Economic

Economic
Development
Development
and
and Growth
Growth

Group 9:
Bai Lenilang Kawit
Irish Jane Bulawin
Jeight Tabaranza
The Evolution of Western Adam Smith and Classical Economics: Adam Smith, often regarded
as the father of economics, laid the foundation for classical

Economic Thought: Impact 01

economic thought in the late 18th century. His seminal work, "The
Wealth of Nations," emphasized the importance of free markets,
individual self-interest, and the invisible hand in promoting economic

on Islamic Economic
prosperity. While Smith's ideas were rooted in a Western context,
they have had a profound impact on shaping economic policies
worldwide, including those in Islamic nations.

Growth and Development Douglass North and Institutional Economics: Moving forward in time,
the mid-20th century witnessed the rise of institutional economics,

The evolution of Western economic thought, from Adam 01.

with Douglass North as a prominent figure. North argued that
institutions, both formal and informal, play a crucial role in economic
development. His ideas have influenced policies in Western countries
Smith's classical economics to Douglass North's and have been applied to understand the challenges and
opportunities in Islamic economies. The examination of institutional
institutional economics and Amartya Sen's frameworks in Islamic nations becomes essential for understanding
development economics, has shaped global economic their economic growth and development trajectories.

paradigms. In the context of Islamic economic growth

and development, these ideas provide frameworks for Douglass North and Institutional Economics: Moving forward in time,
the mid-20th century witnessed the rise of institutional economics,
analysis and policy formulation. Understanding the with Douglass North as a prominent figure. North argued that
institutions, both formal and informal, play a crucial role in economic
intersections between Western economic thought and development. His ideas have influenced policies in Western countries
Islamic economies is crucial for fostering inclusive and and have been applied to understand the challenges and
opportunities in Islamic economies. The examination of institutional
sustainable development in an increasingly frameworks in Islamic nations becomes essential for understanding
interconnected world. their economic growth and development trajectories.
 FOUNDATION AND
FRAMEWORK OF DEVELOPMENT
AND GROWTH IN ISLAM
THREE DIMENSIONS OF ISLAMIC CONCEPT OF DEVELOPMENT:

1. Individual self development

2. The physical development of the earth
3. The development of the human collectivity
This dimension focuses on personal growth comma utilizing natural
resources for material needs and progressing towards integration
and unity
 ECONOMIC GROWTH IN ISLAM
A gardh hassan is a loan that is given to someone in need
without expecting a monetary reward. Giving a gardh hassan
loan is a righteous act that is highly rewarded by Allah (swt).

1 2 3 4
The cleansing of one's The Quran says that When people are able
When we give to those
income and wealth, whoever lends to Allah to borrow money to
in need, we are
and the belief in strong (swt) a beautiful loan, start a business, go to
demonstrating our
support of the Allah (swt) will give school, or pay for
care for them and our
messengers of Allah them manifold medical care, they are
desire to see them
(swt), all of which lead increase (Quran more likely to be able
succeed.
to forgiveness by Allah 245:2). to improve their lives.
(swt) of (previous)
misdeeds.
 Historical Perspective: Islamic
economics draws inspiration from the
principles outlined in the Quran and
Sunnah. Over the years, there has
been a concerted effort to integrate Islamic Banking and Finance: One of
Historical Perspective: Islamic
these principles into economic the noteworthy dimensions of
economics draws inspiration from the
policies, fostering an environment development in Islamic economics is
principles outlined in the Quran and
that aligns with Islamic values. This the expansion of Islamic banking and
Sunnah. Over the years, there has
historical foundation has provided a finance. Sharia-compliant financial
been a concerted effort to integrate
solid base for the contemporary institutions have proliferated,
these principles into economic
development of Islamic economics. offering alternatives to conventional
policies, fostering an environment
that aligns with Islamic values. This banking. The principles of interest-
historical foundation has provided a free transactions (Riba) and risk-
solid base for the contemporary sharing have been central to this

Dimensions of
development of Islamic economics. development, creating a unique
economic landscape.

