Riba And Its Types

Definition of Riba or Interest

The word "Riba" means excess, increase or addition, which correctly interpreted according
to Shariah terminology, implies any excess compensation without due consideration
(consideration does not include time value of money).

This definition of Riba is derived from the Quran and is unanimously accepted by all Islamic
scholars. There are two types of Riba, identified to date by these scholars namely 'Riba An
Nasiyah' and 'Riba Al Fadl'.

'Riba An Nasiyah' is defined as excess, which results from predetermined interest (sood)
which a lender receives over and above the principle (Ras ul Maal)

'Riba Al Fadl' is defined as excess compensation without any consideration resulting from a
sale of goods. 'Riba Al Fadl' will be covered in greater detail later.

During the dark ages, only the first form (Riba An Nasiyah) was considered to be Riba.
However the Holy Prophet also classified the second form (Riba Al Fadl) as Riba.

The meaning of Riba has been clarified in the following verses of Quran:

"O those who believe, fear Allah and give up what still remains of the Riba if you are
believers. But if you do not do so, then be warned of war from Allah and His Messenger. If
you repent even now, you have the right of the return of your capital; neither will you do
wrong nor will you be wronged." Al Baqarah 2:278-9

These verses clearly indicate that the term Riba means any excess compensation over and
above the principal which is without due consideration. However, the Quran has not
altogether forbidden all types of excess; as it is present in trade as well, which is
permissible. The excess that has been rendered haram in Quran is a special type termed as
Riba. In the dark ages, the Arabs used to accept Riba as a type of sale, which unfortunately
is also being understood at the present times. Islam has categorically made a clear
distinction between the excess in capital resulting from sale and excess resulting from
interest. The first type of excess is permissible but the second type is forbidden and
rendered Haram.

"Seized in this state they say: 'Buying and selling is but a kind of interest', even though
Allah has made buying and selling lawful, and interest unlawful." Al Baqarah 2:275

The basic cause of riba is that economic activity does not involve the investor & he gives his
money under control of someone else. Because of which he becomes idle & ceases to play
any active role in the society. The control of a large amount of money in few hands gives
rise to monopoly & power to influence all sectors of social life.

Since investor is away from actual economic activity, he has no sense of social
responsibilities, & does not have active participation in social development. Easy money
spoils the character. The hard working classes like labor groups, workers, employees, are
left behind in development & prosperity giving rise to a gap which creates class system &
social unrest.

The economic monsters thus created take control of new resources growing more powerful.
Since possession of money becomes sole criteria to occupy resources. The honest &
hardworking people are prevented from participation in economic activities & playing an
active role. Thus, an illegal trade, killings & mafia flourish.
Classification of Riba

1. The first and primary type is called Riba An Nasiyah or Riba Al Jahiliya. 2. The second
type is called Riba Al Fadl, Riba An Naqd or Riba Al Bai.
Since the first type was specified in the Quranic verses before the sayings of the Holy
Prophet, this type was termed as Riba al Quran. However the second type was not
understood by the Quranic verses alone but also had to be explained by the Holy Prophet, it
is also called Riba al Hadees.
Riba An Nasiyah
This is the real and primary form of Riba. Since the verses of Quran have directly rendered
this type of Riba as haram, it is called Riba Al Quran. Similarly since only this type was
considered Riba in the dark ages, it has earned the name of Riba Al Jahiliya. Imam Abu Bakr
Hassas Razi has outlined a complete and prohibiting legal definition of Riba An Nasiyah in
the following words:
"That kind of loan where specified repayment period and an amount in excess of capital is
predetermined."
One of the ahadith quoted by Ali ibn at Talib (RAA) has defined Riba An Nasiyah in similar
words. The Holy Prophet said:
"Every loan that draws interest is Riba."
Riba An Nasiyah refers to the addition of the premium which is paid to the lender in return
for his waiting as a condition for the loan and is technically the same as interest. The
prohibition of Riba An Nasiyah is one of those issues which have been confirmed in the
revealed laws of all Prophets (AS).
According to the above definition of Riba An Nasiyah, the giving and taking of any excess
amount in exchange of a loan at an agreed rate is included in interest irrespective whether
at a high or low rate. It has been proven through ahadith that the Holy Prophet paid excess
at the loan repayment time but since this excess was not paid through an agreed rate, it
cannot be called interest. This clarifies that the word "draws" in the hadith definition" The
loan that draws interest is Riba." has been used to highlight the giving and taking of excess
amount through an agreed rate in the loan contract.
In short, the Riba of today which is supposed to be the pivot of human economy and
features in discussions on the problem of interest is nothing but this Riba, the unlawfulness
of which stands proved on the authority of the seven verses of the Quran, of more than
forty ahadith and of the consensus of the Muslim community.
Wisdom behind the prohibition of Riba An Nasiyah
First of all, we should realize that there is nothing in the entire creation of the world, which
has no goodness or utility at all. But it is commonly recognized in every religion and
community that things which have more benefits and less harms are called beneficial and
useful. Conversely, things that cause more harm and less benefit are taken to be harmful
and useless. Even the noble Quran, while declaring liquor and gambling to be haram,
proclaimed that they do hold some benefits for people but the curse of sins they generate is
far greater than the benefits they yield. Therefore, these cannot be called good or useful; on
the contrary, taking these to be acutely harmful and destructive, it is that they be avoided.
The Riba consumer suffers such a spiritual necessary and moral loss that it virtually takes
away the great quality of being 'human' from him. An intelligent person who compares
things in terms of their profit and loss, harm and benefit can hardly include things of casual
benefit with an everlasting loss in the list of useful things. Similarly no sane and just person
will say that personal and individual gain which causes loss to the whole community or
group is useful. In theft and robbery for example, the gain of the gangster and the take of
the thief is all too obvious but it is certainly harmful for the entire community since it ruins
its peace and sense of security.
Riba Al Fadl
The second classification of Riba is Riba Al Fadl. Since the prohibition of this Riba has been
established on Sunnah, it is also called Riba Al Hadees.
Riba Al Fadl actually means that excess which is taken in exchange of specific homogenous
commodities and encountered in their hand-to-hand purchase & sale as explained in the
famous hadith:
The Prophet said,
"Sell gold in exchange of equivalent gold, sell silver in exchange of equivalent silver, sell
dates in exchange of equivalent dates, sell wheat in exchange of equivalent wheat, sell salt
in exchange of equivalent salt, sell barley in exchange of equivalent barley, but if a person
transacts in excess, it will be usury (Riba). However, sell gold for silver anyway you please
on the condition it is hand-to-hand (spot) and sell barley for date anyway you please on the
condition it is hand-to-hand (spot)."
This hadith enumerates 6 different commodities namely:

1) Gold 2) Silver 3) Dates 4) Wheat 5) Salt 6) Barley
These six commodities can only be bought and sold in equal quantities and on spot. An
unequal sale or a deferred sale of these commodities will constitute Riba.
It has been declared by Islamic scholars that if a commodity bears both of the two
characteristics namely; it has weight and can be used as a medium of exchange, and then
the following two kinds of transactions are not allowed when the same goods are being
exchanged:
A deferred sale of goods (A deferred sale is when the goods are returned/or paid for after
some undetermined period)
A sale of unequal quantities of the same goods
However, when only one of the two characteristics is present to term the sale as Riba Al
Fadl, then exchange of unequal goods are allowed but deferred sale is not allowed.
The only law & rule generating source is QURAN & practices of HOLY PROPHET (S.A.W) & if
anyone gives precedence to any other authority, then it is disobedience to ALLAH & HOLY
PROPHET (S.A.W) .this also forbids Muslims to form sects & have secretarian thoughts,
because they have to work for benefit of mankind.
Any dispute which arises must be resolved in a conference (IJMA-CONSISTENCY)
formulating new laws in the light of QURAN & SUNNAH.
Also, it is felt that MUSLIMS are suffering from time delay syndrome of concepts that a book
written long time ago is surely authentic, forgetting the principles that QURAN & SUNNAH
are the sole guidelines for all times.
Modern scientific research is surprised to find out that not a single verse of QURAN
describing nature can be proven wrong.
Wisdom behind the prohibition of Riba Al Fadl
The prohibition of Riba Al Fadl is intended to ensure justice and remove all forms of
exploitation through 'unfair' exchanges and to close all back-doors to Riba An Nasiyah
because in the Islamic Shariah, anything that serves as a means to the unlawful is also
unlawful.
Basically in borrowing the concept is that when you borrow you return the same as well, but
if the parties mutually agree they can exchange as they like.
Riba, Its Economic Rationale and Implications
By Dr. Abdel-Rahman Yousri Ahmad
Director General
Institute of Islamic University
Pakistan
Introduction
The word "Riba", in Arabic language, literally means an "increment' or addition". In Islamic Fiqh the term
riba has a special meaning. Riba is an unjustified increment in borrowing or lending money, paid in kind
or in money above the amount of loan, as a condition imposed by the lender or voluntarily by the
borrower. Riba defined in this way is called in Fiqh riba al-duyun (debt usury). Riba also is an unjustified
increment gained by the seller or the buyer if they exchanged goods of the same kind in different
quantities. This is called "riba al-fadl" or "riba-al-buyu" (trade usury).
The Prophet (p.b.u.h.) exposed to his companions, also, this form of riba known as "riba al-buyu". He
warned them that barter exchange of commodities of the same kind will be leading to riba. He (p.b.u.h.)
advised all traders to use money for the exchange of such goods to avoid riba. In Islamic literature this
kind of riba is also described as riba al-khafi, i.e. disguised or implicit riba, in contrast to "riba al-duyun"
which is considered "Jali" i.e., explicit or clear.
Riba prohibition in Quran is mentioned in three distinct passages. To consider the chronological order of
the Quranic revelation, Allah, firstly, gave a warning (Sura 30:39) that riba earnings will be wiped out
while persons giving charity will be rewarded more than they have spent. Secondly, believers have been
ordered, and warned never to take riba at compound rates (Sura 3:130). Thirdly riba in all forms was
utterly condemned, and those cared not for its prohibition were threatened a holy war to be waged
against them by Allah and his Messenger (Sura 2:275-279). It was made clear that riba transaction is
different than trade and that it is the Will of Allah to prohibit riba irrespective of any reasons which may be
given for its support. Prohibition of riba in Quran is undoubtedly quite strict and decisive. Sunna explains
different forms of riba and puts more emphasis on its prohibition. The Prophet (p.b.u.h.) in his hadith
warned that riba is more sinful than committing adultery repeatedly.

