of Islamic Economics 1. To safeguard Islamic values regarding religion, life, intellect, offspring & wealth. 2. To justly distribute wealth resources. 3. To optimally use resources. 4. To develop society with lawful investments. 5. To protect future generations. 6. To enhance national independence and economic stability.

Five Solutions: 1: Prohibited Earnings From the production, sale and distribution of intoxicants From gambling and lotteries From theft, falsehood, deceit and embezzlement From pornography, prostitution & pimping Deceitful use of an orphan’s property is particularly banned.

Five Solutions: 2: Prohibited Expenditure Hoarding, which destabilizes currency value and leads to false shortages and inflation Extravagance and wastefulness, which deprives the poor Extreme frugality, which cripples consumption, production and overall wealth.

Five Solutions: 3: Required Expenditure ZAKAT A 2.5% alms tax on savings that have accumulated for a year. It applies to cash, stocks, crops, precious metals, livestock and “circulating assets.” If wealth is hoarded, it will be eaten by zakat. It channels wealth from the rich to the poor, instills a sense of responsibility, lessens economic gaps, and promotes goodwill.

Recipients of Zakat “Zakat is for the poor and the needy, and for those who collect and administrate it, and for those whose hearts are to be reconciled, and for freeing captives, and for those in loss or debt, and for the cause of God, and for the [stranded] travelers. It is an obligation from God. And He is Knowing, Wise.” (9:60)

Five Solutions: 4: Zero Interest Rate Interest (simple & compound) is strictly prohibited. It channels wealth from the poor to the rich, encourages exploitation of the poor and widens economic gaps. The receiver, giver, witness and scribe are all cursed, according to prophetic sayings. Gaining “profit” by investment is allowed, as it encourages development projects. In modern terminology, it is called venture capital. A fixed “finance charge” is allowed.*

Five Solutions: 5: Inheritance Laws Fixed distribution of inherited wealth to offspring, parents and siblings after the payment of debts. Up to 1/3 of wealth can be bequeathed to recipients not covered by inheritance laws. Eliminates the concentration of wealth on a single person. Eliminates court battles over related issues.

Summary of the Five Solutions Earnings from vice is prohibited. Moderate enjoyment of wealth is encouraged. Tax on superfluous wealth is required. Interest on loans is banned. Inheritance is regulated. Result: Wholesome, comfortable living for all inhabitants of the earth, in an atmosphere of mutual responsibility and goodwill.

More information http://www.quranenglish.com/ Economic System of Islam The Economical Problem of Man

Islamic Economics AWARE Center Diwaniyas