Chapter 10

Abojeib, M., Haneef, MA. M. & Mohamed, M. O. (Eds.) (2018) Islamic Economics: Principles and Analysis.
Malaysia, Kuala Lumpur: International Shari'ah Research Academy for Islamic Finance (ISRA). https://ifikr.isra.my/library/pub/10296
© International Shari'ah Research Academy for Islamic Finance (ISRA).
To cite the book: Abojeib, M., Haneef, MA. M. & Mohamed, M. O. (Eds.) (2018) Islamic Economics: Principles and Analysis.
Malaysia, Kuala Lumpur: International Shari'ah Research Academy for Islamic Finance (ISRA).
Chapter Objectives
• Discussing conventional and Islamic economic development, focusing on

meanings, philosophies, objectives, measures and challenges.
• Taking a look at the state of Muslim economies today, with special attention
to poverty challenge.
• Elaborating on the necessity of developing an appropriate definition of
poverty and measures to eradicate it from the Islamic perspective.
• Delineating the approaches suggested by different scholars that might
enable the setting up of appropriate and effective policies in this regard.
Abojeib, M., Haneef, MA. M. & Mohamed, M. O. (Eds.) (2018) Islamic Economics: Principles and Analysis. Malaysia, Kuala Lumpur: International Shari'ah Research Academy for Islamic Finance (ISRA).
Economic Development in Conventional Economics
• In conventional economics, economic development has evolved through many phases or

defining moments of economics: from the Industrial Revolution, the rise and fall of
socialism, the Great Depression, globalisation to information revolution.
• Supported by deregulating telecommunications and other changes in economic policy,

there are developments of more sophisticated inventions today such as nanotechnology,
robotics, autonomous vehicles, energy storage, the Internet of things (IoT), artificial
intelligence (AI), and quantum computing.
• As a result of these sophisticated technological developments, the prediction that the

Fourth Industrial Revolution which was in the offing (Schwab, 2017) has now become a
reality, coupled with the fintech revolution.
Evolution of the Concept of Economic Development
• Although some are of the opinion that economic development is synonymous with
economic growth, the former is much broader than the latter. Although some are of the
opinion that economic development is synonymous with economic growth, the former
is much broader than the latter.
• Economic development relates to the levels of social and human achievements, and
income distribution as well as narrower measures of per capita income.
• Economic growth means more output, while economic development implies both more
output and changes in the technical and institutional arrangements by which it is
produced and distributed.
Evolution of the Concept of Economic Development
Economic Development involves:
1 Improvements in material welfare, especially for persons with the lowest incomes.
2 Eradication of mass poverty which correlates with the eradication of illiteracy, disease
and early death.
3 Positive change in the composition of inputs and outputs by shifting the structure of
production from agricultural to industrial activities.
4 Enhancements of economic organisation by involving productive employment among
the working-age population rather than the privileged minority.
5 Popular participation of the working-age population in decision-making whereby they
should engage in improving their welfare.
Human Development
• The human development theory can be traced to ancient philosophy and early
economic theory. But its importance grew especially from the 1980s with the efforts of
Pakistani economist, Mahbub ul Haq (1934–1998) and Indian economist, Amartya Sen.
• The Human Development Index (HDI) was created to emphasise that people and their
capabilities should be the ultimate criteria for assessing the development of a country,
not economic growth alone. The indicators cover three basic dimensions of human
development: a long and healthy life, knowledge, and a decent standard of living.
• The HDI can also be used to question national policy choices or to ask why two countries
with the same level of GDP per capita can end up with different human development
outcomes.
Sustainable Development
• While human development is based on three pillars—health, education and income—

sustainable development goes beyond them incorporating economic vitality, environmental
stewardship and social equity.
• Sustainable development focuses on the current generation and future generations as well.
• The sustainable development discourse took over in the late 1990s by adopting the
Millennium Development Goals (MDGs) which were introduced to address the indignity of
poverty by establishing measurable, universally-agreed objectives for tackling extreme
poverty and hunger, preventing deadly diseases, and expanding primary education to all
children.
• In 2012, MDGs were replaced with Sustainable Development Goals (SDGs) which were
introduced to produce a set of universal goals to meet the urgent environmental, political
and economic challenges facing the world, with a deadline for attainment by 2030.
Sustainable Development
Economic Development from the Islamic Perspective
“It is He who has made the earth manageable for you—travel its regions; eat His provision
—and to Him you will be resurrected” (Qurʾān, 67:15).
• Economic development in Islam is seen as a multi-dimensional activity and process,

integrating human and social development.
• In other words, economics and material development in Islam were to be placed under
a wider scope to develop the human being as a whole.
• Economic development in Islam is, by large, a balanced and sustained improvement in

the material and non-material well-being of man (Sadeq, 1991).
Abojeib, M. & Haneef, MA. M. & Mohamed, M. O. (Eds.) (2018) Islamic Economics: Principles and Analysis. Malaysia, Kuala Lumpur: International Shari'ah Research Academy for Islamic Finance (ISRA)
Economic Development from the Islamic Perspective
1 It involves quantitative as well as qualitative changes.