The "riba" system was formally introduced in Islamic countries during the 19th and 20th Centuries through
two channels; (i) secular legislations which have endorsed the Western definition of usury, (ii) the modern
banking system whose activities are interest based. These two channels were opened during the era of
Western colonial rule to the Islamic world. Besides, the riba system has increasingly gained strength in
the Islamic world because of the serious economic dependence on the Western world on one hand and
secular education which neglected the teachings of Islam.
Arguments "justifying" interest
Affected by the changes, some Muslim scholars and jurists from the Islamic world volunteered to defend
the interest system, by distinguishing interest from riba. The same controversy of ancient times and mid
centuries has been repeated in the modern Islamic world. M. Dwaleeby (1950) thought that interest
charged on consumption loans is definitely "usury", but that on loans taken to finance trade or production
is not. Much earlier A. Jewish (1908) insisted that prohibited riba is only that which is accumulating at a
compound rate. Thus simple interest is not riba.
A. Sanhory (1956) an eminent Professor of Law and Fiqh emphasized the prohibition of all kinds of
interest, whether simple or compound, charged on consumption loans or on production loans. Yet he
recognized that the economic system prevailing in contemporary Islamic countries is not confirming with
Shariah rules and Islamic ethics. Thus business finance on loss and profit sharing basis, as Islam
requires, has become rare. Under such conditions it has become "most urgent" for business people to
seek finance on interest basis.
Sanhory emphasized that debt finance involving interest has become a matter of great urgency that it
justifies a resort to "Darura" (necessity) rule in Shariah. Sanhory emphatically asserted that "Darura" to
interest is not similar to "Darura" which permits eating pork or dead animals' meat. Yet the capitalist
system adopted by Islamic countries, or imposed upon them from outside, and its interest-based financial
institutions has created emergency conditions calling for relaxation of riba prohibition rule. Hence, he
concluded that simple, but not compound, interest may be allowed till the economic system can be
changed and becomes Islamic.
Sharing in civil and commercial law drafting in Egypt and in other Arab countries, Sanhory accepted that
interest can be charged at simple rates in the range of 4% -8%. Exactly as happened before in 16th
Century Europe, "exceptions" or relaxation of usury prohibition rule led to more exceptions and further
relaxations. Besides, the capitalist system and the interest-based institution have continued and become
well established.
Another attempt to separate interest from riba has been made by some economists in the Islamic
countries who believe that interest rates are frequently less than or equal to inflationary rates. Therefore,
under such conditions, interest payments may be considered as a compensation to the loss in real value
of money, and not riba. This argument to the disappointment of its exponents could not defend interest if
the general price level decreased, remained constant, or increased at a rate lower than the interest rate.
In all these cases, which are quite possible in practice, interest will be riba according to the
inflation/interest argument. This attempt to justify interest, as claimed by its exponents, relied upon
Ta'weed (compensation) principle set in Fiqh by Abu Yusuf (Saheb Imam Abu Hanifa) in the 8th Century
(2nd Century- Hijri Calender) in the case of fulus (cheap metal money) whose real value against gold or
silver money was subject to considerable deterioration at times of "Ghala" (inflation). Yet, Abu Yusuf and
his followers had never thought of inflation as a permanent case, a monetary system entirely dependent
on fiat money, or that their suggested compensatory system may be used for justification of the interest
system. Many Islamic economists have already recognized that the problem of entrenched inflation in
many Islamic countries is severely affecting the real value of money particularly over the long run and that
it calls for a solution on Shariah basis. Compensation of loss in real money value may be accepted on
Shari'ah basis through an acceptable form of indexation, but never through the interest system. In fact,
the real solution of the problem, as many Islamic economists suggest is to take positive steps towards a
just monetary system in which interest has no place and inflation can be cured effectively.
All attempts to separate interest from riba have supported the interest system which the contemporary
Islamic countries came to accept under external forces a century or two ago. Yet these attempts have
entirely failed to convince true Muslims all over the world. Besides, Al-Azhar' Islamic Research Academy
in Egypt, The Council of Islamic Ideology (Pakistan), The Islamic Fiqh Academy of the Organization of the
Islamic Conference, other Fiqh academies in the Islamic world have refused and refuted all attempts to
justify interest or separate it from riba.
Fiqh rules on prohibition of riba
To emphasize interest or riba prohibition, reference should be made to three Fiqh rules:

a) A benefit gained from a loan is riba. A rule which is based on the ethics of Qard Al-Hassan (Benevolent
or good loan) in Quran and on Hadith of the Prophet (p.b.u.h.) "the only reward for a loan is the thanks
giving and the repayment".
b) Which means that the capital owner has to choose either a "return" on his capital by sharing with its
user in profit, or a "guarantee" to repay his capital intact. A "return" and "guarantee" on capital can not be
combined together in one deal.
c) Which means that the capital owner will be entitled to "Profit" only if he is ready to accept "loss" if this
happened. These rules are the basis of all profit and loss sharing financing methods in Islam, and they
leave no doubt that interest paid to bank depositors above their money, or interest paid by borrowers from
banks for the use of banks' money is riba.
The nature of the Islamic Economic Rationale
Before tackling the economic rationale of riba prohibition a few remarks ought to be made. Firstly a
necessary distinction should be established between an economic rationale from an Islamic point of view
and a secular one. The latter depends on secular theory and empirical test. An Islamic economic rationale
would not deny the importance of the secular theory if its basic assumptions or postulates confirm with
Islamic Shari'ah rules and ethics. Otherwise, because the Islamic economic theory is still in its formative
stage, dependence is heavily placed on theoretical arguments and hypotheses within the boundary of
Islamic rules and ethics. Yet, these theoretical arguments and hypotheses cannot be tested as long as
contemporary Islamic economic experience is limited. Available experience can be cited to support
theoretical arguments.
The second remark concerns our approach in exposing the Islamic economic rationale of riba prohibition.
Interest is not the only form of riba, but it is the most popular one. Thus arguments showing the
inefficiency of the interest system in fulfilling economic targets and inability to achieve socio-economic
justice will be reviewed. In contrast, the expected advantages of the interest-free financing will be
presented.
Thirdly it should be made clear in advance that all arguments concerning the economic rationale of
interest prohibition should not on Shari'ah basis be taken 'reasons' for riba prohibition. Arguments and
theories may be accepted or rejected but riba will remain prohibited and condemned in Islam. Any
argument, in this respect, should be viewed therefore as an attempt on our part to understand and explain
the "wisdom" rather than the "reason" of riba prohibition.
Economic Rationale of Riba Prohibition and Implications
1st Argument
The interest system is inherently incapable of allocating available liquid funds among firms and activities
in the society according to considerations of efficiency, productivity and growth. An Islamic system based
on profit/loss sharing financing methods would offer, in principle, an efficient substitute.
Secular economic theory claims that the interest mechanism guarantees an efficient allocation of
available funds. According to the Keynesian theory every businessman would estimate the marginal
efficiency of investment (MEI) while the interest rate (i) is determined by money demand and supply. If
(MEI) is equal or greater than (i) it will be rewarding to borrow and finance the investment project.
Otherwise the project will not be undertaken. Accordingly, available money for lending will be allocated
efficiently among firms and activities.

This argument cannot be theoretically or empirically defended. Let us assume for sake of simplicity and
discussion that (i) measures accurately the opportunity cost of money available for lending in the credit
market, and that a uniform interest rate (i) is applied by banks (lenders) in all cases of borrowing. Hence
investment projects for which (MEI) below (i) will be excluded. On the other hand all projects fulfilling the
condition (MEI> i) will find excess to loanable funds without any preference given by banks (lenders) to
projects with relatively higher (MEI). In a free market economy we can not claim that loanable funds would
be optimally or best allocated in this way. Theoretically speaking an Islamic free-interest financial system
would offer a much better substitute for allocating available funds among firms and activities. Assuming
that interest-free financial institutions would aim at maximizing their "halal" (i.e. legal on shari'ah basis)
revenues, a preference will be given to projects with higher (MEI) over other projects with relatively lower
(MEI). Under these circumstances deviation from an optimum (or the best) pattern of funds allocation in
the economy may occur because of some other factors, such as failure to estimate accurately (MEI) on
the part of enterprises or lack of experience on the part of the financial institutions' managers. Yet such
inefficiencies are likely to exist in a traditional interest-based financial system as well.
Let us, now investigate the simple assumptions which have been made above.

a) Current or market rate of interest can not simply be taken to measure the opportunity cost of available
units of money capital. The rate is not determined in practice as the theories claim by loanable funds or
by money supply and demand. It is rather determined by monetary authorities which take into
consideration, besides loanable funds or money supply and demand, several macroeconomic policy
requirements and variables such as income and price stability, unemployment rate, public debt, and
balance of payments position. Determined in this way the interest mechanism will not necessarily help in
allocating loanable funds efficiently among firms or between different economic activities.
Research studies, years ago, showed that (MEI) tends to increase considerably at boom and fall sharply
at depression, whereas the rate of interest, due to macroeconomic policy requirements, would not be
changed at all in the same manner. Hence allocation of loanable funds according to the interest
mechanism would further be driven away from the optimum pattern. On the contrary in an Islamic
financial system, under the same circumstances, available funds will always be distributed efficiently
among investors since financiers share with them expected profit, high or low. Assuming that financiers
would raise their profit share margin proportionally with expected higher future returns at boom and that
they would be reluctant to extend their finance at depression because they would share in loss which is
quite expected profit and loss sharing mechanism would also help in bringing about stability at the macro
level.
b) Investors with projects satisfying the (MEI) condition and seeking interest-based finance are not
treated equally by banks (lenders) as we have simply assumed. Large corporations are given priority and
better borrowing terms, irrespective of how funds will be used by them. In fact banks (lenders) are
concerned, above anything else, with borrowers solvency. Hence, preferential treatments and financing
priorities are set by banks on credit-worthiness basis. It should be noticed that today's bankers are not, in
this respect, different from olden days or mid-centuries' usurers. Their main concern is identical, namely
to take utmost precaution for loan repayment plus interest. Consequently small enterprises are either
neglected or given least attention by bankers, even if their investment projects are expecting highest
returns.
The problem of small enterprises with the interest-based financial institutions is quite serious in the
developing world, though it may be of minor importance only in developed countries. "Surveys indicate
that less than I% of small firms in developing countries obtain credit at controlled rates from financial
institutions; the remainder rely on the informal sector. The combined net effect is to raise their capital
costs and reduce their ability to compete against large firms", according to W.B (I987). In fact failure of
small businesses to obtain finance from banks have forced them quite frequently, in the absence of equity
finance, to borrow from money lenders in the informal market at very high rates of interest. So they have
jumped from the frying pan to the fire.
A study concerning the informal credit market in Peru mentioned that interest rate in that market was as
high as 800% - I000% per annum sometimes in the mid 1980s. Todaro, M., states that "commercial
banking system of many LDCs restricts its activities almost exclusively to rationing scarce loan able funds
to "credit-worthy" medium-and large-scale enterprises in the modern manufacturing sector. Small farmers
and indigenous small scale entrepreneurs and traders in both the formal and informal manufacturing and
service sectors must normally seek finance elsewhere sometimes from family members and relatives, but
more typically from local moneylenders and loan sharks who charge exorbitant rates of interest.
In addition, a brief note should be given on interest rate control policies because these, it may be claimed,
have always exerted favourable economic effects, which is not true. In the developing world, to which
Islamic countries belong, experience showed that interest rate and selective credit policies have reduced
the efficiency of investment on the whole. "This is particularly true when controls on interest rates make
them negative in real terms. As well as promoting investment in low return projects, interest rate controls
encourage firms to build up their inventories. Furthermore, faced with the need to ration credit, banks lend
to the borrowers they know well - large scale enterprises and parastatals - or even to the industrial groups
that own them. In Colombia, interest rate controls reduced the funds available for smaller-scale industrial
enterprises; the efficiency of investment fell as a result. Interest rate controls also keep credit cheap in
relation to labour for those firms with unrestricted access to loans from the formal financial sector and
thus encourage capital intensive investments in some parts of industry. These distortions ultimately affect
growth."

