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THIS ASSIGNMENT IS A PARTIAL FULFILLMENT FOR IE1001 PART 1

CERTIFIED ISLAMIC FINANCE PROFESSIONAL (CIFP)

INCEIF
Student Name: Khalid Ali Alyahmadi Student ID: 1100245

intellect. progeny and wealth and hence. According to the Islamic economic system all wealth belongs to Allah and the community is only a trustee of this wealth. to preserve faith Shariah prescribes prayers. are not primarily materialist. The goals of Islam (referred to as maqasid al-Shariah). The main objective of Shariah is to preserve the interest (maslaha) of mankind. The Islamic worldview. fasting and haj among others. is based on a set of implicit and explicit assumptions about the origin of the universe as well as the nature and purpose of man not only in this world but in the hereafter too. Faith provides a moral filter for allocation and distribution of resources in accordance 2 . To achieve this objective Shariah incorporates everything that is considered necessary to preserve and enrich religion. race Shariah has set certain parameters. For example. to introduce high morality to the world of business and enforce the commandments of God in that subject of enterprise. on the other hand. The Islamic worldview is derived from sharia or Islamic laws and teachings prescribed by Allah through Quran or Sunnah. irrespective of their sex. unlike those of the predominantly secularist systems of the present-day world. This worldview controls the nature of man's reflections on almost any subject. a major principle of the Islamic legislation on economics and commerce is to secure the rights of the individual and maintain the harmony of society. age. To ensure the true well-being of all individuals.Question No. ( 1 ) It is necessary to have a worldview or underlying philosophy. self. the ultimate ownership and objective of the limited resources and the criteria for efficiency and equity. Every society or system is dominated by its own worldview which is based on a set of implicit or explicit assumptions about the origin of the universe and the nature of human life. Differences in views about human nature lead to differences in conclusions about the meaning and purpose of human life.

to preserve intellect. and to preserve progeny. Sadaqat (charity). 3 . the wasteful are brothers of the devils. bay’ talaqqi al-rukban (forestalling genuine competition by discouraging the sellers to reach the market). Therefore the Islamic economy discourages such acts as tanajush (collusion to bid up prices. to preserve life Shariah prohibits killing and encourages seeking medical treatment when needed. and a motivating system that gives biting power to the goals of need-fulfillment and equitable distribution of income and wealth. wine and illegal drugs consumption. It recognizes the role of the market in the efficient allocation of resources. and gambling in order to preserve wealth and ensure its circulation among the members of the community. families. Within the Sharia guidance it is clear that Islamic economics does not seek to abolish private property. but does not find competition to be sufficient to safeguard social interest. Shariah prohibits excessive consumption (Israf) of foods and drinks which could lead to obesity and death “Indeed. and ever has Satan been to his Lord ungrateful” (17:27). Last but not least. It tries to promote human brotherhood.with the dictates of brotherhood and socioeconomic justice. socio-economic justice and the well-being of all through an integrated role of moral values. jizyah (taxes levied against unbelievers within the Islamic community) and laws regarding inheritance. ihtikar (hoarding with a view to raising prices). and bay’ al-hadir lil bad (middleman ship to deprive the sellers of the best price available). Shariah encourages marriage and prohibits abortion and pornography. Shariah prohibits alcohol. Sharia promotes trade and prohibits riba. Allah Almighty Says “You will never come to piety unless you spend of things you love” (3:92). Finally achieving economic justice requires economic well-being for all believers and thus instituted within Islamic system are zakat. as was done by communism. society. market mechanism. and ‘good governance. nor does it prevent individuals from serving their self-interest. Furthermore. gharar. In addition. Moreover.

