Wa0098

Economic System of
Islam:
1. Introduction:
 The supremacy of God is the basis of everything in Islam, no matter of

what nature, whether spiritual, economic, or political.
 The Islamic economic system is a collection of rules, values and

standards of conduct that organize economic life and establish relations
of production in an Islamic society.
 Justice remains an integral part of the aforesaid system as it strictly

forbids the exploitation and using unfair means in the conduct.
 It provides equal and ample opportunities to all to grow and prosper in
life.
 “He is the sovereign of the heavens and the earth, and all affairs are
referred back to Him.” (57:5)
2. Fundamentals of Islamic Economic
System:
 1. Golden Mean (Between two extremes of capitalism and communism):
The Islamic economic system is neither communist nor capitalist. In fact, it

has its own distinguishing system based on equity, justice, and level-
playing field.
It includes the virtues of both and disdains their shortcomings.
It allows neither unrestricted freedom to damage the interest of a

community and the individual, nor does it recommend totalitarian
regimentation that destroys the egoism of the individual.
 2. Individual liberty and social nature:
Islamic economic system gives complete freedom to individual to earn his

livelihood.
But, fair means should be used so that society’s interests remain protected.
 3. Obligation of lawful earning:
Life of a believer in the world is a temporary phase of his eternal life in the
hereafter.
i.e. it prohibits from illegal means of earnings (corruption be it in any form.)
Man will be held accountable for all his actions and deeds.
There’s no room for any sort of exploitation and usurpation.

 4. Humans to exploit natural resources only for betterment in the world
and success in the hereafter:
“It is He who has made you vicegerents (delegates) on the earth, and
raised some of you above others in rank so that He may test you in what
He has given you. Indeed, your Lord is quick in punishment, yet He is also
forgiving and merciful.” (6:165)
 5. Islam forbids asceticism (severe self-discipline/self-denial) and unchecked
materialism:
One should neither give oneself entirely to spiritual activities while disregarding
the needs of the body, nor should one judge everything by its economic benefit
while ignoring the moral value of life.
6. Welfare of individual and society:

“Do your work in the world in such a way as if you were going to live forever,
and work for the hereafter as if you were going to die tomorrow.” Prophet PBUH.
In collective welfare, lies the individual welfare.
 7. Duties of Employer and Employee:
Islam imposes moral duties on both the employee and the employer. The
employee is commanded by God to do his work diligently, efficiently and
honestly. On the other hand, employer is commanded not to oppress and
exploit the employees.
Today, rights of labors violated.

Violence on child labor.
3. Characteristics of Islamic Economic
System:
1. Absolute liberty to individual:
No unfair means and exploitation of fellow beings.
2. Right to property:
Islam has recognized individual’s right to own property, but subjects it to
such limitation as to render it absolutely harmless to the common good of
the society.
Today, land mafia in Pakistan.
 3. Economic inequality within natural limits:
This is indispensable for growth and development as it creates healthy
competition.
But, this inequality shall be in natural, reasonable and equitable limits. i.e.
So long as differences in wealth and rank do not lead to emergence of class
system, the rulers and the ruled, the masters and the servants etc and all
are treated alike before the law of the land, it is permissible and lawful in
Islam.
It is often said that inequitable distribution of wealth can be remedied

through equal redistribution. But, this hypothesis as has been proven by
communism system is unnatural and impractical.
 4. Social security of citizens (concept of a welfare state):
The Islamic state is legally and morally responsible for the provision of
basic needs to its members.
It ensures and safeguards the society’s security and its well being of the
public i.e. inalienable rights of health, education etc.
 5. Social justice:
“We surely sent our Messenger with clear signs and revealed with them the book and the
Balance (of right and wrong), that man may stand forth in justice and we sent down iron, in
which is (material) for might ways and many uses for men.” 57:2.
6. Riba (Interest) free economy:

Fixed interest rates are exploitative in nature.
The Council of Islamic Ideology (CII) says in a seminar that the ideal alternatives to interest
in an Islamic economic system are profit-loss sharing mechanism and qard-hasanah.
For this, they suggested the reorganization and restructural reforms in banking sectors.
(USA-1.5pc; China-2pc; Japan is in negative; Pakistan 13.25pc.)
4.Specific Islamic guidelines:
 1. Production:
No sort of exploitation, misuse or usurpation and no use of unfair means.
2. Consumption:
It forbids both miserliness and extravagance and suggests a middle-course
between the two.
“And they who, when they spend are neither extravagant nor miser and
there is ever a just mean between the two.” Surah Al Furqan.
 3. Distribution:
The levy of zakat is a strong preventive measure against those who hoard
their wealth.
4. Exchange:
Islam enjoins fairness in transaction and urges to keep record of the
exchanges to ensure transparency.
It forbids undocumented economy. Money-laundering and offshore

business.
Likewise, benami properties. 36pc of the undocumented economy in
Pakistan.
5. Conclusion:
 To sum up, the economic system of islam is based upon the complete
harmony between the individual and societal good.
 It neither separates the individual from the society nor does it regard his
welfare and wealth as conflicting with that of society.
 Thus, Islamic economic system forms the basis of an egalitarian and

progressive society.

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Economic System of

 The supremacy of God is the basis of everything in Islam, no matter of

 The Islamic economic system is a collection of rules, values and

 Justice remains an integral part of the aforesaid system as it strictly

The Islamic economic system is neither communist nor capitalist. In fact, it

It includes the virtues of both and disdains their shortcomings.

It allows neither unrestricted freedom to damage the interest of a

Islamic economic system gives complete freedom to individual to earn his

There’s no room for any sort of exploitation and usurpation.

6. Welfare of individual and society:

Today, rights of labors violated.

It is often said that inequitable distribution of wealth can be remedied

6. Riba (Interest) free economy:

It forbids undocumented economy. Money-laundering and offshore

 Thus, Islamic economic system forms the basis of an egalitarian and

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