All the facts mentioned above are quite relevant to Islamic countries which are classified, without
exceptions, within the LDC category. The interest system now in application in Islamic countries (with
minor exceptions, i.e. Pakistan, Iran and Sudan) against Shariah is not helping in allocating their scarce
funds efficiently, among firms or between economic activities. The system is also discriminating
unfavourably against small-scale firms, farmers and traders irrespective of efficiency or productivity
considerations.
The riba system is full of contradictions and attempts to regulate it through interest rate controls have
either failed or accentuated its imperfections. On the whole, therefore, the system which is prohibited by
Shariah, is adversely affecting economic development in the Islamic countries. On the contrary a financial
system based on profit and loss sharing offers a much better alternative to Islamic countries since it is
expected to be free of all the imperfections of the riba system.

2nd Argument:

The interest system brings about and effectively maintains a pattern of income distribution which is biased
towards wealthy people and large businesses, irrespective of rational economic considerations. An
Islamic interest-free financial system supports a just income distribution pattern fairly correlated to
economic efficiency, productivity and actual factors contributions to the total value added.
This argument is directly dependent on preferential treatment given by interest-based financial
institutions, mainly commercial banks, to wealthy persons and large enterprises because they are credit-
worthy. Medium-scale enterprises are not deprived of finance from banks but they may not obtain all their
requirements always while they are usually charged with relatively higher interest rates. Small-scale
economic activities in all economic sectors are discriminated against, as mentioned previously. In quite a
few number of developing countries, however, governments provide for special arrangements to cover a
higher portion of small activities financial requirements through banks. Yet even then, credit ceilings are
usually imposed strictly upon the small share of finance allotted to small activities, whereas cumbersome
formalities and heavy guarantees are demanded from their owners. Thus the interest system will
effectively help large enterprises to grow larger and rich entrepreneurs to grow richer irrespective of their
economic efficiency or productivity.
On the other hand small entrepreneurs even with bright new ideas, carefully studied projects with
prospects of high returns and possible positive contribution to the total value added will be deprived of
finance or may obtain much less than their requirements. Hence they have much less chance to grow
their activities and their incomes. It should be noticed that this problem is particularly serious in most
developing countries, where small-scale activities employ the largest portion of the total labour force,
while its share in GDP is much less than medium and large-scale businesses.
An Islamic interest-free financial system would not cause the same disturbances. "Mudaraba", first and
foremost in Islamic finance, is based on personal confidence of the capital owner in his partner, the agent
manager; in his efficiency, dedication to work and honest character. Thus economic and managerial
considerations are taken into account where as trust-worthiness replaces credit-worthiness. Profit, when
realised, will be divided between the capital owner and his partner, the agent manager according to a
mutually agreed proportions while all loss, if happened, is born by the capital owner. It should be noticed
that the agent manager also suffers, in the last case, from the loss of all his efforts, as these will be
rewarded nothing.
Musharaka, another principal financing method, flexibly allows for large and small capital owners to come
together in various forms of companies. Partners will divide realised profits among them according to
agreed proportions, fixed in advance in the company's contract. Fiqh rules allow small partners to obtain
the same percentage share in realised profits as large partners, or even more, according to efficiency,
experience or managerial efforts considerations. On the other hand loss, if happened, will be born by all
partners according to their shares in the company's total capital. Economic justice is carefully protected
and maintained between partners in Musharaka. All other Islamic financing methods are of the same
nature, i.e., based on partnership and profit/loss sharing principles. Some of these methods namely
Istisnaa Muazrah and Murabaha can be used effectively to solve the financial problems faced by small-
scale entrepreneurs, farmers and traders in particular.
To conclude, the Islamic financing methods would undoubtedly help in supporting a just income
distribution pattern. These methods endorse partnership and profit/loss sharing principles, they do not
discriminate against partners who do not share in finance or contribute only with a small share, and they
facilitate the extension of finance to small-scale activities, on the basis of confidence in their efficiency
and expected returns. However, it should be expected that the application of the Islamic financing
methods will be faced with many problems at the beginning as actually has happened.
3rd Argument
The interest system encourages passive behaviour to develop among people having liquid funds by
helping them to relinquish responsibilities and risks in investment activities. In contrast sharing in
responsibilities and risks is inherent in the profit/loss sharing methods of finance.
No doubt that the interest system relieves money capital owners from holding any responsibilities and
risks related to the execution or to the final outcome of the investment activities financed by them. It is
claimed by the interest system's exponents that this is one of its merits since easy and risk less income is
guaranteed to the capital owners periodically. It is also claimed that entrepreneurs within this system are
willingly accepting its terms and satisfied that the financiers do not intervene in their business. Interest
paid by the entrepreneurs is included in costs and thus transferred to purchasers through sales, while net
profit once realised is totally their own.

Yet, such system is viewed quite differently on ethical and social grounds. Money capital owners are
encouraged to develop a passive behaviour in the production sector. On the other hand entrepreneurs
financed by loans and paying interest are not really doing this with comfort whether at boom when interest
rates are relatively high and the uncalculated risk is greater than normal or at recession when interest
rates are relatively low but loss expectations are greater than normal. If profits are not actualised they,
along, will face the consequences and may be subject to bankruptcy. Ethically, this is a kind of gambling
rather than risk-taking based on rational calculations. Therefore, within the interest system, options of self
finance, equity or a mixture of equity and debt finance may be preferred by enterprises than purely debt
finance.
The growth of the interest-based finance in any society whether through the banking system or by selling
bonds in capital markets will directly be reflected in growth of passive behaviour among society members.
Individuals who receive guaranteed interest paid to them periodically without bearing any responsibilities
or risk can not be considered but inactive society members. As well as, their passive behaviour is
emphasised by the full option, given by the banking system, to restore their funds at any time. Those
inactive individuals are considered sleeping partners in secular literature and it is estimated that the
growth of their members in any society would endanger economic growth.
It goes without saying that partnership based on profit/loss sharing mechanism would help in getting rid of
passive individualistic behaviour. The Islamic modes of finance help directly in promoting responsibility
and risk-taking morals and motivations, which are quite essential for economic growth. The economic
rational of the interest-free finance is quite clear here, i.e. providers and users of finance will be sharing
together in all the responsibilities and risks involved in the investment activities from A to Z. All partners
are actually active in the Islamic system. Islamic ethics motivate people to exchange opinions, advice,
share positively in production. All these ethics are basic for rational behaviour and good deeds. At the
same time the sharing ethics will always provide a support for brotherhood and co-operation among
members of the Islamic society.
4th Argument
Prohibition of interest would not affect savings, as well as it would not affect their mobilisation provided
that Islamic ethics are prevailing, and the application of various interest-free financing methods is
conducted successfully by specialised Islamic institutions.
Classical and Neo-classical economists have held that national saving is positively related to the rate of
interest (S=f(i)). The Keynesian theory refuted this proposition and showed that saving is a function of
income. Practical evidences confirm the Keynesian proposition to a great extent. High income groups, in
comparison to low or middle income, are more capable of saving in any society. High income economies,
in comparison to low and middle income at the world level, save higher proportions of their incomes.
However attempts to defend "interest' as a prime mover of saving continued but on new basis. "Real"
rather than "nominal" interest is given much attention by secular economists in this respect.
Literature concerning these attempts for developed and developing countries can not be surveyed here.
Yet since Islamic countries belong to the developing world our attention will be given to empirical studies
testing the responsiveness of savings to real interest within this scope. G. Arrieta (1988) reviewing
several empirical research studies showed that saving responsiveness to real interest could not be
confirmed in five out of nine studies and still requires further enquiries. The results of secular empirical
researchers should be treated with care by Islamic economists. Conclusions which are unfavourable to
the interest system would strengthen the economic argument against it but they should not intervene with
"belief' concerning riba prohibition in Islam. Also there are cases in developing countries where empirical
studies indicate that real interest rates played a positive role in mobilising saving resources. These
studies would strengthen the secular view which is supporting the interest system, but they are irrelevant
to the Islamic economic rationale concerning riba prohibition. In fact the interest mechanism may play a
significant role in mobilising saving resources if its prerequisites are well satisfied. These prerequisites are
mainly; favourable secular laws and values to interest, active interest-based financial institutions, and
savers' willingness to obtain guaranteed and regular returns on their funds.
Concerning the Islamic countries we have to be careful, therefore, before drawing any conclusion with
respect to the responsiveness of savings to interest rates (nominal or real). Secular laws prevailing at
present in these countries are favourable to the interest system, with exceptions in three cases only.
Commercial banks were established in most of the Islamic countries during the Western colonial rule and
succeeded in developing their financial activities gradually. A portion of the Muslim population have
become accustomed to deposit savings in commercial banks in return for guaranteed regular interest
(income). Most of those who developed these anti- Islamic behaviour have been affected by the western
life-style and secular values. Some of them would assert that they deposit their savings in commercial
banks only because they have no other alternative to "protect" their funds or to "invest" them. Besides,
governments, large and medium scale businesses in the modern manufacturing, trade and services
sectors deposit their savings in commercial banks.
On the other hand a large section of population in the Islamic countries is still against interest
transactions. It is important to note that this section has not been affected by modern attempts to justify
interest. And that it is consisting mainly of low and middle income households, small-scale farmers,
traders and manufacturers. Yet, the petite savings of all those are not given any, of proper, attention by
commercial banks.
Conclusion
Under all these circumstances it will not be unexpected that interest-based financial policies would be in
some cases, successful in savings mobilisation. However many of the above mentioned factors are
bound to change once 'efficient' Islamic interest-free financial institutions are established. Not only petite
savings will be mobilised by these Islamic institutions but also the savings of all those who say that they
have no alternative to commercial banks at present.
In fact, a revival of Islamic Shariah and ethics would settle the matter decisively against the interest-
based system and its ability to mobilise Muslims, savings. But before realising this precious target, it is
very important that the ability of any new Islamic financial institution to effectively mobilise saving
resources would mainly depend on efficient practice of interest-free financing methods, success in
achieving highest possible "halal" returns and thus gaining the confidence of the savers to invest their
funds through them.
Definition, Function and Role of Commercial Banks in the Economy
Banking experts in developed countries defines a commercial bank as a profit-oriented financial
institution. To obtain the profit of commercial banks perform the inter mediation
function. Because permitted raise funds in the form of deposits, commercial banks also called
depository financial institutions. Based on its ability to create money (demand deposits),
commercial banks may also be known as the creator of a commercial bank demand deposits.

