The Islamic Economic

System
By Gold Rush

Members:
Maryam Noor (Leader)
Maham Hameed Sana Ahmed
Mahwish Waqar Mehreen Munawar
Nadia Latif Leena Tayyaba
Huma Cheema Sunita Sana

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 CONTENTS
1. Age of Discovery 4
2. Introduction 5
3. Features 7
What the Islamic Economic System aims
4. to do? 9
5. Merits 11
6. Demerits 13
7. Conclusion 15

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 Age of Discovery
&
Introduction

Age of Discovery:

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 The Islamic Empire significantly contributed to globalization during the Islamic
Golden Age, when the knowledge, trade and economies from many previously isolated
regions and civilizations began integrating due to contacts with Muslim explorers, sailors,
scholars, traders, and travelers. Some have called this period the "Pax Islamica" or "Afro-
Asiatic age of discovery", in reference to the Muslim South-west Asian and North African
traders and explorers who travelled most of the Old World, and established an early global
economy across most of Asia and Africa and much of Europe, with their trade networks
extending from the Atlantic Ocean and Mediterranean Sea in the west to the Indian Ocean
and China Sea in the east. This helped establish the Islamic Empire (including the Rashidun,
Umayyad, Abbasid and Fatimid caliphates) as the world's leading extensive economic power
throughout the 7th-13th centuries. Several contemporary medieval Arabic reports also
suggest that Muslim explorers from al-Andalus and the Maghreb may have travelled in
expeditions across the Atlantic Ocean between the 9th and 14th centuries.
Arabic silver dirham coins were being circulated throughout the Afro-Eurasian landmass,
as far as sub-Saharan Africa in the south and northern Europe in the north, often in exchange for
goods and slaves. This helped establish the Arab Empire (including the Rashidun, Umayyad,
Abbasid and Fatimid caliphates) as the world's leading extensive economic power throughout
the 7th–13th centuries.
The origins of capitalism and free markets can be traced back to the Islamic Golden
Age and Muslim Agricultural Revolution, where the first market economy and earliest forms
of merchant capitalism took root between the 8th–12th centuries, which some refer to as
"Islamic capitalism".

Introduction:

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 Islamic Economic system is that part of life which relates to the economic activities of
the people. Its essential elements are eternal as revealed by Allah in the Holy Quran and
exemplified by the Messenger through his Sunnah. Islamic economics can refer to the
application of Islamic law to economic activity either where Islamic rule is in force or where
it is not; i.e. it can refer to the creation of an Islamic economic system, or to simply following
Islamic law in regards to spending, saving, investing, giving, etc. Islamists movements and
authors will generally describe this system as being neither Socialist nor Capitalist, but a third
way with none of the drawbacks of the other two systems.
Islam is an entire way of life, and Allah's Guidance extends into all areas of our lives. 
Islam has given detailed regulations for our economic life, which is balanced and fair. 
Muslims are to recognize that wealth, earnings, and material goods are the property of God,
and we are merely His trustees.  The principles of Islam aim at establishing a just society
wherein everyone will behave responsibly and honestly.
Islam differentiates between the basic needs and luxuries; there exists no concept of
relative scarcity of resources in Islam. The resources available on earth are sufficient to
secure the basic needs (food, clothing, and shelter) of fifty billion human beings. Such a
misunderstanding has concealed the reality that starvation, poverty, and economic
backwardness, result from maldistribution frustrated by man-made laws and systems. Under
the Islamic system, Nigeria alone could support the whole of Africa, as occurred in the past
when, under the system of Islam, Africa sent food to relieve the famine in Medina during the
rule of Omar bin al-Khattab.
The implementation of Islam would eliminate the stranglehold by which the elites
control the polices of the world and milk its resources. The shortsightedness of limiting
production stems from the man-made ideologies that fail to understand the nature of creation.
Because the Islamic system reflects the wisdom of the Creator, then the implementation of
Islam will provide a society conducive to life that will address the needs of humanity based
on the correct understanding of life. Muhammad (SAW) said, "The son of Adam, if he had
two valleys of gold, would desire a third and would not be satisfied till he bites the dust."
Islam will safeguard against abuses of exploitation in acquiring wealth by limiting the
way in which wealth is acquired.
In the systems of today, the stock market offers no such protection and allows for any
outsider to secure a share in any business or corporation and impose his policies on the
company agenda, even if that individual puts no effort or work into the business. Today, food
manufacturers have cultivated the art of burning surplus food and dumping surplus milk into
the ocean to artificially inflate prices by creating "scarcity," an art that would cease to exist
with the implementation of Islam.
Unlike today's system, which opens all doors for anyone to access wealth by any
means, Islam categorizes wealth in a systematic way that both protects the right of
individuals to access wealth and, simultaneously protects the society and secures the needs of
the Ummah. Islam mandates vital and natural resources as public property while allowing for
unlimited access to luxury items.
For such a system to emerge, the Ummah must revitalize within itself the Islamic way
of life and cultivate the Islamic culture and the Islamic Aqeedah as the sole basis for
providing solutions to its problems.