Development in
Social Justice
Distribution:
and
Islamic
Wealth
economics
places a strong emphasis on social
Islam Entrepreneurship and Innovation: The
evolution of Islamic economics has
seen a growing recognition of the
justice and equitable wealth
importance of entrepreneurship and
distribution. The evolution of Islamic
Historical Perspective: Islamic innovation. Islamic economic
economic thought has led to the
economics draws inspiration from the principles encourage ethical business
development of policies that aim to
principles outlined in the Quran and practices and the pursuit of economic
reduce income inequality and ensure
Sunnah. Over the years, there has activities that contribute positively
fair access to resources. Zakat, the
been a concerted effort to integrate to society. This approach has
Islamic wealth tax, is a prime
these principles into economic fostered an environment conducive to
example of a mechanism designed to
policies, fostering an environment sustainable development and
address social welfare and poverty
that aligns with Islamic values. This technological progress.
alleviation.
historical foundation has provided a
solid base for the contemporary
development of Islamic economics.
 DISTRIBUTION JUSTICE, THE
MARKET, AND STATE
Distribution Justice one of Market has gained Role of the State: The growth of Islamic
the central tenets of Islamic momentum, fostering Governments in Islamic economics is evident in
economics is the emphasis ethical and Sharia- economies are actively the advancements in
on distribution justice. This compliant business engaging in economic distribution justice,
concept revolves around development through market dynamics, and the
practices. The market is
equitable wealth distribution policies aligned with proactive role of the
evolving with the
and social welfare. Islamic Islamic principles. State
integration of Islamic state. These
economic principles intervention aims at
developments underscore
encourage the fair allocation principles, promoting ensuring social welfare,
the commitment of Islamic
of resources to ensure that transparency, fair trade, reducing income
economies to ethical and
wealth is not concentrated in and discouraging inequality, and promoting
equitable economic
the hands of a few. The exploitative practices. economic stability. This
practices, positioning
implementation of Zakat, a Innovation in Islamic proactive role reflects a
them for sustained growth
mandatory charitable commitment to fostering
finance instruments is in the global economic
contribution, plays a pivotal a balanced economic
further diversifying landscape.
role in addressing economic environment.
disparities and fostering market dynamics.
distribution justice.
DISTRIBUTION JUSTICE, THE MARKET AND
THE STATE
Distributive justice in Islam is about creating a society where everyone can
live a dignified and fulfilling life. It's about ensuring that everyone has the
opportunity to reach their full potential, regardless of their background or
circumstances.
Islam prohibits usury because it's seen as a way of fulfilling our social
responsibility and helping to ensure that everyone has a chance to
succeed in life.
Islam also encourages charity and giving it to the poor. This is because
it's seen as a way of fulfilling our social responsibility and helping to
ensure that everyone has a chance to succeed in life.

ISLAMIC PERSPECTIVE ON FINANCIAL

INCLUSION
A good money system allows the poor to borrow for needs and save. Some say
we must share money evenly for growth; others think money systems are too
complicated, hurting the poor. Ensuring everyone, especially the poor, can use
money services is crucial for growth and reducing poverty.
 Risk Sharing and Wealth
Redistribution
Risk Sharing in Islamic Economics:
1. Profit-and-Loss Sharing (PLS):
Islamic finance promotes partnerships (Mudarabah and Musharakah) where profits and losses are shared
between parties.
Encourages a collaborative approach, aligning interests and fostering a sense of shared responsibility.
2. Interest-Free Banking:
Unlike conventional banking, Islamic finance prohibits the payment or receipt of interest (Riba).
Promotes risk sharing by tying returns to the actual performance of investments.

Wealth Redistribution in Islamic Economics:

1. Zakat:
A mandatory form of wealth redistribution, Zakat requires Muslims to donate a percentage of their wealth to
support the less fortunate.
Acts as a social safety net, addressing poverty and ensuring economic inclusivity.
2. Sadaqah:
Voluntary charitable giving beyond Zakat, demonstrating the spirit of generosity and compassion in Islamic
economics.
Fosters a sense of community and solidarity.
ECONOMIC STATE OF AFFIARS IN OIC COUNTRIES

In Islamic public policy, key areas include:

1. Public Sector Governance: Ensuring accountability, efficiency, stability, quality regulation, supervision,
and preventing corruption and violence.

2. Integrity of the Legal System: Upholding judicial independence and impartial courts.

3. Preservation of Human Freedom: Protecting individual freedoms.

4. Non-Discrimination: Eliminating discrimination based on gender, religion, ethnicity, sect, or tribe.

5. Environmental Preservation: Safeguarding water, air, biodiversity, habitats, and treating depletable
resources responsibly.

6. Promotion of Economic and Social Prosperity: Supporting policies aligned with the Islamic vision.
PUBLIC POLICY IN THE ISLAMIC
ECONOMIC SYSTEM
All public policies shape economic developments in a community. The direct policies needed to support
development in the Islamic economic system are those that are targeted to achieving the Islamic
vision,
which consists of these areas:

Freedom for all members of society to pursue their economic interests

Economic justice for humans of all generations while preserving the interests of all living
creatures
Equal opportunity (education, healthcare, and equality before the law) to succeed
Provision of good jobs for all who can and want to work
Personal property rights and sanctity of contracts
Equitable distribution of income and wealth
Poverty eradication
Basic need fulfillment of food, shelter, and clothing when private alms giving is insufficient
Management of natural and depletable resources to benefit all members of current and future
generations
Abolition of corrupt practices financial
Supportive system that excludes debt and interest
Minimum level of public debt (of course, not tied to interest)
It is almost impossible to measure and assess the adherence of Muslim countries to all these
Islamic teachings on economic governance and management. However, we can get an indirect
insight into some of these areas, including those listed next:

Quality of institutions
Quality of governance
Market freedom (for goods, labor, and financial markets)
Economic freedom
Corruption elimination
Progress in poverty eradication
Overall income distribution
Prevalence of wealth hoarding
Quality and availability of education
Employment opportunities
Equity of benefits derived from natural resource depletion
Independence, effectiveness, and fairness of the legal system
Level of private and public debt