The definition of commercial banks according to Law No. 10 of 1998:"Commercial Bank is a
bank conducting business based on conventional or I slamic principles in its activities to
provide services in payment traffic."

The functions of commercial banks which are described below shows how important the
presence of commercial banks in modern economies, namely:

1. Creation of money. Money is created by commercial banks demand deposits, namely the
means of payment via transfer mechanism (clearing). The ability to create demand deposits of
commercial banks led possisi and function in the implementation of monetary policy.The central
bank can reduce or increase the money supply by affecting the ability of commercial banks to
create demand deposits.


2. Smooth Support Payments Mechanism. Other functions of commercial banks are also very
important is to support fluency payment mechanism. This is possible because one of the services
offered by commercial banks are the services associated with payment mechanisms.Some
services are very well known is the clearing, transfer money, deposit receipt, deposit, gift with
cash payment facilities, credit, payment facilities are simple and convenient, such as plastic cards
and electronic payment systems.

3. Community Savings Deposits Funds collected by the bank's most common is the deposit of
funds. In Indonesia, the fund consists of demand deposits, time deposits, certificates of deposit,
savings and / or any other form that can be equivalent. The ability of commercial banks raise
funds is much greater than other financial institutions. Deposit funds collected will be distributed
to parties in need, primarily through credit.

4. Supports Smooth International Transaction Commercial banks also are needed to facilitate and
/ or facilitate international transactions, both transactions of goods / services and capital
transactions. The difficulties of transactions between two parties of different countries always
arise because of differences in geography, distance, culture and the monetary system of each
country. The presence of commercial banks operating on an international scale will facilitate the
settlement of such transactions. With the commercial banks, the interests of the parties who
conduct international transactions can be handled more easily, quickly and cheaply.

5. Storage of Valuable Goods storage of valuable goods is one of the earliest of the services
offered by commercial banks. Communities can store valuables such as jewelry owned, money,
and diplomas in the boxes provided by the bank intentionally for rent (safety box or safe deposit
box). The rapid economic development caused banks to expand services by storing the security
or securities.