on the other hand. “And there is not a thing but that with Us 4 .Question No. which are land and capital. clothing and shelter to all human beings. Consequently. Islam. because it had not provided enough to meet all of human wants. whether property resources or human resources to achieve productive efficiency and allocative efficiency. which are labor and entrepreneurial ability. According to Islam the economic problem does not lie on the scarcity of resources but rather on the distribution of these resources. (2) According to secular system economics is concerned with the problem of using scarce resources to maximize production of goods and services in order to satisfy the economic wants of society. They often argue that maximum material well-being can be best realized if individuals are given unhindered freedom to pursue their self-interest and to maximize their want satisfaction in keeping with their own tastes and preferences. One of the Islamic scholars says “Imam must give preference to necessities over needs when dealing with people's rights. and treat them equitably by giving the poorer preference over the less poor and the urgent need preference over the lesser need”. both of which are recognized as scarce. Muslims believe that Allah has equipped earth with sufficient resources to secure basic needs such as food. When considering human wants. and human resources. Shariah differentiates between basic needs or necessities and luxuries and hence the concept of relative scarcity does not exist in Islamic economics. defines the economic problem in fundamentally different way. However. achieving maximum production requires efficient use of scarce resources. namely property resources. The secular worldviews attach maximum importance to the material aspect of human well-being and tend generally to ignore the importance of the spiritual aspect. It identifies two classes of economic resources. the secularists believe that scarcity of resources was a manifestation of nature’s niggardliness.

Islam protects the ownership of businesses by restricting ownership of companies to only those who contribute capital or effort. Therefore. However. under the system of Islam during the ruling of Omar bin alkhattab. Allah Almighty Has created resources in abundant. Africa sent food to relieve the famine in Madinah. poverty and economic backwardness are not a result of scarcity of resources rather they are a mere resultant of misdistribution inflated by manmade laws and systems. Islam prohibits all forms of prostitution or pornography. Islam forbids monopolies by banning the hoarding of wealth. Islam also forbids trading of alcohol and illegal drugs and forbids engaging in gambling. For example. 5 . In Islam revenue from natural resources such as oil and gas are considered public property and should be distributed to meet the need of every individual and family in the society and not be only on the hands of the elites who control the policies of the world and exploit its resources. Islam protects society by defining certain desires as prohibited needs. then the implementation of Islam will provide society with a conduct to life that will address the needs of humanity based on the correct understanding of life and the needs of the mankind. recourses in the eyes of man are scarce or limited due to lack of knowledge and skills to reach these resources. Islam does not impose any limit on the amount of wealth acquired by an individual consequently creating an enticement to work. In addition. Moreover.are its depositories. For example to protect the honor of the woman. However. Furthermore. and We do not send it down except according to a known measure” (15:21). For example. riba or any other illegal activity. Islam safeguards against abuses in acquiring wealth by limiting the ways in which wealth is acquired. the sufferings we see around the world such as starvation. Since the Islamic system reflects the knowledge of the creator.

however. It is for his own benefit. Second. emphasize that both freedom and the pursuit of self-interest need to be subdued by moral values and good governance to ensure that social harmony and family honor are not hurt in the process of everyone serving their self-interest. all rules in the Shariah carry with them their own justification in terms of individual self-interest. And desire not corruption in the land.Question No. give attention to both the material as well as the spiritual aspects of human well-being. considers it as a primary factor in its incentive/motivation system. First. in fact. Self-interest is a necessity in any organized society if the individual is to find it utility-maximizing to follow behavioral rules prescribed by the system. and [yet]. material and spiritual. both here and in the hereafter. the religious worldviews. They stress the role of individual freedom and the role that the serving of self-interest can play in human development. And do good as Allah has done good to you. do not forget your share of the world. Self-interest is a natural motivating force in all human life. self-interest is not ignored. in Islam. contrary to popular opinion. Provided that self-interest is defined. But selfinterest has to be linked to the overall concept of good and justice. Indeed. They. including the Islamic. Allah does not like corrupters" (28:77). through that which Allah has given you. (3) The above made statement is not valid and I disagree with it for the following reasons. This is made amply clear by the Quran in which all commandments are generally coupled by the assertion that compliance with them by the individual is for his own benefit. Islam. the home of the Hereafter. Often the incentive and the rewards. for compliance and the retributions for non-compliance are 6 . Allah Almighty Says “But seek. in this world and for his ultimate salvation in the next that the individual is invited to follow the rules of the Shariah.

