CHAPTER 4

PRODUCTION IN ISLAMIC
ECONOMY
CONTENTS
 Production
 Importance of production
 Objectives of production
 Production pattern and allocation of resources
 Production ethics
 Factors of production
DEFINITION OF PRODUCTION
ACCORDING TO CONVENTIONAL VIEWS

 Production is the act of changing production factors

into goods and services that are required for
consumption and investment.

Any activity that will satisfy the needs of buyers by

producing goods and services.
 DEFINITION OF PRODUCTION
ACCORDING TO ISLAMIC VIEWS

It is the creation of goods or services that give

utilities according to priority based on syarak.

 It is not just to increase or fulfill the demands of an

item but rather to form morals for success in this
world and the hereafter (falah).
OBJECTIVES OF PRODUCTION

ISLAMIC ECONOMY CONVENTIONAL

ECONOMY
Increase wealth and Economic development is
satisfaction the source of well-being
Ultimate objective is to
worship Allah to achieve
Allah’s pleasure and al-
falah
 PRODUCTION OBJECTIVES

 Responding to Allah SWT's call.

 Personal Safety
 Living Needs
 Meeting Dependants' Needs
 National Requirements

PRODUCTION OBJECTIVES
In Islam, increasing the economic welfare, efficient
use of resources dan maximizing profits are ways to
earn a living towards achieving specific objectives as
listed by Dr Nejatullah Siddiqi:

 Provide for own needs in a moderate way

 Fulfill the needs of dependents
 Provide for future needs
 Provide for future generations
 Social service and contribution in Allah’s way
IMPORTANCE OF
PRODUCTION
ISLAMIC ECONOMY
Allah has provided all
resources on this earth, man
must process the resources to
meet our needs
AlMulk 15:It is He Who has
made the earth manageable for
you, so traverse ye through its
tracts and enjoy of the
Sustenance which He
furnishes: but unto Him is the
Resurrection.
Conventional Economy
Production increases living
standards through the increase
in economic welfare by
offering as many economic
goods and services possible
Using resources in a more
effective way to balance the
resources available compared
to unlimited human wants
 PRODUCTION CONCEPT
ISLAMIC CONVENTIONAL
ECONOMY ECONOMY
Goods and services Concept of Goods: something that
covering economic Goods possesses tastes and
and spiritual goods economic value

Selection of types Types of Goods - There is an element

based on Muslim of self-interest and
consumer goals purchasing power
Price
Income
MUSLIM CONSUMERS –
OBJECTIVES
 In Islamic economy, choice is based on
objectives/goals of a Muslim consumer:
 Fulfill living needs in a moderate form
 Avoid using haram goods
 Using economic goods in a proper way, not
extravagant, excessive or wasteful
 Consuming and satisfaction arising from it are to
achieve the real satisfaction in akhirah
HEIRARCHY OF GOODS
 DHARURIYAH –basic needs
 HAJIYYAH – efficacy
 TAHSINIYYAH - comfort
 KAMALIYYAH - luxury
PRODUCTION FACTORS
ACCORDING TO ISLAMIC
ECONOMISTS
 PRODUCTION FACTORS
ACCORDING TO THE
CONVENTIONAL ECONOMY
 LAND – natural resources used in the
production process.
 LABOR - direct and indirect labor
 CAPITAL - a tool to increase production.
Examples: factory buildings, machinery, vehicles
etc.
 ENTREPRENEURS – people who run an
organization to achieve an objective.
 PRODUCTION FACTORS
ACCORDING TO THE ISLAMIC
ECONOMY
LAND
a gift from Allah SWT that is priceless.

Used to explore all the materials of human needs.

Sura al-Baqarah : 11 and 60.
Including earth, minerals, mountains, forests,
livestock, climate and rain.
 PRODUCTION FACTORS
ACCORDING TO THE ISLAMIC
ECONOMY
LABOUR
 The decisive and most important factor in production.

Labor rewards not only in the world but also in the

hereafter.
Labor qualities (know yourself, holy soul, positive,
diligent, diligent, patient, honest, trustworthy, sincere,
compassionate, respectful etc.)
Wages in Islam – wages of labor money and wages for
true labor.
 PRODUCTION FACTORS
ACCORDING TO THE ISLAMIC
ECONOMY
CAPITAL
Must be free from usury because it can lead to

inflation, exploitation and social injustice.

Socially everything other than land that can generate
income is considered capital.
Islam allows profit taking.
Capital is a productive process.
 PRODUCTION FACTORS
ACCORDING TO THE ISLAMIC
ECONOMY
OPERATORS
Refers to the person or body that designs, guides

and manages a business and activities related to the

business.
The Prophet s.a.w as the best example.
The success of God's prophet Joseph a.s in the face of
the drought that engulfed the land of Egypt.
 PRODUCTION MEASURES IN
ISLAM
 Prioritizing the production of basic goods
 Limiting the production of luxury goods
 Involvement of as many members of the
community as possible in the production process
 Prioritizing the welfare aspect
 PRODUCTION HIERARCHY

 Production of basic necessities

 Production of goods requirements efficiency
 Production of comfort goods
 Production of luxury goods
 Prohibited production of dangerous and destructive
goods.
 ETIKA PENGELUARAN
 Kaedah yang lurus dan adil
 Sumber pengeluaran tidak boleh digunakan
sewenang-wenangnya
 Tidak ke arah keruntuhan Akhlak, Rohani atau
menganggu masyarakat
 Menentang pemborosan dan pembaziran
 Perolehan keuntungan bukan secara monopoli
 Corak pengeluaran apabila pengeluar beretika
THE END