.6. Provision of Other Services In Indonesia, providing other services by commercial banks are
also more numerous and widespread. Currently, we have to pay electricity, phone buying mobile
phone bills, send money via atm, paying employee salaries using bank services.These services
very easy and gives a sense of security and comfort to those who use it.
Islamic Economy: Its Ideological and Legal Foundations
Every system, intending to achieve certain goals, must be designed in a realistic manner. Therefore,
if the system is supposed to be implemented in order to serve human life, particularly in the long-run,
it must serve man's goals and be consistent with his fitrah (primordial nature).
This is not possible unless the designer of the system has a command over the knowledge
necessary for understanding social and individual aspects of man. Besides, the designer should
have a thorough understanding of actual relations between those two aspects of man and the
primordial nature of man as well.
In addition to those prerequisites, the designer should understand the historical trends of such a
relationship, the needs for the development of such relationships and methods for pursuing those
needs in order to realize an evolutionary, human approach toward actualizing the goals of the
creation of man.
Indeed, the way the aforesaid satisfaction of needs is to be carried out should not overlap other
systems which are meant for satisfying other needs of man. In other words, such a system should
observe a wise balance and study the role and interrelationship of other systems which together
comprise the whole system of life.
If we assume that the designer of the system possesses all those necessary prerequisites, we
should assess subsequent stages in the process of achieving the desirable realism which is
necessary for a system to be able to provide a proper context for itself.
By this we mean the extent to which this system is compatible with the norms and values of the
society (where the system is to be implemented), the extent of consistence between those norms
and values and the emotional values presented by the system, and finally the extent to which this
system assures the realization of a desirable education to create social obedience for those
ideological views and emotional values.
Although the system may be realistic, accurate, and rational in perceiving the reality and
understanding its needs and their satisfaction, it will remain incapable if it is not preceded by an
ideological impetus which supplies the society with bases for the stance that it should take toward
the universe, the life, and the man itself.
Consequently, the ideological impetus will guarantee the system the element of iman [faith] rescue it
from the most important civilizational maladies including ilhad [atheism], which is the opposite
of iman, and shirk[polytheism], which signifies the excessive belief in false gods, and shakk[doubt],
which is a manner resembling other destructive attitudes. Unless these requirements are realized,
we cannot assure the provision of the first contextual element for the system's implementation.
Similarly, as long as the emotional motivations, which are the focus of education, are not perfectly
compatible and harmonious with the ideological structure of the society, we cannot guarantee
balance in man's personality when there is a wide gap between his beliefs and the internal and
external values and motivations that the system provides in order to satisfy his needs.
Moreover, these emotional motivations cannot form human behavior and action unless they are
strong and clearly defined.
So far, we have realized the necessity of two factors for every system intending to materialize its
human goals: first, the planner's holistic approach towards human reality, including his relations and
needs as well as their fulfillment concomitant with the rest of the system; second, facilitating its
implementation through faith and compatible emotional motivations.
Realism, in turn, requires the following two fundamental factors: first, the system should contain legal
guarantees binding all those who oppose the harmonious human nature or those few who have not
chosen the completeiman or the full commitment to the requirements of iman; second, it has a
perfect flexibility to accommodate the temporal and spatial variations in human life and provides
fixed solutions for fixed elements of human life and flexible ones for the accommodation of its
alterable elements.
We believe that Islam was correct in announcing its rule in the form of general rules. Thus, it did not
ignore any one of those aspects, but observed them perfectly and completed the religion which
provides appropriate answers to man's needs till the Day of Judgment.
Accordingly, it announces that the whole Islamic system is based on reality and nature and that it is
the fixed truth aiming at serving human beings and accomplishing the purpose of his creation. Thus,
it enjoins whatever is desirable and forbids whatever is refused by the nature.
God, the Exalted, says:
Then set your face upright for religion in the right state, the nature made by Allah in which
He has made men. There is no alteration in Allah's creation. That is the right religion but most
people do not know. (30:30)
Say: O people! Indeed there has come to you the truth from your Lord ... (10:108)
O you who believe! Answer (the call of) Allah and the Apostle when he calls you to that
which gives you life, and know that Allah intervenes between man and his heart, and that to
Him you shall be gathered. (8:24)
Those who follow the Apostle Prophet, who was taught neither to read nor to write, whom
they find written down with them in the Tawrah and the Injil [Old and New Testaments], (who)
enjoins them to do good and forbids them from doing evil, and makes the pure and good
things halal [lawful] for them and makes impure and harmful things haram [prohibited] for
them, and remove from them their burden and the shackles which were upon them. So (as
for) those who believe in him and support him and help him and follow the light which was
sent down with him, they are indeed the saved. (7:157)
The proof of this argument is the same one that proves its attribution to the Great Creator as it
proves for this Creator all attributes of knowledge about all facts and full, absolute control over the
formation of shari`ah (the comprehensive body of Islamic rules), and perfect kindness to the
servants and other attributes which are not imaginable for any body other than Him the Exalted.
We are not to present any reasoning for this but only point to the Holy Qur'an's emphasis on this fact
in all occasions when it points to Allah's kindness and knowledge:
Does He not know Who He created? He it is Who made the earth smooth for you, therefore
go about in the spacious sides thereof, and eat of His sustenance, and to Him is the return
after death. (67:14-15)
Say: Allah suffices as a witness between me and you. Surely He is Aware of His servants,
Seeing. And whomsoever Allah guides, is the follower of the right way, and whomsoever He
causes to err, you shall not find for him guardians besides Him. And We will gather them
together on the day of resurrection on their faces, blind and dumb and deaf. Their abode is
hell, whenever it becomes allayed We will add to their burning. (17:96-97)
After this introduction, we try to discuss several points pertaining to the core of the discussion with
emphasis on the following subjects:
1. Major attributes of the Islamic economy, their natural character, and Islam's emphasis on them.
2. The proper grounds Islam prepares for its economic system.
3. Relationship between this system and other systems.
4. Flexibility of the Islamic economic system.
Salient Features of the Islamic Economy
When we study the Islamic economy as a way which Islam prescribes for individual and social
behavior in the economic field and examine Islam's rules in this area, we can conclude that its most
important attribute is social justice. In this respect, the Islamic economy resembles all other systems
that claim to be serving human being and realizing his social aspirations but it differs from them in
the details of its conception of social justice.
Justice cannot emerge unless the following requirements are present: first, believing in the private
and social property on an equal and advanced level in a way that the private property acts on the
fulfillment of man's natural demands for possessing the result of his effort and obtaining the benefits
of his business. While the public property aims at guaranteeing that social action enjoys a social
product through which the provision of some needs and shortages would become possible.
Second, faith in individual economic freedom as a general, continuous, comprehensive principle
which stems from the nature of the ownership along with the belief in the existence of some limits at
which this freedom ends. This is for the purpose of either guaranteeing individual's interest as in the
case of objects the use of which was outlawed because of the physical or moral damage that they
could inflict upon the individual, or to secure others' rights and liberties which is also a natural
guarantee admitted by all religions and human affiliations.
Third, faith in the principle of mutual responsibility. Islam guarantees, for every individual in the
Islamic society, the subsistence level, i.e., provision of his natural needs. The government is obliged
to provide this minimum for all and it is absolutely impermissible that even a single needy person is
found in the Islamic society. Regarding how to make the society economically capable of doing this,
the following factors may be mentioned:
Obliging individuals to accomplish their responsibilities and duties with respect to the provision of
the necessary needs of others. Since one of government's responsibilities is to compel individuals to
perform their obligations, even those which are individual, it may bind individuals to carry out these
duties as well.
The legal power of waliy al-amr [head of the Islamic government] to determine the limits of public
domain (saddu mantaqat al-mubahat) through legislation supplies the government with the desirable
power.
Public properties and anfal [properties with no particular owner/s] which are designated by the
government as public properties which the government oversees and uses to achieve the above
goal.
Financial punishments and methods that are devised by Islam to transfer private properties to the
public ownership as with respect to mawqufat[endowments] or the lands the inhabitants of which
perished or the dead without heirs and so forth.
Nature of the Islamic legislation--as Shahid al-Sadr (r) put it--which aims at strengthening the social
structure for the realization of this mutual responsibility.
Fourth, belief in the principle of social balance and refusal of the class system in the Islamic society.
We came to know through the third point that the required minimum is to provide subsistence for all
individuals. As far as the maximum is concerned, it may be assumed through the following factors:
1. The prohibition of tabdhir and israf [wasting and squandering] in all areas, therefore, an individual
cannot possibly trespass to the line of israf.
2. The prohibition of every action that leads to misuse of particular properties, and
of lahw [amusement] and mujun [impudence].
3. Rejection of all social and economic privileges which discriminate between different groups of
people which, in turn, eliminates all the grounds for the emergence of the class system.
If we go back and scrutinize all of these features and expose them to human nature and conscience
we will find them principles that may be admitted in a natural way. This explains the return of each of
the two extremist systems of capitalism and socialism to a moderate position after its collision with
opposing natural factors--as we believe.
The natural basis of these views is evidently emphasized by general regulatory and conceptual
authoritative texts (nusus) that are numerous and to some of which we point here:
There are nusus that stress the inherence character of private and public property:
The Exalted says:
And the man shall gain nothing but what he strives for. (53:39)
(naturally if we interpret it as including worldly possession).
Amir al-mu'minin (`a) says: This property is indeed neither mine nor yours but it is a collective
property of the Muslims ... what is earned by their hands does not belong to any mouths other
than theirs.1
There are some nusus that emphasize the economic freedom in a natural form the clearest of which
is the rule on which all fuqaha' [Islamic scholars] rely, namely the rule (Al-nasu musallatuna `ala
amwalihim [people are in control of their properties]). Naturally, there are some limits to this freedom
which are mentioned by other nusus stressing that this restriction is only for the benefit of the
individual and the society.
There are some nusus that emphasize the inherence of mutual responsibility and cooperation and
further consider all kinds of negligence with respect to this principle as a general rejection
of din [faith and religion]. The Exalted says:
Have you seen the person who rejects the religion? He is the one who treats the orphan with
harshness, and does not urge (others) to feed the poor. (107:1-3)
Finally, there are some nusus that stress the necessity for the realization of balance in the society
through their emphasis on the prohibition of israf and also the necessity of renouncing poverty and
providing subsistence for every individual. The Imam (`a) says, while speaking of the duties of
thewaliy al-amr [leader] toward the needy: He keeps giving him from zakah till he makes him
needless.
The Proper Grounds Which Islam Prepares for Its Economic
System
In this regard, the analyst can find in front of him a huge wealth of noblenusus that emphasize
various concepts and numerous rules and fixed historical laws and that all serve the cause of Islamic
economy and participate, in a natural way, in the realization of its far-reaching goals. We mention
below a number of these issues:
A. The Real ownership belongs to Allah, the Exalted
This principle is the most important tenet that forms man's image as it leaves its visible marks on the
economic behavior of Muslim individual.
Ownership belongs only to the Unpaired, Almighty Allah and He the Exalted bestowed an assumed,
legal ownership upon the human being so that it distributes the properties among its individuals and
exercises this ownership according to the purposes that Allah chose for the benefit of humanity.
This notion has great influence on the exclusion of negative effects on ownership in its absolute
capitalistic form.
B. The purpose is to reclaim the land through a joint, human effort and
responsibility
In this way, the man believes that the human effort from the beginning to the end is one and that the
