Objectives of Islamic Economic System


There is a misconception in some sections that establishment of Islamic economy means establishment of Arab economy as it existed 1400 years back at the time of the Prophet (S. M.) this is not correct. Islamic economy would be totally up-to-date in its method of organization and use of technology. Only the principles and framework will be derived from the Quran, the techniques of the Prophet and the practices of the early days of Islam.


Similarly, it is wrong to say that Islam does not give an economic system. We recognize capitalism as an economic system, though its basic characteristics are only the recognition of the private right of ownership and freedom of economic activity for the individual, even though its only basic characteristic is the social ownership of means of production. Islam gives us a much more comprehensive guidance in economic matters such as prohibition of interest, compulsory levy of zakat, freedom of work and enterprise, concern for the poor, distinction between the Halal (permissible) and Haram (prohibited) in income, consumption and production and so on. As such Islam undoubtedly gives mankind an economic system not found in other religions. An economic system does not mean only the details of organization, which are more or less the same in all economic systems.

It is also necessary to bear in mind that an Islamic solution of the same problem may be more than one. There can be alternative solutions or models for the same problem or issues. This is particularly true of new issues. The difference can be quite acute in such sectors as land reform and role of government in economy. As long as the alternative solutions proposed by Islamic scholars through Ijtihad remain within the explicit framework of the Quran and the Sunnah, the alternatives would be considered Islamically valid and legitimate.


The Islamic economy which was established by the Prophet (SM) and developed by the Khulafa-I-Rashideen in Madina is the first model of Islamic economy in so far as basic principles and reference point along with the Quran and the Sunnah. We should remember that the Prophet freed the pre-Islamic Madinite economy from Jahiliya, or all un-Islamic practices. As such, none can say that what was allowed in Madinite economy, at that time as not permissible to-day, or what was not permitted in that economy as permissible now.


The goals of Islamic Economy


The goals of an Islamic economy are as under :


a. Establishment of Adl (justice), to attain Hasanah (good) and Falah (welfare) in this life and the life hereafter.


b. To establish Ihsan (gracious conduct or kindness) in economic affairs.

c. Establishment of Maroof (proper or good acts, institutions) in economic life.


d. Elimination of Munker (evil, wrong or injurious practices) form economic life.


e. Freeing humanity from unwanted burdens and shackles and to make life easier for them.


f. Achieve maximum economic growth.


g. Maximize employment to ensure maximum distribution of wealth in society.


h. Achieve universal education


i. Encourage co-operation in society


j. Favoring weaker sections to establish them in life.


The following verses of the Holy Quran clearly point out the aforesaid objectives of Islamic economy:

a. Allah enjoins on you justice and gracious conduct. (Sura Nahl: Ayat-90)


b. When we give them power on earth, they establish prayer, give zakat, enjoin maroof and prohibit Munkar. (Sura HaJJ, Ayat:41).


c. He (the Prophet) enjoins them to follow right things and forbids them evil, he makes pure things lawful for them and impure things pure things unlawful, he relives them of their burdens and frees them from shackles that bound them. (Sura Araf, Ayat: 157).


d. Our Lord, grant us good in this world and in the hereafter. (Sura Baqara; Ayat-201)


e. We desired to show favour unto those who were depressed in the earth, and to make them leaders and to make them inheritors and to establish them on earth. (Sura Qausas: Ayat 5-6)


f. Co-operate in acts of piety and virtue and do not co-operate in acts of sin and trangression (of laws of God)


g. So that wealth does not circulate only among rich people of you. (Sura Hashr: Ayat-7)


There are many other verses of similar nature in the Holy Quran which clearly establish the aforementioned goals of Islamic economy.


As regards achieving maximum economic growth, we can point out that Islam did not allow any owner to keep his agricultural land uncultivated for a long time. Islam also encouraged cultivation of barren land by any body who could do so. Hazrat Umar-Bin-Abdul Aziz directed his governors to lease all uncultivated state lands to any body who could cultivate against even 1/16th share of the crop. This indicates Islam’s concern for maximum utilization of resources for maximum econimic growth. (Dr. Yusuf Al Halal Wal Haram)


Islam also encourages maximum distribution of wealth as has been indicated in the verse of Sura Hahar. Universal education has been enjoined by the Prophet in his famous saying “Education is compulsory on all Muslims, male or female”. Education helps gainful employment which helps in better distribution of wealth. (S.N.H. Naqvi: Ethics amd Economics. An Islamic Synthesis, First education, Chapter 5, published by Islamic Foundation, U.K.).


Basic Characteristics of Islamic Economy


Freedom of work and enterprises: Islam has allowed freedom of work and enterprise. This is evident from the Madinite model of Islamic economy. A reading of the chapter of any Hadith collection in respect of agriculture, gardening, business etc. will establish this. The Quran also clearly states that “ Allah has made business lawful for you (Sura Baqara)”.


