CHAPTER SIX

THE ECONOMIC ROLE OF

STATE IN ISLAM
ISLAMIC STATE.
 The first Islamic state was establish in Madinah at the
time of the Prophet Muhammad (Pbuh) and his first four
successors/ Caliphas.
 The principles of this state are to be found in the Qur'an
and the Sunnah.
 The essence of the Islamic state is the notion that "all
sovereignty belongs to Allah". The state is one of the
means that brings human beings closer to Him.
FUNCTION OF ISLAMIC STATE.
 Consequently, we find a Muslim scholar like Al-Mawardi
defining the objective of the Islamic state as "to
continue the function of prophethood in safeguarding
religion and managing the worldly affairs"
 ECONOMIC OBJECTIVES OF
THE ISLAMIC STATE
 Eradication of Poverty and Unemployment
 Controlling Inflation
 Discourage monopolies
 Provide Law and Order
 Implement Social and Economic Justice
 Justice in Production
 Justice in Consumption
 Justice in Distribution
 ERADICATION OF POVERTY AND
UNEMPLOYMENT
 One of the prime responsibilities of the
government is to eradicate poverty from the
society.
 This can be achieved through an equal
distribution of wealth for the welfare of the
society. This would entail the full and efficient
employment of all human and natural resources
to achieve an optimum rate of economic growth.
 CONT. ERADICATION OF POVERTY
AND UNEMPLOYMENT
 Helping people by providing a necessary infrastructure
either through, the private sector, or to be taken by the
government if necessary.
( Such as improvement of the roads and highways, building
of dams and bridges, provision of irrigation networks,
construction of ports, airports and telecommunication
services and the provision of other facilities which would
bring about economic growth).
 The eradication of poverty also is greatly dependent
upon the provision of services such as education and
health care to society.
 CONTROLLING INFLATION
 One of the most serious problems of modern economy is
persistent inflation, with an accompanying decline in the real
value of money.
 The stability in the real value of money is vitally important not
only for the continued long-term growth of an economy but
also for social justice and economic welfare.
 Money is a measure of value, and any continuous and
significant depreciation in its real value would have an adverse
effect on social justice and general welfare, which are among
the central goals of the Islamic economic system.
 DISCOURAGE MONOPOLIES
 One of the cornerstones of Islamic public policy is to
discourage monopolies, since the government is committed to
an equitable distribution of income and wealth.

 An Islamic government should not create monopolies by

granting exclusive licenses.

 The Islamic government should encourage competition.

 MAINTAIN LAW AND ORDER
 One of the most important duty of the Islamic state
is to safeguard life and property of all individuals
within its boundaries. Only in this case a
determinant level of growth and stability of an
economy will accomplish together with an inner
happiness of individuals.

 Hadith in the words of the Prophet (pbuh),

“a woman traveling alone from Hira’ to the Ka’bah
feels such security that she has fear of none but
Allah.”
 SOCIAL AND ECONOMIC JUSTICE

An Islamic government carries a great responsibility in

performing justice to its society. Its obligations in terms of
economic affairs are as follows:
It should collect and distribute the Zakah from the rich to the
poor, hence enhancing the situation of eight categories of people.
Only in case Zakah is not sufficient the government can levy an
affordable rate of taxes according to the people’s ability (without
being oppressed).
Islamic government should allocate its resources among the
sectors. It should also fairly reward its officials as well as those
who deserve to be rewarded.
 CONT. SOCIAL AND ECONOMIC
JUSTICE
 Also, the government should introduce public policies, which
would ensure a balanced growth between the material and the
spiritual development of its people.

 The government should eliminate injustice such as usury,

fraud, and speculative transactions, and the mal-weighing of
commodities, to ensure the smooth running of the economy.
 CONT. ENSURE SOCIAL AND ECONOMIC
JUSTICE
Islam considers mankind as one family, all members of this
family are alike in the eyes of the Creator and before the law
revealed by him.

 There is no difference between the rich and the poor, the high
and the low, or the white and the black.
 There is no discrimination due to race, color or position.
 The only principle for a man’s worth is his character, his ability
and his services to Islam and humanity.
 JUSTICE IN PRODUCTION
 There should be no exploitation in the production process.
 No unlawful method is pursued to acquire wealth.
 An employee deserves a fair wage in accordance with his
contribution to the production process.
 He is also deserve to good human treatment and deserves all
necessary human and technical assistance when he is unable to
perform his duties.
 The interest of the owners in maximum production is also
protected in Islam, as it urges employees to perform their
duties with honesty, and efficiency.
 JUSTICE IN CONSUMPTION

 This means the fulfillment of the basic needs of everyone.