important goal is to make the humanity subservient before God, establish the worshipping society
and prepare the grounds for it through making the earth inhabitable, extract the greatest benefits
from it to the advantage of all through performing the duties arising from the joint responsibility.
Diversion from this is diversion from the purpose.
C. Ethical concepts in the service of economic cause
Islamic nusus are full of a magnificent ethical plan which leads to its contribution to this economic
system and to the realization of its goals. Most of the riwayat [traditions], on one hand, encourage in
the human being the spirit of cooperation, responsibility, Islamic fraternity, ithar [self-
sacrifice],zuhd [piety], and compassion for the miseries and aspirations of others.
On the other hand, they drive away from the human being such vices as stinginess, greed,
exclusivism, transgressing the rights of others, opportunism, avarice, and envy.
Imam Sadiq (`a) counted all good manners as the troopers of `aql [wisdom] and all vicious attributes
as the troopers of jahl [ignorance]. We can neither mention all of the riwayat in this regard nor touch
on their educational details, therefore, only point to this particular fact that the Islamic ethics and
educational system augment in human being the spirit of generosity before they emphasize the
economic freedom and the possibility of using it to his own particular benefits.
The story of Qarun [Korah] is well-known for its focus on this ethical principle:
And seek by means of what Allah has given to you the otherworld's abode and do not neglect
your share of this world ... (28:77)
This story and this principle is a multifaceted Islamic creed which, if prevails in the society, will
provide the greatest grounds for the implementation of the desirable economic system.
D. Al-infaq al-mustahabb [commendable spending for a divine cause]
and the extended life
Here, a wonderful aspect of the solution to the problem of conflict between the inherent motivations
for serving one's self and the motivations for serving the society is manifested.
According to this notion, one begins with the prolongation of his own life and ends up with a level of
eternity in the hereafter. He finds out that self-interest and social interest are integrated; a notion that
encourages him to make continuous infaq which does not ever run out of its driving forces according
to the principle which says whoever establishes a favorable habit he will be rewarded both for it and
for the action of whoever follows it.
And here we would like to remind emphatically the extended effect of waqfsince, as the result of
these motivations, the private property is transferred to the public ownership and man's permanent
exploitation of his property is realized.
E. Shukr al-ni`mah [gratitude for a blessing] means to make the best use
of the wealth and avoiding its waste
The major problem in the global economic domain does not lie in the weakness of growth rates of
natural resources and their failure to keep up with the population growth rate but it lies in the failure
to make ideal use of natural resources or, as the nusus put it, in kufran al-ni`mah [ingratitude for the
blessing] and squandering the natural, mineral and animal resources and so forth:
And He gave you of whatever you asked Him for and if you count Allah's blessings you will
not (possibly) obtain their number. Man is indeed very unjust, very ungrateful. ... (14:34)
And it is a kind of shukr al-ni`mah to make ideal use of he labor force and to avoid wasting it. For this
reason, the nusus emphasize the continuous work and even declare it obligatory for those who are
able.
F. Relationship between moralities and material pursuits at the
civilizational level
There is an amazing civilizational fact that nobody can perceive it except those who believe in
the ghayb [the metaphysical world] and its various aspects. The Holy Qur`an stresses
that zulm [injustice] leads to halak[annihilation] (Thus, because of their injustice We destroyed them)
and that'adl [justice] and du`a' [praying] and shukr [gratitude] leads, in a lawful way,
to rakha' [comfort]
Ask for your Lord's forgiveness, surely He is the most Forgiving. He will send down the cloud
upon you pouring down abundance of rain. And help you with properties and sons, and make
for you gardens and make for you rivers. (71:10-12).
This fact arouses, in hearts, a great hope in the future, even the material future, and opens the way
for a social and economic dynamism.
Add to what was mentioned above other major factors that contributes to this background.
Strong Connection with Other Systems
It is evident in all systems devised by Islam that they are put forward as parts of a larger system
which includes, in general, the whole universe. These systems are in strong and close
interconnection in such a manner that none of them can achieve its desired goal without the
implementation of other systems (and naturally, we do not claim here that the obligation to set up the
system hinges on the establishment of other systems but what we emphasize is the issue of
system's achievement of all of its desired goals.)
In this regard the following points should be made:
A. Certain areas of the social system are reserved to be filled by the waliy al-amr (or by some one
appointed by him) due to his ijtihad [ability to extract Islamic rule whenever needed] and
determination of the nature of the prevailing situations and ummah's interest. This is what we
observe, for example, in economic, legal, and penal systems and in the institutions
ofwaqf [endowment], mu`amalat [transactions], irth [inheritance], and so forth. This fact indicates the
complete connection between these institutions and the ruling political system.
B. The economic system is strongly related to the system of `ibadat[worshippings]. This is the issue
which is sometimes presented as the companionship of the prayers and zakah in tens of Qur'anic
cases. Zakahand khums are two financial `ibadahs.
Financial kaffarat [expiations] are, in fact, also a huge economic participation by `ibadat system in
the service of public economic interest. It should not be ignored that
some `ibadahs like sawm [fasting] and hajjprovide the elements of economic grounds, to which we
clearly pointed. There are certain `ibadahs that strongly contribute to the public ownership such
as waqf, if we require niyyat al-qurbah [proximity intention] in it.
C. The economic system and its goals and pecularities naturally have a strong connection with the
system of mu`amalat [transactions] which is designed in such a manner to provide the proper
environment for the realization of mutual responsibility, balance, and dual ownership, emphasize the
labor element, and prohibits riba [usury], 'akl al-mali bi al-batil [financial misappropriation], harmful
acts, lahw [debauchery], and wasting of the wealth.
D. There is a considerable linkage between the economic system and the system of jihad [military
defense] in Islam for the latter system involves, in addition to combative rules and methods,
implications for ownership, war spoils, and so forth.
E. Undoubtedly, the economic system is also related to the social system including the form of
society's principle cell, i.e. the family, and also the social relations among the families, and
individual's relations with the society. All of these are predominated by social Islamic rules including
mutual responsibility and balance, which form the most important characteristics in the economy as
we mentioned frequently.
This argument also involves the rules regarding mahrs [dowries], nafaqahs[allowances], various
methods of division of labor, and such issues as irth[inheritance], wasiiyyahs [bequests], and the
rulings with regard to children,qada' [adjudication], financial ta`zirs [discretionary punishments] and
other varieties of financial punishments, and others which may not be all discussed in this limited
space.
G. Touching on these relations, the late Ayatullah al-Sadr points to another aspect of the issue,
namely the relationship between government's economic doctrine and its financial policy which is, in
fact, a part of government's planning for enforcement of the laws of Islamic economy, thus, it is a
part of the economy itself.
H. We already pointed to the link between Islam's economic system and its ethical system which
makes the latter one of the major preludes and the motivating element for the ummah in the way of
implementing the economic system and realizing its goals to such an extent that it becomes hard to
distinguish between the two systems.
Here I would like to point, as a diversion from the main course of discussion, to the fact that Islam
addresses the whole life in general and devises for it the best system which guides toward the goal
in a deliberate manner and based on principles of justice and equity. Whereas we find the positivist
world today floundering in the establishment of a desirable system for the protection of human
dignity, distribution of responsibilities, and realization of rights. Therefore, social systems collapse,
one after another, and admit their defeat while Islam remains a straight religion without any
deviation.
As an example for this argument, we focus on the slogan which the positivist world spouts through
giving it a widespread global character and which has recently altered to a sweeping emotional
wave, namely the slogan of equality of women and men in all situations, periods, and places, and
with respect to all rights without any exceptions whatever it would be.
We have been finding this slogan tens of times in the documents presented in the conferences of
Mexico City, Bucharest, Cairo, and recently in a strong and explicit form, in the Beijing Conference
on Woman. We see the document produced by this conference concentrating, specifically, on the
issues of inheritance, absolute material equality, judgeship, and the so called sexual freedom rights
for all ages and so forth.
We consider this slogan as a blind assertion although it has an attractive appearance since equality
is one of the principles favorable to the human taste concerning two individuals whose rights are
equal in terms of their human dignity and affiliation, i.e. the man and the woman. But this principle is
not too general to have exceptions.
This is due to the natural differences between man's and woman's physical and emotional
structures, nature of the social responsibility which is to be carried out by each, and the extent of
participation by each in the social construction including the establishment of social justice. Hence,
we may not call out the slogan of quantitative equality without considering the desired balance
otherwise we will commit, through this equality, injustice and unfairness.
When the principles of equality and social justice are in conflict, one may ask to which one the
priority goes? Undoubtedly, the principle of justice is the one which common-sense testifies to its
generality and insusceptibility to exception, therefore, social justice qualifies the principle of equality
and even determines its socially desired form.
We feel great regret on the blind, sweeping, global wave that has been put forward thoughtlessly
and that criticizes against the Islamic inheritance system pretending to ignore that it is part of a
whole and that there is a wonderful balance between this system and the nafaqah [allowance]
system and the duties of each of the man and the woman in the social life.
The Flexibility of Islamic Economic System
This subject is, in general, related to the flexible character of Islamic rules but we will show it from
the economic angle. Briefly, Islam supplied this system with all necessary elements which enable it
to accommodate the vital changes which occur frequently and rapidly in the economic field. The
reason is that economy is a field related to the complexities of man's social life as well as to nature's
ability to provide, and the proper environmental conditions, and so on.
Therefore, with respect to land distribution and ownership, there is a great difference between the
situation of land's perfect abundance and man's insufficient physical power and the situation of
scarcity and increasing shortage resulted from human growth rates on one hand, and man's
immense technological power to reclaim the land.
This difference may affect the issues of hiyazah [occupancy] -which is considered as an ownership
factor-, social development, mines' ownership, vertical ownership -both in depth and in altitude-,
energy's ownership, etc.
This difference may also influence the issue of alteration of the nature and effects of property
relationship leading mujtahids [jurists] to keep aloof from the issue of absolute ownership of land and
suggest the subject of haqq al-ikhtisas [exclusivity right] which results from the impact made by the
individual on the land, thus when the impact ceases to exist the right will expire and returns to the
public domain which can be used by the Islamic state according to the public interest.
Therefore, existence of the element of ijtihad and its constant openness represents one of flexibility
elements without which one cannot know the developments' effects on the nature of the rule
deduced form the nusus.
The fact that Islam put forward certain broad economic rules and related them to the `urf [prevailing
standards of conduct] concept has a special connotation for notions like israf and tabdhir [wasting
and squandering], faqrand ghina [poverty and needlessness], al-nafaqat al-muta`arifah [customary
allowance], al-manfa`at al-muhallalah [lawful profit], ma`un [basic need], riba[usury], mithliyyah and
qimiyyah [fungibility and being ad valorem], circulation and depression of cash
currencies, daman [liability], individual and social damage, haraj [impediment], darurah [urgency], al-
maslahat al-`ulya [the higher expediency], being asbaq [preceding] in waqf,
being `aqdiy[contractual], being bay`iy [exchange], trade through taradi [mutual agreement],
being qimariy [gamble], lahw, and even `adalah [justice], zulm[injustice], ta`addi [transgression],
and akl al-mal bi al-batil [misappropriation of property].
Thus, `urf intervenes when these concepts change, often due to change in conditions, and
consequently, as a result of change in the `urfi[commonplace] view of the subject the judgment also
changes as we saw in the issue of shatranj [chess] for example.
However, the most important element on which the Islamic system concentrates is the element of
intervention by the mujtahid, just waliy al-amrin the economic life. This intervention has its own
criteria, rules, and what the late al-Sadr calls the penetrating beams that illuminate Islam's positions
and give it the spirit of the system and its promising goals.2
In such a system, the waliy has the obligation to take advantage of his social power and true
commitment to Islam and the Islamic expediency of theummah and, through consultation with the