2 It possesses a comprehensive character which inseparably includes moral, spiritual
and material aspects.
3 It deals with the improvement of the welfare of man.
4 It attains the welfare of man through advancement, reorganisation and reorientation
of entire economic and social systems, as well as through spiritual upliftment, in
accordance with Islamic teachings.
5 Its index is based on economic growth, equity in the distribution of income and
wealth, and a healthy and congenial social environment of Islamic norms and values.
Philosophical Foundations of Economic Development
Ahmad (1980) suggests that there are four key philosophical foundations of economic development
from the Islamic perspective, namely:
1 Tawḥīd (Monotheism). Refers to God’s unity and sovereignty which lays down the rules of God-
human and human-human relationships.
2 Rubūbiyyah (Lordship). Refers to the divine arrangements for nourishment, sustenance and
directing things towards their perfection. This is the fundamental law of the universe which
throws light on the divine model for the useful development of resources and their mutual
support and sharing. It is in the context of this divine arrangement that human efforts take place.
3 Khilāfah (Vicegerency). Refers to a human’s role as God’s vicegerent on earth. It defines the
status and role of a human and specifies his or her responsibilities as a Muslim and as a member
of a Muslim nation.
4 Tazkiyah (Purification). Refers to purifying one’s negative desires. It is also explained by scholars
as ‘purification plus growth’ that a human being shall undertake in all his or her
relationships―with God, other humans, the environment, society and state.
Philosophical Foundations of Economic Development
Furthermore, Salleh (2013) suggests additions. According to him, the philosophical

foundations of Islamic development cover the following:
1 The mould of Islamic development—the Islamic world view.
2 The actors of Islamic development, who are human beings―the khalīfah (vicegerent)
of God.
3 The time scale—represented by three worlds: pre-birth, present and hereafter.
4 The framework—the Islamic obligatory knowledge.
5 The methodology—ʿibādah (worship and obedience) of Allah (SWT).
6 The means—natural resources.
Characteristics of Economic Development
Based on the earlier discussion about the philosophical foundations, the following three
characteristics of economic development can be derived:
1 Comprehensive
2 Integration of material and spiritual aspects
3 The centrality of man in economic development
However, despite the rich conceptual foundations of economic development in Islam, the
reality of the Muslim countries today is another story.
Development of Muslim Countries and the Poverty Challenge
• According to the Organization of Islamic Cooperation (OIC), Muslim countries comprise 30 per
cent of the countries in the world, with 23 per cent of the world population being Muslims in
2017.
• According to the Pew Research Center projections, by 2050 there will be near parity between
Muslims (2.8 billion, or 30 per cent of the population) and Christians (2.9 billion, or 31 per cent
of the population), possibly for the first time in history.
• Moreover, Islam will be growing faster than any other major religion (PRC, 2015). In addition, a
recent report by the same research centre showed that even if all migration into Europe were to
immediately and permanently stop–a ‘zero migration’ scenario–the Muslim population of
Europe would still be expected to rise from the current level of 4.9 per cent to 7.4 per cent by
the year 2050 (PRC, 2017).
Development of Muslim Countries and the Poverty Challenge
• Poverty is a pressing challenge in many Muslim countries. Today, large populations in

