TOPIC 3

VALUES IN PRODUCTION

1
 INTRODUCTION
• In Islam production does not mean the
creation of an object that does not exist
• Because no one is able to do so other than
Allah
• From an economic point of view, production
means human effort in combining existing
resources so that it can be benefitted by man

2
 The aims of production
• There are three goals of economic production
in Islam, namely;
1. Improve the material conditions of
individuals
2. The morality of individuals
3. How to get a good place in the afterlife

3
 Implications of those aims
• There are three main implications;
1. Production that makes people lose their
moral values is prohibited. Therefore all
activities related to such goods and services is
prohibited
Example: i. prostitution
                 ii. cinemas showing pornographic or
immoral films

4
2. The social aspect is very important in
production, so that the benefits can be
distributed to many people so as to achieve a
high degree of equality. Example;
i. Rice production is better than tobacco
production
ii. Aircraft production is better than war
equipment production

5
3. The problem of scarcity is not only related to
human wants, but is related to the usage of
natural resources, which usually involve
laziness and negligence. Laziness and
negligence is actually similar to oppression and
cruelty
• The Prophet said, "Seek help in Allah, and do
not feel incapable, because nothing is
impossible.”
6
 The goals of firms
• 5 goals of the firm
1. Meet their own needs without avarice or
excessive
2. Meet the needs of own family members
3. Prepare for emergency or unexpected trouble
4. Provision for prosperity
5. Social services and contributions in the name
of Allah
7
 Islamic view of factors of production

Land
• Islam recognizes land as a factor of production
• Islam also did not rule out the definition of land
that includes all natural resources on the surface
of the earth, soil fertility and water content, air
and any other resources such as minerals, oil,
gems and so on
• Both al-Quraan and Sunnah have emphasis on
the proper land usage
8
• For example, the need to convert the
abandoned land to plantations, to provide
irrigation to enable the cultivation of
appropriate plants
• The Messenger of Allah said, "Whoever
worked the land not owned by anyone then he
is more entitled to it”. (Bukhari)

9
• In the view of Islam, 3 ways that are legal to
own land are through:
1. Inheritance
2. Transfer of legal title through buying and
selling
3. Working the land

10
• Islam recognizes the right of land ownership
so landowners can allow others to work the
land and collect rent
• The lease can be in the form of money or part
of its output
• Rich people are encouraged to allow their
poorer brother (relatives) to work their idle
land without charging rent

11
• Islam has also stressed that good land
management must be done through irrigation
• Example is a hadith which means “Water which
is abundant should not be blocked because of it
will inhibit the growth of plants” (Bukhari).
• This means that a landowner has the right to
irrigate their land, but must let the water flow
to other areas after it fulfill his needs

12
• Land can be seen as a natural resource, and as
a resource that can be extinct
• As a natural resource; the owner has the right
to use it, and also has the responsibility to
look after it
• In a return the owner will receive income
from production or from rental

13
• As resources that may become extinct; the
usage must take into account the right of the
current generation and future generations
• Therefore, the present generations have no
right to use this resource in a manner that will
bring harm to future generations

14
Labour
• Labour in Islam can never be separated from
moral and social life
• All the characteristics of relations and conduct
between capital, labour and employer should
be based on Sharia law
• Labour is not merely a number that provide
labor or services to employers
• A Muslim labourer is not free to offer his
services for the highest paying job

15
• A Muslim worker is not free to do works or
tasks that is prohibited by Shariah
• Employers also have a moral and social
responsibility to determine the welfare of its
employees
• To provide protection to workers who meet
with accidents or disaster
• As well as the protection of the law

16
 Rasulullah’s guide on how to treat
employees
1. Wages on time
• In terms of wages, the Prophet ordered the
employer to pay wages on time, signified by
the expression “before the worker’s sweat
dried”
• Moreover Islam also considers those who
oppress the workers as the enemy of God

17
• as reported by Imam Bukhari and Ibn Majah in
a Hadith Qudsi, Allah said:
“Three people who would become my enemies
on the Day of Judgment .....those who employ
a worker, who does his job well, but the
employer did not give him his wages.”

18
2. Human beings are equal
• Rasulullah always equate workers with
employers, they are the same

3. Lighten the load

• The Prophet ordered employers to help
workers and to assign appropriate tasks to
them according to their abilities
• Considerations granted by an employer to his
employees is also rated as good deeds that
will beneficial in the judgment day
19
4. Rights and responsibilities
• Allah also remind workers that work must be
professionally done in accordance with the
level of work
• take whatever is due to you after the
obligations have been met, if the due or
payment is taken before discharging of the
work, there will be injustice (to the employer)

20
• Muslims must always remember that anything
that is obtained through work is God's gift and
we need to be grateful,
• grateful is a key feature of the servants of
Allah

21
Capital
• Islamic economic system must be free from
riba
• Riba or interest is prohibited in Islam.
• Roughly defined, riba is profit earned from
business done through unfair dealing, often
involving suppression
• Also, any excess amount received over the
original amount given or lend, has involved riba

22
• Riba involve additional loan repayments
against loans taken
• This is normally in a certain percentage of the
loan amount
• This percentage is usually burdensome to
borrowers

23
• Islamic economics generally classify all things
which generate income, other than land, as
capital
• This includes privately owned (private) and
public properties (social)
• As the Islamic economic system prioritizes a
balanced society, the difference between social
capital and private capital is not important