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Features
&
Aims

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Features:
A vigorous monetary economy was created on the basis of the expanding levels of
circulation of a stable high-value currency (the dinar) and the integration of monetary areas
that were previously independent. Innovative new business techniques and forms of business
organization were introduced by economists, merchants and traders during this time. Such
innovations included the earliest trading companies, big businesses, contracts, bills of
exchange, long-distance international trade, the first forms of partnership (mufawada) such as
limited partnerships (mudaraba), and the earliest forms of credit, debt, profit, loss, capital
(al-mal), capital accumulation (nama al-mal), circulating capital, capital expenditure,
revenue, cheques, promissory notes, trusts (see Waqf), startup companies, savings accounts,
transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers,
deposits, assignments, the double-entry bookkeeping system, and lawsuits. Other important
features of Islamic Economic System are:
 Teachings of Quran and Sunnah to serve as the basis for all economic activities.
 Islamic economic institutions, not just the Islamic bank but all those connected with
Islamic banking operates on the basis of "zero interest." This prohibition is for all
interest-based transactions, whether giving or receiving, whether dealing with
Muslims or non-Muslims.  Islam prohibits time value of money in itself as producing
no value - in conjunction with other value driven agreements the idea is entertained.
In the case of Islamic banking, the lost time value is compensated by utilizing a sales
contract, charging a mark-up on the home or vehicle that the client might be seeking
to purchase by way of a loan.
 Most Islamic economic institutions advise participatory arrangements between capital
and labor. The latter rule reflects the Islamic norm that the borrower must not bear all
the cost of a failure, as "it is God who determines that failure, and intends that it fall
on all those involved."
 Perhaps due to resource scarcity in most Islamic nations, this form of economics also
emphasizes limited (and some claim also sustainable) use of natural capital, i.e.
producing land. These latter revive traditions of Haram and Hima that were prevalent
in early Muslim civilization.
 The concepts of welfare and pension were introduced in early Islamic law as forms of
Zakat (charity), one of the Five Pillars of Islam. The taxes (including Zakat and Jizya)
collected in the treasury of an Islamic government was used to provide income for the
needy, including the poor, elderly, orphans, widows, and the disabled. Every Muslim
who owns wealth, more than a certain amount to meet his or her needs, must pay a
fixed rate of Zakat to those in need.  The government was also expected to store up
food supplies in every region in case a disaster or famine occurs. One of the earliest
versions of a welfare state appeared in the Abbasid Caliphate.
 Islamic Inheritance system.
 State’s responsibility to eradicate all forms of exploitation of man by man such as
feudalism and reduce inequalities of income and wealth.
 The last tool of economic policy has to do with the role of the government as an
insider of the system rather than as an outsider. The government can intervene in the
economic matters in the larger interest of the society. At the same time people have a
lot of freedom in this government regulated economic system.
 Public and private sectors
 Property Rights:

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 o Public property in Islam refers to natural resources (forests, pastures,
uncultivated land, water, mines, oceanic resources etc.) over which all humans
have equal right. Such resources are considered the common property of the
community. Such property is placed under the guardianship and control of the
Islamic state, and can be utilized by any citizen, without undermining the
rights of other citizens over it.
o State property includes certain natural resources, as well as other property that
can't immediately be privatized. Unclaimed, unoccupied and heir less
properties, including uncultivated land (mawat), can be considered state
property.
o There is consensus amongst Islamic jurists and social scientists that Islam
recognizes and upholds the individual's right to private ownership. Islam also
guarantees the protection of private property by imposing stringent
punishments on thieves.
 Islam accepts markets as the basic coordinating mechanism of the economic system.
Islamic teaching holds that the market, through perfect competition, allows consumers
to obtain desired goods, producers to sell their goods, at a mutually acceptable price.
The three necessary conditions for an operational market are said to be upheld in
Islamic primary sources:
o Freedom of exchange: the Qur'an calls on believers to engage in trade, and
rejects the contention that trade is forbidden.
o Private ownership
o Security of contract: the Qur'an calls for the fulfillment and observation of
contracts.
 It is forbidden to gain property or wealth by fraud, deceit, theft, or other falsehoods.
Forbidden are earnings from gambling, lotteries, and the production, sale, and
distribution of alcohol. 
 It is particularly hateful for a guardian to take from an orphan's property.
 It is unlawful to hoard food and other basic necessities.   Everyone should take what
they need and no more.
 A Muslim should be responsible in spending money.  Extravagance and waste are
strongly discouraged. 
 Muslims are encouraged to give constantly in charity. The Prophet Muhammad once
said that "nobody's assets are reduced by charity."
 Islam bans certain things that are considered to be harmful for the individual and the
society as a whole. This results in protection of rights and honor. For instance, to
protect the honor (ird) of the woman, Islam would outlaw all forms of prostitution,
pornography, or any type of sexual bombardment that exploits the charms and
physical attractiveness of women.
 Monopoly power is considered undesirable in Islamic Economic System; The Caliph
would link the currency to gold, silver or some other precious resource. By backing
the currency with resources of real value, Islam creates a stable medium of exchange
and eliminates the concepts of linking currencies that allow nations to manipulate
currencies and maintain a monopoly over the financial markets of the world.
 During the Muslim Agricultural Revolution, the Caliphate understood that real
incentives were needed to increase productivity and wealth, thus enhancing tax
revenues, hence they introduced a social transformation through the changed
ownership of land, where any individual of any gender or any ethnic or religious
background had the right to buy, sell, mortgage and inherit land for farming or any

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 other purposes. They also introduced the signing of a contract for every major
financial transaction concerning agriculture, industry, commerce, and employment.
Copies of the contract were usually kept by both parties involved.
 Created the cheque system of today.
 Enabled trade networks to form over huge distances.

What Islamic Economic System aims to do?

Islam aims to set up a model society that exemplifies all economic and social morals:
 The distributive objective is built into the system by Zakat, the State insurance, and
the inheritance system. Thus, over accumulation and excessive concentration of
wealth is checked by forces that are working within the system itself.
 Freedom of choice in Production and Consumption matters.
 Islam aims to keep a balance between individual and state roles: individual’s freedom
and efforts are not entirely sacrificed for the state, nor the state is kept weak and futile
so that it cannot ensure social justice and implement policies for general welfare.
 General welfare of the people. The concept of ‘Falah’ includes the welfare in this
world as well as welfare in the world hereafter.
 All efforts should be made for Social justice.
 Social and human equality.
 Promoting cooperation among people for common well-being by developing helpful
attitude towards fellow beings.
 All Muslims must consider each other brothers: they must share sorrows and
happiness of other Muslims.
 Islam believes in moderation in all economic activities; use of resources, consumption
of goods, work and leisure.
 People are instructed to treat each other with benevolence: they may sacrifice and
give the others more than their due right or share.
 It seeks an economic system based on uplifting the deprived masses, a major role for
the state in matters such as circulation and equitable distribution of wealth and
ensuring participants in the marketplace are rewarded for being exposed to risk and
liability.
 Islam firmly believes in the dignity of labor. Honor and being paid without delay is
their due right.
 All transactions should be just and fair. Hoarding, under-weighing, adulteration,
artificial monopoly, selling through deceit and misleading advertisements are not
permitted.
 Islamic Economic System aims to create equality of opportunity for all by spending
huge amounts on Public utilities, education, and health and infrastructure facilities.
 In view of the great importance of organization in modern industry, it is absolutely
essential that the right type of persons, who are really fit and qualified for the job,
should be appointed as organizers.

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Merits

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Merits:
 The implementation of Islam would eliminate the stranglehold by which the elites
control the polices of the world and milk its resources. Islam does not impose any
limits on the amount of wealth that an individual can acquire, thus creating an
incentive to work. Because the Islamic system reflects the wisdom of the Creator,
then the implementation of Islam will provide a society conducive to life that will
address the needs of humanity based on the correct understanding of life.
 Islam denies the "free" market of Capitalism which has led to the situation of
"survival of the fittest". Such an unrestricted environment has led directly to the
current situation where multinational companies have scavenged the resources of the
world like parasites unrestricted in their "freedom." Under the Caliph, natural and
vital resources would be categorized as public property and a right of every citizen of
the state - Muslim or otherwise.
"The humans have a right to three things - water, green pastures, and fire-based fuels
(An-Naar)."
 Islam forbids monopolies by outlawing the hoarding of wealth (Al-Ihtikar), and
eliminating copyright or patency laws that would open the avenue for potential
monopolies to develop.
 Islam protects the ownership of businesses and companies by restricting ownership of
companies only to those who contribute both capital and effort to the company or
business, thus effectively putting the seal on such concepts as "corporate takeover"
from ever becoming a reality.
 Islam categorizes wealth in a systematic way that both protects the right of individuals
to access wealth and, simultaneously protects the society and secures the needs of the
Ummah.
 Islam creates a stable medium of exchange and eliminates the concepts of linking
currencies that allow nations to manipulate currencies and maintain a monopoly over
the financial markets of the world.
 The Islamic Economic System secures the needs of every individual, and eliminates
all forms of economic and social corruption.
 The early Islamic economy set up a very simple yet highly effective transport system
that has evolved to the transport system of today.
 Zakat provides a major means of fiscal policy because it affects the allocation of
resources, the level of aggregate demand and the distribution of income as well since
the variations in the volume and the timing of collection and disbursement of Zakat
creates variations in disposable income and fixed and circulating capital. The
flexibility of Zakat allows for the intensification of the development efforts.
 These innovations made by Muslims and Jews laid the foundations for the modern
economic system.