Free Economy: Islam allows economy to operate freely according to the market for us, subject to Islamic restrictions and guidelines on production, distribution, marketing, investment, trade, exchange, wages etc. The state can also further interfere in this free economy to restore equilibrium and establish justice and other Islamic objectives as explained above. In an Islamic economy, there is an “allowability constraint” in every field (a term introduced by Dr. SNH Naqvi in his above mentioned book). An entrepreneur can produce only permitted things. Projects should be normal in such an economy, after giving proper wages to the labourers in accordance with Islamic principles. Some forms of trade practices, exchange, investment and land tenancy in agriculture arte prohibited in Islam. It also disallows monopoly and hoarding as social evils.

The aforesaid restrictions make “Free economy in Islam qualitatively different from capitalism. Islam cannot be said to be capitalistic only because it allows forces of demand and supply to operate in the economy. Forces of demand and supply are fundamental economic forces, which were operational in all ages even before capitalism.

Trusteeship ownership: In Islam God is the true owner of all things. The Quran says: “ To Allah belongs whatever is in the heavens and whatsoever is in the earth”. (Al Imran). However, Allah in His mercy allows human beings to inherit wealth, own it and use it subject to His laws as evident from the following verses:


i. The land belongs to Allah. He allows it, to be inherited by whomsoever he pleases (Sura Araf, Ayat 128).


ii. Do they not see that we have created for them among the things fashioned by us cattle of which they become owners (Yasin Ayat-29)?


Islam, therefore, allows man as Vicegrant, to inherit from Allah (that is to own) wealth. This is indeed a trust for proper use.

In early Islam there were three kinds of ownership; private, communal and state ownership. The books of Hadith are full of accounts of individual ownership. This was the standard ownership. Some important things like water, canals pastures and graveyards were communal properties. The state owned the mines, rivers and large tracts of land. After the conquest of Syria and Iraq, these lands were made state lands and were not allowed to go into private ownership (Tafhimul Quran, Sura Hashr, Syed Abul Ala Maududi).

There is no bar on state ownership of enterprise in Islam. The basic economic institutions can be or should be brought under state control, if required to establish social justice or protect the interests of the community.

Protection of lawful property: Islam prtects lawful property and is in favour of confiscation of unlawful property. There are many instances of take-over of unlawful property during the period of Hazrat Omar and Hazrat Omar bin-Abdul Aziz. Lawful property can be taken over by the state only for valid social seasons after due compensation. During the last Hajj, the Prophet (S. M.) announced the principle of protection of lawful property. The Quran says, “Don’t eat each other’s property wrongly”. (Sura Nisa: Ayat 29).

Prohibition of interest: Islam prohibits interest. This requires a total reorganization of the economy, banking, investment, exchange, business and international trade. A big effort is under way in the Muslim world in this direction. A body of literature has already come up on this subject.

Zakat: Islam has made Zakat compulsory on the wealth of rich Muslims. This is spent for the weaker and distressed sections of the society. Zakat not only distributes wealth between the rich and poor of the society, it also influences investment, savings and allocation of income and resources. A detailed study has been made in this regard by Dr. Monzer Kahf in his book “ Islamic Economy”. American Trust Publications, U.S. A. A rich body of literature has come up in recent times on Zakat. The Zakat and Ushr Ordinance of Pakistan can be particularly referred to in this connection.

Concern for poor: This is a special feature of Islam . Zakat is one institution which testifies to this. In this connection we may refer to Ayat 5-6 Sura Qausar as quoted in para 6 above, is particularly significant, where Allah, the Almighty has expressed this desire to show favour on the depressed people. Islamic economy shall establish all possible institutions to carry out this desire of the Almighty.

Distribution of inheritance: Islam has not left the distribution of inheritence on the whims of a person. In Islam a person cannot favour one over the other of his relations for temporary or subjective reasons as is the rule in the West. Islam distributes inheritable property among several groups of people:

i. Children

ii. Husband/Wife

iii. Parents

iv. Brothers and sisters in certain situations.


This distribution has taken care of different groups keeping in view their social role, requirements and proximity of kinship relationships. For those who remain outside the list of inheritors, Islam has provided for wasiat (will) for all such relations of they are in a distressed condition. A person can will up to 1/3rd of his property for distressed relations or others outside the inheritors.


Time and again as we veer from the clear injunctions of Allah, we hark back discouraged and crest-fallen. Islam provides us the principles of social behaviour in our economic life. It is up to us to develop the technology for the implementation of such principles. Already there is a resurgence over the Islamic world towards these ends. We pray to Allah for his blessings and continued guidance.