24
• The Government reserves the right to intervene
when private capital is used to the detriment of
the public interest
• Like conventional economics, Islam is also
aware of the options on the use of current and
future consumption
• Savings will reduce consumption now, but will
be able to increase production and
consumption in the future
25
• Ownership of private property has a tendency
towards excessive accumulation of wealth
controlled by a small group of community
members
• Islam can protect the interests of the poor by
imposing a moral responsibility on the rich
• Islam tried to emphasize to the wealthy, the
benefit of spending their wealth for the benefit
of society
26
• For example, in surah 35: 29, Allah mention
“Lo! those who read the Scripture of Allah, and
establish worship, and spend of that which We
have bestowed on them secretly and openly,
they look forward to imperishable gain,”

27
• At the same time, expenditures must be
controlled, as mentioned in surah 6:141
“He it is Who produced gardens trellised and
untrellised, and the date-palm, and crops of
divers flavour, and the olive and the
pomegranate, like and unlike. Eat ye of the
fruit thereof when it fruiteth, and pay the due
thereof upon the harvest day, and be not
prodigal. Lo! Allah loveth not the prodigals.”
28
• In this way Islam proposes a compromise
between current consumption; which had to
be reduced, while capital formation continued
for the use in the future

29
• Although usury or interest or riba is outlawed,
this does not mean that capital has no cost
• Such cost can be expressed in other forms
such as;
i. Murabahah
- Where additional benefits agreed upon by
both the buyer and seller, and this extra can
be paid immediately or in installments

30
ii. Hire purchase
• Islamic banks can finance the purchase of
durable goods and could use such property as
collateral.
• The bank is entitled to receive the net lease
payments in addition to the original loan by
installments

31
iii. Operating lease
• Involving the lease agreement between the
parties (rentor and rentee) a lease of the
property with the use of the property
• The rentor retains the title to the property,
while the leasing party will pay the agreed
rent for the period of 5 to 15 years

32
Management
• Management also has an important role in an
Islamic economy
• Special features of management include
1. In a stock-based company, the manager will
try to gain profits to be distributed as dividend
to be shared with partners or shareholders

33
2. Entrepreneurs offer human capital, while
investors provide capital. Thus both parties
are complementary to achieve normal profit
• management behavior is controlled by Shariah
3. Management in Islam always emphasize
values such as honesty, punctuality and
sincerity in business transaction, as this will
reduce the cost of supervision and control

34
7 Shariah rules relating to the ownership of
private property;
1. Use of property
2. Payment of zakat
3. Useful usage
4. Use without harm
5. Legal ownership
6. Reasonable use
7. Reasonable profits

35
 1. The use of property
• Islam prohibits the act of not using the property
• Such attitudes is the same as wastage, this is
especially true for land use
• Idle land is not only a loss to their owners, but also
a loss to the public
• The government in an Islamic state reserves the
right to revoke an ownership of the abandoned land
• This is also true for any type of property involved in
production

36
 2. Zakat payment
• Property owners must pay Zakat at the rate of
property owned
• All gold, silver, currency, agricultural products,
livestock, business property owned by man
during his lifetime is a subject to zakat payment
• However, the definition of property in the early
days of Islam can not be accepted as final

37
• This is because the property in modern times
is different in the form and variety
• There are some of the opinion that zakat rate
can also be changed by the government to
take into account the changing economic
conditions, for example due to inflation

38
 3. Useful usage
• Property should be used with beneficial namely
to the way of Allah
• If this is followed, the property will be used to
benefit the entire community
• The needs of society is also changing according
to the situation
• A policy is needed where the rich have to
allocate a portion of their wealth to the cause
of Allah, to fund projects that will help the poor
39
 4. Use without harm
• Islam also stipulates that the property owner
does not use the property in a way that could
bring harm to others
• Because if there is damage to others, there
will be a conflict, and this is prohibited
• If the harm is unavoidable, must choose the
one with most minimal damage

40
• The jurists have elaborated that there are
several different types of harm, such as;
1. That will be faces by the whole society
2. Intentional
3. Unintentional
4. Serious
5. Small

41
• In all cases, a balance must be established
among those involved
• So ultimately benefits will be available and the
danger can be avoided
• With this Muslim will take away any form of
anti-social actions

42
 5. Legal ownership
• Ownership of property by illegal means is
prohibited, because it would destroy a society
eventually
• This includes the ownership of the property
through fraud and dishonest practices such as
bribery and perjury
• The government is empowered to punish
dishonest activities

43
• Monopolistic practices and hoarding are also
considered as one offense that may be fined
• Both would be bad for the society as the
needs of the people have been blocked

44
 6. Reasonable use
• Property owners must balance the usage of
their wealth
• That is not too extravagant, nor too stingy
• Property that has been given by God should be
taken care of properly and not wasted in vain
• When a person is disabled, his property must
be administered and managed on his behalf, by
others who are trustworthy and qualified

45
• Stingy attitude is also not recommended,
because the property is stored or hidden will
become useless
• This attitude can be addressed through
progressive taxation
• So that property owners are aware it is not
profitable to be stingy

46
 7. Reasonable profits
• Shariah confirms that the property must be
used to get a reasonable profits
• But not to get benefits either in politics or the
economy, without considering the interests of
the general public

• End of topic 3

47