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Demerits/Criticism

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Demerits/Criticism:
While most Muslims believe Islamic law is perfect by virtue of its being revealed by
God, Islamic law on economic issues is not "economics" in the sense of a systematic study of
production, distribution, and consumption of goods and services. The Islamic Economic
System has not exactly failed as it is considered perfect for the world in the sense that it
revolves around every aspect of an economy. It sets rules for everyone; rich or poor, owner or
labor, society or individual.
Critics of Islamic economics argue, however, that the fundamental characteristic of
charging interest (i.e. charging a premium, on the principal amount of a loan, for the time
value of the loaned money) is not truly eliminated in Islamic banking, but rather the interest
is merely hidden and relabeled.
This version of Islamic economics, which influenced the Iranian Revolution, called for
public ownership of land and of large "industrial enterprises," while private economic activity
continued "within reasonable limits." These ideas helped shape the large public sector and
public subsidy policies of the Iranian Islamic revolution. In the 1980s and 1990s, as the
Islamic revolution failed to reach the per capita income level achieved by the regime it
overthrew, and Communist states and socialist parties in the non-Muslim world turned away
from socialism, Muslim interest shifted away from government ownership and regulation. In
Iran, it is reported that "eqtesad-e Eslami (meaning both Islamic economics and economy),
once a revolutionary shibboleth, is undoubtedly absent in all official documents and the
media. It disappeared from Iranian political discourse about 15 years ago [1990]."
Some argue early Islamic theory and practice formed a "coherent" economic system
with "a blueprint for a new order in society, in which all participants would be treated more
fairly". Michael Bonner, for example, has written that an "economy of poverty" prevailed in
Islam until 13th and 14th century. Under this system God's guidance made sure the flow of
money and goods was "purified" by being channeled from those who had much of it to those
who had little by encouraging Zakat (charity) and discouraging riba (usury/interest) on loans.
Bonner maintains the prophet also helped poor traders by allowing only tents, not permanent
buildings in the market of Medina, and not charging fees and rents there.
Just a glance at the economic system in Islam suffices to explain the fear and dread that
America and the West have shown towards Islam, and explains the dedication and effort
exerted towards curtailing or suppressing the resurgence of Islam as a system. Such a system
would not only break the grip that the Capitalist nations have secured over the wealth and
resources of the Muslim lands and dethrone their upper hand over the policies of the world,
but would provide the long-awaited solutions to life that they have kept a secret from their
own people with their extensive media manipulation and education. Because the currency in
Islam is linked to gold or other precious resources, the implementation of Islam would cut the
economic chains that America employs by linking other currencies to the dollar.

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Conclusion

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 Conclusion:
The key difference from a financial perspective is the no-interest rule since most other
religions favor charitable giving and socially responsible investing. The belief that the
prohibition of investment with interest charges is essential for an Islamic society is
widespread, though liberal movements within Islam may deny the need for this prohibition,
since they see Islam as generally compatible with modern secular institutions and law.
But in other parts of the Muslim world the term lived on, shifting form to the less
ambitious goal of interest-free banking. Some Muslim bankers and religious leaders
suggested ways to integrate Islamic law on usage of money with modern concepts of ethical
investing. In banking this was done through the use of sales transactions (focusing on the
fixed rate return modes) to achieve similar results to interest. This has been heavily criticized
by many modern writers as a means of covering conventional banking with an Islamic
facade.
Islam makes a distinction between Halal and Haram which is the difference between
right and wrong. It also lays considerable sheers not only on the ends but on the rightful
means to achieve those ends, so Islamic Economic System is the best and complete economic
system. A lot of progress has been made in the Capitalist System but at the cost of depriving
the social worker of their rights.

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