Islam for Non-Muslims

• RELIGIOUS FAITHS VS IRRELIGIOUS IDEAS
• 1 The Present State of the World Religions
• 2 Religious System as a Historical Reality
• 3 The Evidences of God across the Universe
• 4 The Absolute Oneness of God
• 5 The Reality of the Afterlife
• 6 The Growth of Irreligious Ideas
• 7 Worshipping Natural Elements
• 8 Worshipping Imaginary Idols
• 9 Worshipping Human Beings
• 10 Inventing Relationship to God
• 11 Inventing the Idea of Reincarnation
• 12 Inventing the Theory of Evolution (Darwinism)
• 13 Inventing ‘Nature’ as the Creator of the Universe
• 14 Importance of Religion in this Secular World
• ISLAM AS A RELIGION
• 15 Addressing the Criticisms of Islam
• 16 Islam as a Magnet for the Non-Muslims
• 17 The Quran as the Original Divine Book
• 18 The Quranic Reality in Archeological Findings
• 19 Muhammad (pbuh) as the Great Prophet
• 20 Islam as the True Religion
• 21 Islam as the Universal Religion
• 22 Islam as the Eternal Religion
• 23 Islam as a Practicable Religion
• 24 Islam as an Enjoyable Religion
• 25 Islam as the Peaceful & Savior Religion
• 26 Islam as the Progressive & Rational Religion
• 27 Islam in Health & Hygiene
• 28 Islam in Promotion of Science
• 29 Muslims in Practices of Science
• 30 Islam & Other Monotheisms: Similarities & Differences
• 31 Islamic Tolerance for Other Religions
• 32 Islamic Rights for Non-Muslim Citizens
• ISLAM AS A WAY OF LIFE
• 33 Islamic System vs. Human Ideologies
• 34 Moral & Social Impacts of Islamic Rituals
• 35 Moral Discipline in Islam
• 36 Sinning of 3 W’s: Women, Wine and Wealth
• 37 Dignity & Equality of Man in Islam
• 38 Human Rights in Islam
• 39 Social Duties in Islam
• 40 Dignity & Rights of Labor in Islam
• 41 Dignity of Women in Islam
• 42 Rights of Women in Islam
• 43 Marriage & Family Life in Islam
• 44 Political Philosophy in Islam
• 45 Economic Principles in Islam
• 46 Islamic Economy vs. Capitalism & Communism
• 47 Patriotism & Internationalism in Islam
• 48 Understanding Controversial Issues in Islam
• 49 Conversion to Islam: Problems & Prospects
• 50 Conclusive Message to the Non-Muslims

45: ECONOMIC PRINCIPLES IN ISLAM

Introduction: Islam is much more than a religion. It made contributions to the world of economics on a scale not available in other religious system. Islamic economics marks a difference from other two contrasting economic systems (capitalism and communism) by charting a middle course between their two differential priorities: production efficiency for capitalism and distributive fairness originally intended in communism.

(A) Efficient Production Policy:  Modern economics is largely divided into: (i) supply side and (ii) demand side economics, basing on the location of emphasis. The supply side economics inspires the suppliers or producers (through business tax break, low interest etc.) for boosting production.  The demand side economics, by contrast, aims to help the demanders or buyers (through minimum wage, price regulation, low income tax etc.) 

    Islamic economics, rising above such division, gives balanced stress on the both. Even if Islam basically represents a public oriented economics, it shows no lack of interest in production either. If you do not produce or earn enough, how can you be able to spend for your personal needs as well as for social charity? It, therefore, inspires the growth of gross domestic product (GDP) as well as higher personal income through favorable distribution policies including the following:

(1) Unlimited Ownership Rights: Islam recognizes ownership right as an incentive for economic activities. If you are not allowed the rights to own your money or wealth, you will have no incentive to work hard. Islam therefore allows you to have personal saving from your income either based on wage, profit or rent (but not interest). You can use your savings for building up wealth for you or your family without any ceiling as long as your income does not come from any illegal sources and you don’t default in any payment obligations (zakat etc.). An Islamic state will not take away your assets unless there is an overriding reason like implementing a vital road project on your land (through proper compensation) in the greater public interest.  People are also warned from “coveting” or “straining eyes” for what God gave other people legally (4:32; 15:88). Islam thus allows ‘self-interest’ as a vehicle for efficient production.

(2) Open-ended Income: Alongside with unlimited ownership rights, Islam offers open-ended opportunities for making money. Even though the Afterlife is a priority, you “cannot forget your portion (of necessary spending) in this world” as your rational use of earthly “God given fortunes, (can help you) seek Afterlife home” (28:77). This means, if you can earn money above the poverty level, you can be safe with your faith. In that case, you will not unjustly blame God for your misfortunes or you will not be an easy prey to incentives from foreign missionaries.  What’s more, if you have surplus money, you can spend that in a godly manner. Prophet’s two closest allies (Abu Bakr and Othman) were among the richest and they also became closest to God by spending lavishly for Islam.  Thus, Islam stays away from setting any quantitative limit on your earned legal income.