masters of knowledge and expertise, carry out his duties which can be summarized as the following:
1. Identification of the best methods and executive arrangements for the enforcement of the fixed
rules of Allah, e.g. looking for the best way to eliminate riba in the society while preserving the
positive activities performed by the banks.
2. Filling the public domain with laws in accordance with the supreme Islamic expediency while
preserving, as much as possible, the primary rule regarding the various cases.
3. Determining the extent to which the conditions are favorable for the enforcement of Islamic rules
and institutions. Therefore, if the faqih finds the conditions and the rules in such a serious
incompatibility that is called by the scholars of usul as tazahum [conflict], namely tazahum between
the wujub[obligatoriness] of implementing the hukm [ruling] and the prohibition of resulting evil
consequences, he must produce the best possible solution to facilitate the implementation of
the hukm while compensating its mafsadahs[damaging results].
If this appears to be impossible he should shift to the area of tarjih bi al-ahammiyah [preference
based on priority] which is a vast area that follows the opinions of experts and mujtahids. The
situation may reach to a point that due to the priority of preventing the mafsadah caused by it, the
implementation of a certain hukm is suspended. This area is an accurate and a delicate one which is
not to be resorted to except in rare situations.
Conclusions
Based on what was discussed above we can briefly highlight the following practical conclusions:
First, we repeatedly see or hear those who suggest the idea of cross-combination of ideology and
system which signifies the establishment of a socialist or a capitalist economic system in an Islamic
environment or the implementation of Islamic institutions in secular social structures. When these
combinationists do not achieve desirable results from their efforts they tend to ignore the
contradiction between the system and its implementation context and place the blame on the system
itself. We may mention two experiences as examples here:
1) the experience of establishing socialist systems in our Islamic world and their quick failure as in
Algeria -- during Houari Boumedienne's presidency -- and Libya.
2) the experiment of setting up al-qard al-hasan [interest-free loan] funds under secular systems
where it was struck with unsatisfactory results that encouraged the opponents to attack the resulting
situation as cacophony and accusing the planners of neglecting the absence of favorable conditions.
Second, If we wish to achieve good results in our Islamic community, we must provide the desirable
grounds through deepening the faith in Allah and disseminating the elevated Islamic ethics, explicate
the Islamic concepts related to economics and convey them to the public, and strive to mobilize the
feelings and sensations and give them a desirable Islamic shape. As long as we do not accomplish
this task we should not expect ideal results.
In this regard, I would like to draw your attention to some advertising tactics employed by the banks
which concentrate on the profits generated by the money deposited in al-qard al-hasan funds and on
prizes that it may bring for the depositors without ever referring to the great reward which ensues
whenever they participate in the revitalization of the public economy and server the society through
their bank activities and deposits and without mentioning the noble ayat and ahadith which call for
such deeds.
Third, we propose that Islamic banks form a fiqhi committee consisting of prominent scholars, and
further, that the mujtahids in al-hawzat al-`ilmiyyah(Islamic theological schools) undertake a study
about the legitimacy and plausibility of the proposed economic, financial, and banking systems from
the viewpoint of Islamic laws and constantly express their opinions concerning new forms for such
systems.
Bay` al-salam [forward sale], and bay` al-salam al-mumathil [fungible forward sale], bay` al-
istisna' [manufactural sale], tawrid [mutual forward] contracts,murabahah [resale with stated profit]
contracts, and so on are examples of economic institutions that provide banks with more alternatives
for economic activities.
This is what the late Shahid al-Sadr proposed a quarter of a century ago through his famous
proposal known as riba-free banking and what I put forward as the draft law for the prohibition
of riba in the Islamic Republic of Iran. Ijtihad is indeed a source of blessing and Islamic rules are
overflowing reserves that can undoubtedly help us to safeguard the Islamic character and spirit and
overcome the difficulties caused by the developments of modern life.
LABOUR
I. Meaning and Importance as Factor of Production
II. Dignity of Labour
III. Lawful and Unlawful Wages
IV. Rights of Labour
V. Obligations of Labour
VI. Determination of Wages
VII. Contract of Service
I- Meaning and Importance as Factor of Production
The term labour in Economics is used in a very wide sense. Any work whether manual or mental
which is undertaken for a monetary consideration is called labour. Any work done for the sake of
pleasure and pastime only having no consideration of any reward or compensation is not labour.
According to Marshall, any exertion of mind and body undergone partly or wholly with a view to
some good other than the pleasure derived directly from work, is called labour. Labour in this
sense includes the very highest professional skill of all kinds as well as the labour of a mass of
unskilled workers. Thus it includes labour of highly educated professionals like scientists,
engineers, doctors, economists, professors, lawyers, judges, accountants, diplomats,
administrators, as well as that of ordinary workers in factories, agricultural farms, government
departments, private sector, etc.
Some economists divide the labour into productive and non-productive labour. It is productive if
it adds some material value like labour in the agricultural sector and manufacture. If it does not
result in some material value then it is unproductive. According to Adam Smith, labour of menial
servants as well as of the most respectable orders in society such as sovereign with all its
officers in civil administration, justice and armed forces, is unproductive. However, according to
modern conception all labour is called productive provided it is done to earn an income.
Labour is synonymous with man and is by far the most important factor of production. Even the
natural wealth of a country is of no use if it is not properly exploited by its men. Nature may be
very generous to a country in providing unlimited natural resources but without human
endeavour, they remain unused. Pakistan, it is said, is a rich country inhabited by poor
people. On the other hand, Japan is a country blessed with little natural wealth but it is an
economic power of the first order because of its hard working, diligent and intelligent people.
Thus human resource comprising committed, hardworking and patriotic labour, manual as well
as intellectual, is a must for economic development of a nation.
In view of its importance in the production of wealth, Islam has laid great emphasis on human
labour. Al-Quran, the revealed book of Islam, promulgates the fundamental principle regarding
role of labour when it says: There is nothing for man but what he strives for- (53:39). According
to this verse, there is no royal road or easy way to success. The way to progress and success in
the world is through struggle and effort. The harder a man or a people work., the higher reward
they are likely to get. According to Prophet Muhammad (PBUH), God loves those who work and
strive for their livelihood and to search lawful earning is obligatory after the compulsory things
(like prayer, fasting, belief in God).
Both physical and intellectual labour have been emphasised in Islam. The Quran refers to
manual labour when it talks of construction of boat by Prophet Noah, manufacture of coats of
mail by Prophet David, tending of sheep by Prophet Moses and building of wall by Zul-Qarnain.
The Holy Book also refers to intellectual labour when it relates the story of Prophet Joseph who
was appointed incharge of treasures of Egypt by its king.
[Back to the start of this chapter]
II- Dignity of Labour
Dignity and honour is attached to labour and work in Islam while the sources of unearned
income and easy gains like usury, games of chance, etc. are despised and forbidden. Work is
so much dignified and honourable that the Prophets who are the noblest of the human beings
had engaged themselves in labour and hard work for earning their livelihood. The Quran
mentions the example of Prophet David and Prophet Moses who respectively worked as
ironsmith and shepherd. Prophet of Islam himself pastured sheep. He did not consider any work
as menial or below dignity. In Ghazwah Ahzab (Battle of Allies), the Prophet was seen working
and lifting stones alongwith his companions to dig a ditch to defend Madinah from the enemy.
Let us glance through some verses of the Quran and Ahadith of Prophet Muhammad (PBUH) to
highlight the honour in which labour, both manual and intellectual, is held by Islam.
Verses of Holy Quran :
1. And he was building the ship and every time the chieftains of his people passed him,
they made mock of him. He said: Though ye make mock of us, yet we mock at you
even as ye mock.
-(11:38)
2. So they twain journeyed on till, when they came unto the folk of a certain township, they
asked its folk for food, but they refused to make them guests. And they found therein a
wall upon the point of falling into ruin, and he repaired it. (Moses) said: If thou hadst
wished, thou couldst have taken payment for it.
-(18:77)
3. One of the two women said: O my father! Hire him! For the best (man) that thou canst
hire is the strong, the trustworthy. He said: Lo! I fain would marry thee to one of these
two daughters of mine on condition that thou hirest thyself to me for (the term of) eight
pilgrimages. Then if thou completest ten it will be of thine own accord, for I would not
make it hard for thee. Allah willing, thou will find me of the righteous.
-(28:26-27)
4. And assuredly We gave David grace from us, (saying) : O ye hills and birds, echo his
psalms of praise! And We made the iron supple unto him. Saying: Make thou long
coats of mail and measure the links (thereof). And do ye right. Lo! I am Seer of what ye
do.
-(34:10-11)
Ahadith of Muhammad (PBUH) :
1. Abu Hurairah reported from the Holy Prophet who said: Allah did not raise up any Prophet
who did not graze goats. His companions asked: you too? yes said he, I used to tend
goats for the inhabitants of Makkah for some qirats.
-(Bukhari)
2. Ayesha reported that the Holy Prophet used to mend his shoes, sew his clothes and
work in his household just as one of you works in his own house. She also reported that
he was a man among men who used to patch his clothes, milk his goats and engage
himself in work.
-(Tirmizi)
3. Zubari-b-Awam reported that the Messenger of Allah said: That one of you takes his
rope and then comes with a load of wood upon his back and sells it, and that thereby
Allah guards his face, is better for him than that he should beg of men whether they
give him or refuse him.
-(Bukhari)
4. Meqdam-b-Made Yakrab reported that the Messenger of Allah said: Never has any one
eaten a better food than what he has eaten out of the labour of his own hands; and
David, the Prophet of Allah, used to eat out of the labour of his own hands.
-(Bukhari)
5. Utbah-b-Munzir reported. We were near the Messenger of Allah when he recited Twa,
Sin, Mim, till he reached the story of Moses. He said: verily Moses engaged himself as
a labourer for nine or ten years on condition of keeping his private parts chaste and of
food for his belly.
-(Ahmad, Ibn Majah)
6. Ayesha reported that the Holy Prophet said: The purest of what you eat come from your
own earnings, and your children come from your own earnings.
-(Trimizi, Nisai, Ibn Majah)
7. Abu Zarr reported that the Messenger of Allah said; O Abu Zarr! There is no wisdom like
efforts, no piety like self-denial and no goodness like good conduct.
-(Bukhari)
8. Refe-b-Khudaiz reported that it was questioned: O Messenger of Allah, which earning is
purest? He said: The earning of a man with his own hand, and every honest
transaction.
-(Ahmad)
9. Abdullah-b-Masud reported that the Messenger of Allah said: To search after lawful
earning is compulsory after the compulsory things.
-(Baihaqi)
10. Once the hands of a companion of the Holy Prophet became black by working with a
hammer. The Holy Prophet, seeing his hands, enquired as to what had happened? He
replied that it was because he had worked with a hammer on a very hard ground to
earn livelihood for his family. Hearing this the Holy Prophet kissed his hands (and was
pleased to know that he was earning an honest living by hard work).
11. Ali the fourth Caliph, used to say (with pride) that one day he came to know that the Holy
Prophet was hungry. He went in search of work so that he might earn something for the
Holy Prophet. He saw a Jew in a garden outside Madinah who had a heap of mud and
wanted some-one to put water into it. He struck a bargain with him at one date for a
bucket of water and earned seventeen dates in wages for seventeen buckets of water
and came home. Then he went to the Holy Prophet and informed him about the bargain
and then both ate them.
12. Abu Hurairah reported : Once the Ansars asked the Holy Prophet to divide the date
trees between the Muhajirin and themselves. The Holy Prophet did not allow this. But
when the Ansars asked the Muhajirin to work in the gardens and share the produce
with them, they readily accepted the offer (and the Holy Prophet was very pleased with
this arrangement).
13. Abdur Rahman bin Auf said: When we came to Madinah, the Holy Prophet (created
brotherly relations between the Ansar and Muhajirin and) created this relationship
between Saad bin Rabee and myself. Saad was the richest of all the Ansar and wanted
to give me half of his wealth and one of his two wives. I refused to accept his offer but
asked him to tell me of a trade centre. He told me of a Qainuqa bazar, I went there next
morning and bought some curd and ghee (for sale) and then I went there every day (to
do this kind of business).
14. It is reported that once an unemployed Ansar asked the Holy Prophet for some charity.
The Holy Prophet enquired from him if he had any property. He replied that he had a
blanket to cover his body and a cup to drink. The Holy Prophet asked him to bring
these things. When he brought them, the Holy
Traditions No 10 to 14 quoted by Afzal-ur-Rahman in Economic Doctrines of Islam.
Prophet took them in his hand and auctioned them among the people. One of the present
offered one dirham. The Holy Prophet requested him to raise the bid. Another man offered two