 If supply and demand do not guarantee the provision of goods
and services, the state may intervene and provide such basic
needs.
 An Islamic state is also responsible for the supervision of
norms and values of consumption. Everyone is allowed to
spend for a decent live in accordance with his economic status,
but no one is allowed to waste resources.
 It is advised that Muslims adopt a simple and moderate
consumption behavior according to his or her capacity.
 JUSTICE IN DISTRIBUTION
 Justice and sympathy/kindness are the two main principles in the field of
distribution in Islam.

 Apart from the factors of production, the Islamic state should ensure that a
share of the generated income is donated to those who cannot participate in
the production process due to their handicaps.

 This is done to satisfy their basic needs through the financial support
provided by the rich. In particular, an Islamic government must monitor
two elements in the process of distribution of income and wealth, namely:
• There is no concentration of wealth in one part of the society,
• Each and every factor of production gets its fair share from the production
process.
GOVERNMENT’S ROLE IN PROVIDING
BASIC NEEDS
It is a responsibility of the Islamic government
to guarantee basic needs for all. Therefore,
providing the necessities of life to those who are
needy, poor, unemployed and handicapped is a
sacred/holy function of an Islamic government.
 MANAGING NATURAL ASSETS
 In an Islamic government, the utilization of resources is very
important for overall development, be it in economic,
spiritual or material aspect.
 Economic growth, which is a component of overall
development, requires an abundance of resources for the
production of capital goods,
 Employment of human resources, acquisition of raw
materials, improving technology and also for the
organization of the production process. In particular, capital
formation and technological change have been considered as
key factors for development. The availability of adequate
resources is a prerequisite for growth and development.
 UTILIZATION OF NATURAL
RESOURCES
 
 In the Islamic way of life, the government possesses the
sole right of ownership of natural resources, and all
natural resources are considered as gift for the benefit of
mankind.
 Consequently, it has absolute control over all aspects of
such resources.
 A major objective of an Islamic government is to set up
policies to develop natural resources to the fullest extent
for the benefit of the entire nation
 Thus, man is encouraged to explore natural resources,
develop them by applying all available means, and use
them for the benefit of humanity.
 MOBILIZATION OF HUMAN
RESOURCES
 Human resource development involves professional
skills, moral quality and physical fitness.
 An Islamic government recognizes that the absence of
any of these would affect the development of human
resource and in turn the socio-economic developmental
process.
 Therefore, the government should shape the entire
education system in accordance with Islamic principle,
which would lead to the creation of professionals who
will eventually contribute to the development of human
resource in the state.
 ROLE OF STATE IN THE
MARKET

 When the government can get involved?

 Market Monitoring: Al-Hisbah System.
 ROLE OF THE GOVERNMENT IN THE
MARKET
 To provide the fundamental legal and social
framework for a free market economy.

 To prohibits cheating and the sale of impure foods and

drugs.

 To establish quality standards and defines the

qualifications of those providing professional services
(lawyers/doctors).

 To create conditions that ensure free competition.

 GOVERNMENT'S PRIMARY
DUTY

The jurists have agreed that the government should try

to protect the following three categories of
maslahah (utility/welfare).

1. Essential (daruriyah),
2. Complementary (hajiyah), and
3. Desirable (tahsiniyah).
 GOVERNMENT INTERVENTION
 To ensure al-maslahah (public interest or
general human good).

 To enforce proper behavior and to control

people from improper behavior.

 To create institutions that enhance each citizen

with Islamic standards.
REGULATORY ROLE OF THE ISLAMIC STATE
THE INSTITUTION OF AL-HISBA

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َ ‫ون إِل َى ال َْخيْ ِر َويَأ ْ ُم ُر‬
ِ ‫ون ِبال َْم ْع ُر‬
‫وف‬ َ ‫ع‬ ‫د‬
ْ ‫ي‬ ٌ
‫ة‬ ‫م‬
َ ُ
ُ َ ّ ‫َولْتَك ُ ْن ِمنْك ُ ْم أ‬
َ ‫ع ِن ال ُْمنْك َ ِر َوأُولَئِ َك ُه ُم ال ُْمفْل ِ ُح‬
‫ون‬ َ ‫َويَن ْ َه ْو َن‬

"Let there arise from you a group calling to all that is

good, enjoining what is right and forbidding what
is wrong. It is these who are successful.” (3:104)
 WHAT IS AL-HISBA?

Al-Hisbah is a religious institution under the authority of

10/06/2021
the state that appoints people to:
 carry out the responsibility of enjoining/order what is
right, whenever people start to neglect it, and
forbidding what is wrong, whenever people start to
engage in it.
 ‘Amr bil ma’ruf wa al-nahyu ‘anil munkar’

 It was through this institution that Muslim states used

to control, intervene and supervise many economic
activities.
 THE MAIN PURPOSES OF THE
INSTITUTION OF AL-HISBAH ARE :

 To safeguard the society from divergence/

deviation from deen/ religion.
 To protect the faith.
END