while his rights are still conserved. are first an obligation and a duty. within the framework of the Shariah.enumerated. self-interest should be practiced in light of accountability before God to rein selfinterest:“Accountability before the Supreme Being can serve as a motivating force for abiding by Islamic values and working for social well being”. within the framework of the Shariah. (4) 7 . the individual has the right to pursue his economic interests. Conversely. however. Question No. concurrently. Pursuing one's economic interests. The right to economic benefits is never annulled as a result of the lack of the ability of the individual to undertake his duty of pursuing his economic interests. The potential right remains even if a person is unable to activate it. then a right which no one can ignore. It is in pursuit of self-interest that individual obligations and rights as well as the limits to these rights are specified by the Shariah. Third. then his rights are forgone. What is. So long as the individual has the ability. if the person is able but does not perform his obligations. and as a result of the Islamic concept of justice. extended to him. the right of pursuing his economic interests is. To wrap up. significant is the fact that if power and ability to pursue one's economic interests is lacking. the responsibility is no longer present upon the person.

Webster (2000) describes it as the state of one who lacks a usual or socially acceptable amount of money or material possessions. a situation of inadequate level of consumption. Hanson (1974) and Aigbokhan (2000) see it as having insufficient income to provide a minimum standard of living. The first category is called the positive instruments to alleviate poverty which include zakat.Hornby (2001) defines poverty as the state of being poor. giving rise to insufficient food. Some of the suggested instruments were private ownership of property. Poverty eradication instruments in Islam can be divided into two broad categories. This situation would therefore. but total eradication of poverty is still a long way to achieve. according to Dogarawa (2003) can be summarized as follows: (i) Poverty is considered to be a disaster so that it is essential to seek refuge with Allah from it and to fight it (ii) Islam denounces the view of poverty as something holy due to its negative effects on both the religious commitment and worldly interests of the society. The Islamic view of poverty. that is. dialectical materialism. refer to poverty as a lack of command over basic consumption needs. clothing and shelter. poverty is considered a major concern of modern world. But however it is defined. state ownership of property of communism but these extreme ideologies failed to satisfy the purpose of eradicating or alleviating poverty from the world. sadaqa/ 8 . Capitalism and communism economic systems have presented number of instruments for the alleviation of the poverty. (iii) Islam urges its followers to make du’a (supplication) seeking richness (iv) Richness after poverty is regarded as a blessing from Allah upon His slaves. laissez-faire policy of capitalism and class war. necessitates seeking remedies from Islamic economics in alleviating poverty. Ravallion and Bidani (1994) on the other hand.

ganima and fayi. For example. On the other hand. speculation. Muslims in the world are some of the richest. hoarding. state ownership on uncultivated land and natural resources. waqaf.donations. kharaj. gambling and many other things. ethics and principles. If this wealth is used as per the direction of Allah we can alleviate poverty. Being Muslim every citizen has some responsibilities. qard-al-hasan. Furthermore. if a proper institution for taking care of Zakah (the compulsory giving) is established it will solve the poverty in short duration of time. or they may even just utter a kindly word. mudaraba and musharakah. Islam as system and way of life is based on collective responsibility of society. 9 . the negative instruments are prohibition of interest. If we follow it we will be able remove the poverty from the society. Sadaqat (a very wide term and is used in the Quran to cover all kinds of charity) has so vast scope that even the poor who can have nothing tangible to give can offer sadaqa in the shape of a smile or a glass of water to a thirsty person. and Islamic microfinance such as Ijarah. hibah. corporate social responsibility (CSR).