Islamic Economic System

on Friday, February 22, 2013

The religion Islam has its own economic system that is quite different from the world economics because Islam tends to provide its own systems guiding the Muslims in every sphere of life. The basics of this Islamic economic system are laid down in the Quran and Sunnah (traditions) of Prophet Muhammad. These basics are not just available in theory but they have practical examples from the life of Prophet and his companions. The system given by Islam is just and it ensures maximum benefit to all people by prohibiting the concentration and extra accumulation of wealth by the people.

The major economic principle of Islam lies on the concept of prohibition of Riba (interest), whereas the modern world economy relies upon the value of interest. In such an interest based system, there is no share to protect the rights of the poor classes and the rich are allowed to gain a specific amount of interest on their money. Islam, on the other hand, provides alternatives for the interest based system, including the profit sharing, selling goods for a reasonable cost, hiring, renting and getting a small amount of profit between a stockholder and an entrepreneur.

Islamic economics intend to achieve moral growth, encouraging unity, social justice, just and impartial distribution, and transmission of capital and providing basic human necessities. Therefore, Islam promotes reasonable profit and restricts Riba (interest), “O you who believe! Fear Allah, and give up what remains of your demand for usury, if you are indeed believers.” (Surah Baqra 2:278) and the Muslims who continue to deal with interest are committing sin according to Islam and in a Hadith, it has been said that “Riba is of seventy different kinds, the least grave being equivalent to a man marrying his own mother”. (Ibn Majah, baihaqi)

The major aim of the Islamic economic system is to  bridge the gap between different economic classes and financial sectors of the society. Therefore, in order to ensure it, Islam has introduced the system of Zakat. This welfare system makes it  obligatory for every Muslim whose annual income is greater than the amount of 85 grams of gold to donate 2.5 percent of his wealth as contribution for the benefit of poor. This system of Zakat helps in solving the economic imbalance that exists in the modern society.

Moreover, the Islamic system of economics restricts the accumulation and keeping of luxury items and advises the Muslims to lead a simple life, not an extravagant one. It lies on the concept that every human being has the right to equal financial and social needs and these rights must be protected by the modern states. Similarly, the people who are disabled and poor and not in a condition to earn and work properly must be taken care of through the money generated by Zakat and Usher.

In today’s world, in most of the Muslim countries and the Western world, the prevalent system is the interest based capitalist system. The concept of Islamic banking has started emerging recently, which must be adopted and Riba must be completely avoided in order to ensure the prevalence of the Islamic economic system in the modern world.



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