    Islam, however, sets a qualitative standard on your earning by prohibiting you from “gaining (income) through the property of (other) people” (30:39). Likewise, it also mandates you to spend for the needy which will make you a better person than a selfish capitalist and contribute to social order by narrowing down the rich-poor income gap.  

(3) Farming & Land Tenure System:  The Quran contains passing references like “they tilled the soil” for producing “cucumbers, garlic, lentils and onions” among others (30:9; 2:61), giving legitimacy to farming as a profession. Islam frames a policy that helps farm production as well as benefits the farmers.  It gives you the right to own a farming land provided you keep it productive, either by farming it yourself or leasing that to a farmer free of gain or according to a pre-fixed ratio in contract based on PLS (profit and loss sharing). Otherwise, if you keep your land idle for years in a row, the state has right to cancel your ownership in favor of a productive farmer. Similarly, if a farmer takes up an ownerless land for cultivation, that may pass on to his ownership. The Prophet encourages production of crops and fruits by labeling their sharing with the poor as a valuable act of ‘charity’.

(4) Business & Industry: Islam reveals its progressive nature by looking beyond traditional farming as a way of living. Business and commerce get boost from the Quranic citation “the ships sail (magnificently) by His command so you may seek His bounty (through profitable trading)” (30:46). The Prophet was a living example of a businessman for a period before he became busy as a Prophet.  Many Arabs and Muslims were inspired to adopt business profession by seeing him doing that as well as hearing him saying that ‘business is a principal source of fortunes’.  This is exactly what is proved by the reality of the present world that the richest persons became so by adhering to the fast track of business to fortune building as in the cases of Apple, Google, Microsoft, Facebook, Amazon etc. as of 2022nd century.

Similarly, Islam has a natural emphasis on industrial economy that links from business.  Doing business means you must produce something (crops or industries) to sell. Since Islam was born in pre-Industrial Revolution era, big industries were out of question at that time. Nevertheless, the Arabs during the Prophet’s time produced a variety of mini industries or handicrafts like clothes, medicine etc. The Quran is also dotted with references of industrial activities like  making of iron wares like “coats of mail” made from “softened (heated) iron” (21:80; 34:10), Noah’s ark (boat) made from “wooden planks and nails” (example of carpentry) (54:13), and so on. In this way, Islam is a champion of all 3 sectors of economy: agricultural, industrial and commercial.

Morality Built in Commercial Contracts: God uses the largest Quranic verse (2:282) to build a moral foundation for fair and efficient business practices. Accordingly, you are required to “reduce to writing” basic provisions of any commercial contract involving “(transactions for) future period, be it small or big”, but not necessarily for all spot transactions (2:282).  He enjoins “Let a scribe write down faithfully (the provisions of contract) as between the parties”, “without diminishing anything of what he (liable person) owes” (2:282). If any of the parties is “mentally deficient or weak”, He adds on, “let his guardian dictate faithfully. Take two witnesses whenever you make a commercial contract” (2:282). Such recording mandate aims to make your deal “juster in the sight of God, more suitable as evidences, and more convenient to prevent doubts (or confusions) among yourselves” often due to memory failure (2:282). Otherwise, this could possibly be a problem resulting in deprivation of one party by the other and/or conflict may arise between them.

(B) Fair Distribution Policy: After taking care of efficiency in production, Islam moves on to ensure fair distribution of income among people in general so “wealth does not circulate only within the wealthy among you” (59:7). The reasons are two-fold. First, Protector God is committed to “bestowing bounties on all” His creations in general (17:20). Second, He plans to protect the poor from exploitation by the rich. Accordingly, He banned usury based resource transfer from the poor borrower to the rich lender and instead introduced ‘zakat’ based redistribution of wealth from the rich to the poor.

Obstacles to Accumulation: In fact, capitalism does not have any easy place in Islam.  There are two roadblocks to accumulation of business capital out of your income. One, your income buildup becomes limited for being filtered through strict rules of honesty. Two, much of your income is spent in charity for the society. If capitalism still raises its ugly head crossing all these barriers, then it will be shattered into pieces by the last blow of inheritance through splitting of wealth among your surviving relatives.

Such humane policy of ensuring a minimum living standard for all people is good for business. More money in your hands will mean your higher demand for business goods, opening doors to business prosperity. Such prosperity was made real under the economic management of Caliph Umar II when the givers outnumbered the takers and charity sought destinations beyond national boundary. Now let us see how Islam implements its fair distribution policy.