Muslim countries live below the internationally defined poverty line. In many cases, this
ratio is higher than 40 per cent.
• In fact, poverty should be given a special attention not only because of its high
percentage, but also because of its multidimensional aspect. It degrades human dignity,
creates unemployment, catastrophes and indebtedness. Poverty leads to crimes and
hatred between the rich and the poor; it also leads to incapacitation, helplessness and
dependence on others.
• All in all, poverty is seen as serious not only from a humanitarian point of view but also
from an Islamic point of view. Given the adverse nature and consequences of poverty,
scholars have taken a firm stance about it.
• The war that Caliph Abū Bakr al-Ṣiddīq (573–634) initiated against those who refused to
pay zakāh could be considered as a war against poverty.
Poverty
• Absolute poverty is usually measured with the help of the absolute poverty standard,
that is the standard poverty line. The poverty line is the income necessary to provide a
family of a certain size, with the minimum basic needs such as food, clothing, shelter and
education. It establishes a specific income level for a household of a given size, below
which the household is judged to be living in a state of poverty.
• Relative poverty, on the other hand, is measured with the help of the relative poverty
standard that defines poverty in terms of their income relative to others. For instance, a
household is classified as poor if the household’s income is much less, say 25 per cent, of
the average household’s income.
Concept of Poverty in Islamic Economics
• Central to the discussion of poverty in Islam are the concepts of faqīr (poor) and miskīn
(needy), being two of the most important categories of people who qualify to receive
zakāh.
• The miskīn are those who have some assets and income, but not enough to meet their
basic needs (and their dependents), including material and non-material. On the other
hand, faqīr is one who has very little or nothing.
• In Malaysia, for example, miskīn is defined as those below the poverty line, while faqīr is
defined as those whose income is less than half the poverty income line.
Concept of Poverty in Islamic Economics
• Islam emphasises on the balance and integration of material and spiritual dimensions.
To this view, the concept of poverty in Islam does not only represent deprivation of
goods and services but also being spiritually poor.
• The absence of the redefinition of poverty from the Islamic viewpoint is due to two
reasons: the outsiders’ definition of poverty and the top-down approach.
• Scholars who dominate the thinking on poverty are the outsiders, not the poor
themselves.
• The adoption of a top-down approach comes together with the outsiders’ definition of
poverty. A top-down approach may come with a favourable political will, resources,
bureaucratic machinery and facilities, but they still come from outsiders.
Approaches to Poverty Alleviation
• Apart from zakāh and waqf, institutions such as cooperatives and microfinance are also
found to be effective instruments for creating self-employment. Takāful institutions also
become an important element in the modern poverty-reduction agenda by protecting
people from economic and natural shocks.
• To realise the great potential of these institutions―zakāh, waqf, microfinance and

takāful—integrating them with the overall development scheme is a reasonable
suggestion. Creating institutional development using contemporary organisational
structures and instruments, supportive law and regulations to ensure a high level of
governance and transparency, and to build trust in the institutions, is also necessary .
In Summary
• The concept of ‘economic development’ is much broader than that of ‘economic

growth’. Economic development relates to levels of social and humanitarian
achievement and income distribution as well as narrower measures of per capita
income. While economic growth means more output, economic development implies
both more output and changes in the technical and institutional arrangements by which
it is produced and distributed.
• Human development and sustainable development are indispensable areas of economic

development today. While human development holds to three pillars of health,
education and income, sustainable development goes beyond them to consider the
simultaneous creation of economic vitality, environmental stewardship and social
equity. Hence, sustainable development could be regarded as a further step in
development.
In Summary
• Islamic development should be comprehensive and based on the development of the

human condition. It should integrate both material and spiritual upliftment.
• Poverty alleviation and distributive justice are two important aspects of economic
development. While poverty in Islamic economics has material, moral and spiritual
dimensions, the adopted definitions and measures today are largely based on the
conventional material approaches.
In Summary
• The conventional definition of poverty seems to suffer from an exogenous definition of
poverty itself, as well as from the top-down endeavours. In Islamic economics, measures
of poverty vary, but the two concepts—niṣāb (the minimum level of wealth required for
the eligibility of zakāh) and ḍarūriyyāt (necessities)—seem to provide some solid
grounds.
• Islam has in place institutions that can be used to alleviate poverty. These include zakāh
(alms), waqf (Islamic endowment), microfinance, takāful (Islamic insurance) and other
forms of ṣadaqah (charity).
• There is a need for effective growth strategies with a built-in equitable opportunity
mechanism to reduce the problem from the root. Individuals and societies also need to
be responsible.
Thank you
© International Shari'ah Research Academy for Islamic Finance (ISRA).

To cite the book: Abojeib, M., Haneef, MA. M. & Mohamed, M. O. (Eds.) (2018) Islamic Economics: Principles and Analysis.
Malaysia, Kuala Lumpur: International Shari'ah Research Academy for Islamic Finance (ISRA).

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Abojeib, M., Haneef, MA. M. & Mohamed, M. O. (Eds.) (2018) Islamic Economics: Principles and Analysis.

• Discussing conventional and Islamic economic development, focusing on

• In conventional economics, economic development has evolved through many phases or

• Supported by deregulating telecommunications and other changes in economic policy,

• As a result of these sophisticated technological developments, the prediction that the

• While human development is based on three pillars—health, education and income—

• Economic development in Islam is seen as a multi-dimensional activity and process,

• Economic development in Islam is, by large, a balanced and sustained improvement in

1 It involves quantitative as well as qualitative changes.

Furthermore, Salleh (2013) suggests additions. According to him, the philosophical

• Poverty is a pressing challenge in many Muslim countries. Today, large populations in

• To realise the great potential of these institutions―zakāh, waqf, microfinance and

• The concept of ‘economic development’ is much broader than that of ‘economic

• Human development and sustainable development are indispensable areas of economic

• Islamic development should be comprehensive and based on the development of the

© International Shari'ah Research Academy for Islamic Finance (ISRA).

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