Chapter# 4 Islam and Distribution of Wealth Prepared by Kokab Manzoor

Chapter`s outlines Rent Definition, & Islamic Doctrine Profit Justification of profit, limits, Definition and Islamic principle of fixation of profit Wages Definition, theories & Islamic view point of wage determination. Measure to stop concentration of wealth 1) Legal Measures2) Optional Measures

Meaning and importance N.I is produced by cooperative efforts of F.O.P, and then is distributed among the same factors. Eco system of Islam makes utmost efforts to maintain the distribution wealth on just and benevolent basis and to provide means of sustenance to every member of the society in a dignified manner

RENT Islam recognizes the right of private ownership of property. One of the lawful form of profitable use of property is to let it out on rent. Those goods which are Lawful and durables i.e land, house machinery etc

Definition of Rent) Rent is the surplus produce of the land which is given to the owner of the land due to permanent and durables qualities of the land. (David Ricardo)

Islamic Doctrine of Rent The Islamic doctrine of rent is so framed that the wealth flows in the direction of the poor rather than the rich. Fixing the rate of Rent Justice Benevolence No injustice

Fixing the rate of Rent & the State 1Nature of Land  Higher rates of Rent from more fertile and productive lands and vice versa. “Allah does not place more burden upon a person than he can bear” [Al-buqra ;286]

Cont`d…. 2Nature of Crops  Higher rate of Rent on good crop and low on bad or inferior quality crop.

Cont`d…. 3Nature of irrigation  The nature of irrigation shall be taken into consideration while fixing the rate of Lagan.  10% on rain fed land and 5% on that land which is irrigated through artificial means.

Cont`d…. 4Allowance for cultivator`s Labor  A low rate of rent shall be levied in the land which require heavier labor and which are difficult to irrigate, and vice versa.

PROFIT Justification of Profit Limits of profitable business Definition of profit Principles of fixing the Profit Rate

Justification of Profit  Justification of profit is established by the Quran and the Sunnah.  The Holy Prophet (sws) himself was engaged in trade and his companions also carried out various business activities and earned profit.

2Limits of Profitable Business  Islam forbids adoption of unethical behavior in business.  Fraud, deception, misinterpretation  Unjust weights and measures  Adulteration in foods,  Hoarding and creation of artificial shortage  To buy or sell at higher or lower price by taking undue advantage of the dire need of other party

Limits of profitable business…. Undue influence to carry through transaction To sell defective goods without informing the buyer Monopolies, Cartel etc are forbidden To buy goods from the farmer midway to market on lower than the prevailing market rates.

3Definition of Profit  “The share of the National Income which is given to risk capital for its services in the process of production is called profit.”

4 Principles of fixing the Profit Rate Islam has not established any fixed rule for fixing the rate of profit, however Profit should be fixed on the basis of; Justice Equality Prevailing circumstances Custom and conditions of work

Definition of Wages Theories of Wages Determination of Wage-Rate - The Islamic Viewpoint WAGES

1Definition of Wages In economic terms, wages means the compensation, which a person receives for his mental and physical work. Wages are of two kinds Nominal Wages Real Wages

2Theories of Wages 1Marginal Productivity theory 2Subsistence theory of wages 3Modern theory or demand and supply theory

Islamic viewpoint of Determination of wages 1Just Wage And Allah created the heavens and the earth with (a strategy based on) Truth in order that every soul is rewarded for the deeds that it earns and they will not be wronged. [Al-Jashiya: 22]

Cont`d…. 2Standard of wages And he will talk to the people (alike) both in the cradle and in ripe years, and he will be one of the pious servants (of Allah).’[Al-Imran: 161]

Cont`d… 3Minimum wage Rate There is no living being in earth but its sustenance is the responsibility of Allah [Al-Hood: 6]

Rights and Duties of Labor Fraternal rights Settling the wage rate Prompt payment of wages Adherence to settled Terms Workload according to his capacity Kind treatment The right to withdraw from work Assignment of Lawful work Loyalty Capability Trust Honesty Abiding by the contract Avoiding negligence Avoiding carelessness Rights of worker Duties of worker

Measures to stop concentration of wealth Legal Measures 1Zakat 2The law of Inheritance Optional Measures 1Sadaqat and Alms 2Charity of surplus 3Auqaf

LEGAL MEASURES 1ZAKAT 1 Meaning of Zakat 2 Purpose of zakat 3 Nisab and the Rate of zakat 4 Eight Heads of Expenditure of Zakat 5 Difference between Zakat and tax 6 Importance of Zakat

The meaning of Zakat The word “Zakat” is derived from the word Zaka which means “ increase or growth”. In addition it also implies purification, enlargements etc In Fiqh terminology Zakat means “financial devotion” every Muslim who own a certain amount of wealth, should give away a specific amount of wealth to those who are entitled to receive that amount, in the eyes of Shariah.

Purpose of Zakat The purpose of Zakat is not only to support the poor and to effect a division of wealth, but as an obligatory act of worship. It also purifies heart and soul. Its an expression of gratitude for the bounties of Allah.

Kinds of wealth on which Zakat is levied…. a)Animals b)Gold and silver c)Trade Goods d)Cash e)Mines and Treasures

Eight Heads of Expenditure of Zakat 1The poor 2The indigent ( تنگدست ) 3Functionaries of the Zakat Department 4Reconciliation of Hearts 5Ransom for Slaves 6Debtor 7In the way of Allah 8Ibn Al-Sabeel or Traveler

Economic Importance of the Zakat System Circulation of wealth Just distribution of wealth A remedy for unemployment National Assistance Eradication of poverty Economic expansion

Difference between Zakat & Tax ZAKAT Religious obligation Levied only on Muslims Payment is must Rate is fixed Heads of expenditure is fixed Collected from rich and spent on poor TAX An economic need of state Imposed on All It can be remitted Rates are changed subject to conditions Tax revenue are spent for the benefit of all, rich and poor

2Islamic Law of Inheritance The Islamic law which contains the details of distribution of a deceased`s property among his/her heirs is known as Law of Inheritance. The purpose of this law is to break the estate of deceased into prescribed shares and distribute them among near or distant relatives.

Economic Importance of the Law of Inheritance Elimination of concentration of wealth Growth in circulation of wealth Elimination of Feudal system Growth in agriculture production Equitable distribution of wealth Means of better economic conditions of the survivors.

OPTIONAL MEASURES Sadaqat & Alms Charity of surplus Auqaf

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