(1)  Interest & Banking in Modern Economy: High interest rate or usury is considered the root of many evils of capitalism. By definition, it means extra money you have to pay to the lenders when you return your borrowed money.  This causes a transfer of money from the poor borrower to the rich lender, making the rich richer and the poor poorer. This generates a lazy and unproductive class of wealthy capitalists who also become predator by charging even higher (compound) interest “doubled and multiplied” (3:130).  The lenders even go to the extreme of grabbing personal property in case the overburdened debtor defaults in payment. God therefore “forbids” “taking usury” as that becomes a means of “devouring men’s substance wrongfully” (4:161).

            God is committed to “depriving usury of all blessings” through business loss, bank failure, recession etc. and promised an “increase for deeds of charity” like zakat (2:276). God went to the extent of serving “notice of war from God and His Messenger” against those who would not “give up (claims for) residual demand for usury” after prohibition of usury became official (2:279; 2:278). The Prophet labeled usury as disgusting as having sex with mother. He also made it clear that the prohibition applies to all forms of interest/usury: rates high or low; explicit or disguised in identity; institutional or personal loan etc. Also, the blame spreads to all parties getting involved: usury based loan taker, giver, record keeper, witness and so on. 

Islamic Alternatives:  Islam offers the following to better the above cruel system.

(i)  If someone is struggling with long term poverty, you should make unconditional use of your “deeds of charity (compulsory or optional)” to address that (2:276).
(ii) If that poor person instead needs money only to meet short term crisis, then you better provide help him with “beautiful loan” (5:12) free of interest. That will carry a far better reward in the Afterlife than nominal interest you could earn here on earth for that. If you fear willful negligence in repayment, you are allowed to keep something as security.
(iii) If a person needs large amount of money (not easy to get) for projects like house building, then Islam has a different strategy for commercial lending based on little known but progressively influential Islamic banking and finance.
  
  In Islamic banking, incentive of interest is replaced by that of profit to make money available for lending. Islam does not see it right that you will enjoy fixed amount of profit (similar to interest) from lending to a business even in case of its loss. It therefore goes for the legal alternative that you share both profit and loss (if any), with greater chance to gain profit by investing your capital. This method of Profit and Loss Sharing (PLS) as a substitute for fixed interest/profit is central to Islamic banking. The practicability and potentials of such method are confirmed through ever-expanding presence along with relatively steady success of Islamic banking model across the Muslim world and beyond since 1970’s.

(2) Private Charitable Spending: Islamic vision of economy is different from that of other systems. Accordingly, God is the owner of everything in the Universe including your income and wealth which results from His cooperation. You are therefore not the real owner of all that you have. You, being His “representatives” (6:165), are simply given the right to temporary possession for conditional use, similar to leasing. The condition of your enjoying your income/wealth is that you must make a compulsory giving named ‘zakat’ to the poor (2.5% of your qualifying wealth), in addition to optional ones like sadaqa, gift etc. In this manner, your donation in the pleasure of God will bring you “multiplied reward” (30:39)
    
If all these fail to root out poverty from the society, then your spending obligation becomes open-ended. Then you will spend up to “what is surplus beyond your needs”, without being “miserly” (2:219; 17:100).  Giving a sense of urgency to such charity, Islam condemns your love for wealth as “excessive” and “violent” with ties to punitive consequences (89:20; 100:8).   Such prioritized mechanism for transferring money from a minority of rich to a majority of poor is an important tool for social justice. What’s more, higher propensity to spend on consumer goods by the poor means their higher demand for business goods and that acts like a vaccination of the economy against business cycle problems like recession, depression etc.

(3) Government Welfare Spending: Historically, Islam was a pioneer in organizing the public revenue system, with ‘zakat’ being historically the first regular and compulsory source of government income. Nevertheless, some features that separate ‘zakat’ from regular taxes are: (i) its prayer status contributes to high collection rate and (ii) this is a major source of Islamic revenue that is tied to spending for fighting poverty as the main target. Accordingly, the Quran designates eight areas of spending mostly in the category of poverty elimination (9:60), giving no chance to any Muslim ruler to spend otherwise. 

Zakat is to be imposed at the rate of 2.5% on the value of your yearlong possession of gold and silver (as metals or ornaments), cash (on hand or in bank) or business goods, when their combined value exceeds the prescribed minimum. In the name of ‘ushar’, zakat also applies to farm productivity (6:141), imposed at different rate i.e. 20% crops on rain-fed lands and 10% for irrigated lands.  The eight specific spending heads are uniform for both ‘zakat’ and ‘ushar’.  Spoils of war or booty known as ‘ganimah’ is another source of state revenue to the extent of “one fifth” (8:41). ‘Jizya’ contributed by the non-Muslims in exchange for their military service is also another addition to the diversity of state revenue (9:29).  These revenue sources are more detailed in Hadith of the Prophet. Besides these divine revenues, an Islamic state can also levy other revenues, of course without undermining Islamic values, and social justice.

Conclusion:  In conclusion, the Islamic economy has enormous positive features and potential strengths. These are likely to be contributive to the prosperity of such economy, if properly managed.