dirhams and bought these things. The Holy Prophet gave two dirhams to that man and advised
him to purchase an axe with one dirham. When he bought the axe, the Holy Prophet fixed the
handle in it with his own hands and, giving it over to that man, said, go to the jungle and cut
wood and dont see me before fifteen days. After a fortnight, when he came back, the Holy
Prophet enquired how he was. He replied that he earned twelve dirhams during that period and
purchased some cloth and grain. The Holy Prophet remarked, this is better than begging and
disgracing yourself on the Day of Judgement.
Above mentioned verses of the Holy Quran and traditions of the Prophet of Islam establish
beyond any doubt that work is to be honoured and respected and the worker who earns his
livelihood by his own hands is very much respectable. In Islam there is no work which is lowly or
menial. Lowly or mean is the person who divides the work into high or low.
[Back to the start of this chapter]
III- Lawful and Unlawful Wages
Wages are lawful when the work to be done is lawful. But when the work to be done is unlawful,
then its wages would be unlawful. For example, if one is employed to commit theft or murder,
wages received for the work shall be unlawful because the work is abinitio unlawful. Similarly
wages are unlawful when the work to be done is your religious or social obligation (farz) for
example, wages cannot be received for offering prayer or visiting sick. But wages for medically
treating a person are lawful. Work which is done to please Allah, e.g. recitation of Holy Quran or
teaching Quran to children, is not entitled for wages. However, a person engaged in the
profession of teaching Quran as a source of his livelihood can charge wages for teaching the
Quran. According to opinion of jurists, wages can be charged for washing dead, burying dead,
digging graves, leading tarawih prayers and for guiding the pilgrims by those who are engaged
in such professions. Wages for participation in Jehad or wages for preaching of Islam are not
lawful unless the persons participating in these activities are professional soldiers and
preachers.
Ibn Abbas reported that a party of the Prophets companions passed by a place of water. There
was man among them who was beaten by a scorpion or snake. A man from among the owners
of the place of water came before them and said: Is there any charmer among you? Verily in the
place of water there is a man bitten by a scorpion or snake. A man from them advanced and
read the Opening of the Book for wages of a goat and then he was cured. He came with the
goat to his companions who disliked that and said: You have taken wages for the Book of
Allah! Then they came to Madinah and enquired: O Messenger of Allah, he has taken wages
for the Book of Allah. The Messenger of Allah said: The book of Allah has got more right for
wages than what you have taken for. Bukhari narrated it. And in a narration: You have done
well! Divide it and set up a share for me with you.
[Back to the start of this chapter]
IV- Rights of Labour
Islam recognises the fact that wealth is jointly produced by labour and capital. Since labour is in
a comparatively weaker position, Islam has taken many measure to protect its rights. Rights of
labour are in fact duties of the employer and vice versa. In this section we shall study rights of
labour while in the next section we shall discuss the obligations of labour.
Rights of a labourer and a worker include: that a labourer should be treated as a human being
and not as a beast of burden; that dignity and respect should be attached to labour and work;
that reasonable wages should be fixed at the time of employment, and that wages should be
promptly paid. All these rights were given by Islam to the labour some fourteen hundred years
ago when there was no concept of such rights, there were no labour unions, there were no
charters of demand, there was no labour movement and there was no concept of collective
bargaining.
1. In the sight of Islam all men and women are equal. Islam has established brotherhood,
fraternity and equality among the Muslims and has abolished all distinctions between
man and man based on race, colour, language, nationality or wealth. In Islam rich or
poor, white or black, employer or employee, Arab or non Arab, wealthy or worker, are
all equal as all the human beings hail from the same stock and belong to the same
parents.
The Prophet of Islam treated his servants as members of his family. It has been
reported by Anas that he served the Prophet (PBUH) for a long time and the Prophet
treated him well and never said oof (an expression of condemnation) to him.
2. Before the times of Prophet of Islam, labour was mainly provided by the slaves. The
slaves worked in commerce, agricultural sector and in household while the fruits of their
labour were enjoyed by their masters. The treatment given to the slaves was very
inhuman and cruel. They were ill-clad, ill-fed and mal-treated. The Prophet of Islam not
only restored their human dignity but also raised their status to the level of brothers and
colleagues. The Holy Quran says: And serve Allah and ascribe nothing as partner
unto Him. (Show) kindness unto parents, and unto near kindred, and orphans, and the
needy, and unto the neighbour who is of kin and the neighbour who is not of kin, and
the fellow traveller and the wayfarer and (the slaves) whom your right hands possess.
(4:36). It is reported on the authority of Abu Zarr that the Messenger of Allah instructed
his followers regarding slaves as follows: Your brethren Allah has placed them under
your hands; whosoevers brother Allah has placed under his hands, let him feed him
out of what he himself eats, let him clothe him out of what he clothes himself with; and
let him not be entrusted with a work which will overcome him. If he entrusts him with
what will overcome him, let him assist him therein.
-(Bukhari and Muslim)
3. Besides ensuring human treatment and dignity and respect to labour, Islam provided for
fixation and prompt payment of wages. Following measures were recommended by
Prophet Muhammad (PBUH) in this behalf :-
(a) The employers are required to fix the wages before the workers are employed. It was
declared unlawful to employ any labourer at work without fixing his wages. It is reported
by Abu Saeed Khudri that the Holy Prophet had forbidden to employ any labourer or
worker without first fixing his wages.
(b) Following traditions of the Prophet enjoin the believers to pay the wages without any
delay:-
Abu Hurairah reported that the Messenger of Allah said: The Almighty Allah said :
There will be three persons whose opponent I shall become on the Resurrection Day: A
man who gave in My name and then broke trust, and a man who sold a free man and
enjoyed his price, and a man who engaged a labourer and enjoyed full labour from him
but did not pay him his wages.
-(Bukhari)
Abdullah-b-Umar reported that the Messenger of Allah said: Pay the labourer his wages
before his sweat dries up.
-(Ibn Majah)
4. About the prompt payment of wages, the Holy Quran in the following verse refers to the
story of Moses when he fled from Egypt and went to Madain where he helped two
women in watering their fleet of sheep and was paid his wages promptly by their father.
The verse reads:
Then there came unto him one of the two women, walking shyly. She said: Lo! my
father biddeth thee, that he may reward thee with a payment for that thou didst water
(the flock) for us. Then, when he came unto him and told him the (whole) story, he said:
Fear not! Thou hast escaped from the wrong folk. -(28:25)
5. The Prophet of Islam also enjoined upon his followers not to burden their employees
with heavy work which is beyond the physical strength of the latter to do. If the work is
heavy and the employee cannot do it, the employer should help him in doing that.
Hadith reported by Abu Zarr in Bukhari and Muslim which has been reproduced at
serial No. 2 above can be cited in this connection.
6. The Holy Prophet was so kind to his servants that if any of them was sick, he would visit
him and enquire about his health. Caliph Umar is reported to have made it one of the
duties of government officers to look after the sick particularly slaves and servants.
From this it has been deduced by the jurists that employers should make adequate
provision for medical treatment of their employees.
[Back to the start of this chapter]
V- Obligations of Labour
The obligations of labour are in fact the rights ofthe employer. It is the basic obligation of the
worker to fulfil the terms of his part of the contract of service. He should discharge all of his
duties in accordance with terms and conditions of his service efficiently and honestly. He should
be devoted and committed to his job. If he is provided some in-service training to improve his
skills and qualifications, he should whole heartedly benefit from the training facility and should
leave no stone unturned to improve his knowledge and skill. He is morally bound to remain loyal
and sincere to his employer and no temptation or bribe should induce him to work against the
interest of his master. In case he is entrusted with the property of his employer, he should prove
trustworthy and should neither embezzle nor damage such property.
Traditions of the Prophet of Islam which highlight the responsibilities and duties of an employee
are related below:
1. Abdullah reported that the Apostle of Allah (may peace be upon him) said: When a
slave sincerely works for his master, and worships (his God) well there is for him
double reward.
-(Bukhari)
2. Abu Huraira (may Allah be pleased with him) reported that the Apostle of Allah (may
peace be upon him) said: How excellent is (the slave) which one of you has? He
worships his Lord well and is a well-wisher of his master.
-(Bukhari)
Physical fitness is very essential for efficiency of labour. A strong and healthy worker would be
more productive and efficient than a weak and sickly one. Similarly a trustworthy and honest
worker who realised his duties will be more committed and responsible than a dishonest one.
These qualities have been prescribed by the Quran for an ordinary labour in the story of Moses
in the following verse: One of the two women said: O my father ! Hire him! For the best (man)
that thou canst hire is the strong, the trustworthy. -(28:26)
Thus a worker should be both physically strong and trustworthy and should serve his employer
diligently, efficiently and honestly.
For a mental worker, it is essential that he should have knowledge and skill and thus he should
be able to serve in a position of responsibility to the satisfaction of his employer. These qualities
have been stressed when the Quran relates the story of Joseph who was appointed incharge of
storehouses of Egyptian empire. The relevant verse of the Holy Book reads : He said: Set me
over the storehouses of the land. Lo! I am a skilled custodian. -(12:55)
Thus qualifications of skill and trustworthiness would enable the worker to discharge the duties
of his office with professional competence and integrity.
[Back to the start of this chapter]
VI- Determination of Wages
Labour, as we have already submitted, is very important factor of production and its
remuneration is called wages. The term wages may be used in a narrow or a wide sense. In
the wide sense, it means payment made for the services of labour. In the narrow sense, a wage
may be defined as a sum of money paid under contract by an employer to a worker for services
rendered. But generally in Economics the term wage is used in a wide sense and it means the
share of the national dividend which goes to those who work with their hands or brains, whether
independently or for an employer.
The problem of wages is very important as it effects the whole society. If the workers do not get
fair and reasonable wages, it will not only affect their subsistence but also their purchasing
power. And if a large portion of population like labourers have no purchasing power, it would
adversely effect all those industries which are supplying consumer goods to the working class.
Moreover, injustice to working class would lead to discontentment, frustration, agitation and
strikes. Thus if the labourers are deprived of their just share from the national income, it would
be in the long run an economic suicide for a country.
Various theories have been propounded by modern economists for determination of wages.
According to Subsistence Theory, wages tend to settle a level just sufficient to maintain the
worker and his family at minimum subsistence. Wages Fund Theory explains that wages
depend upon the demand and supply of labour. Residual Claimant Theory states that wages are
the residue left over after the other factors of production have been paid. According to Marginal
Productivity Theory, under condition of perfect competition every worker of same skill and
efficiency in a given category will receive a wage equal to the value of the marginal product of
that type of labour. Thus there is no agreement among the economists about the problem how
the wages are to be determined.
Islam offers a very reasonable solution of wage problem which is based on justice and fairness
and protects the interests of both the employer and the employee. Wages, according to Islam,
are to be determined in equitable manner, without harming the interests of any party, keeping in
view the following Islamic teachings:
(1) Wrong not, and ye shall not be wronged.
-(Al-Quran 2:279)
(2) Lo! Allah enjoineth justice and kindness.
-(Al-Quran 16:90)
(3) Abu Dhar reports that the Holy Prophet said: They (your slaves or
servants) are your brethren, God has placed them under your control;
so whoever has his brother under his control should feed him from
what he (himself) eats and give him clothes the like of which he
(himself) wears; and do not impose on them task which should be too
hard for them, and if you impose on them such a task, then help them
(in doing it).
-(Bukhari, Muslim)
Thus the employer and the employee should treat one another as brothers and not as master
and servant. They should not wrong each other and show justice and kindness in their
relationship. The employer should not forget that contribution of the labour in his produce is
considerable. He should, therefore, pay reasonable wages to an employee to enable him to
enjoy a reasonably decent living.
The minimum wage rate in an Islamic society will be determined keeping in view the basic
human needs which include food, clothing and house. A worker shall be paid adequate wages
so that he can meet expenses on his and his familys food, clothing and house. He should also
be provided for his childrens education and medical treatment of his ownself and his family. It is
reported that Prophet Muhammad (PBUH) used to prescribe minimum wages of a person
engaged for some government job with a view to provide him decent living. He used to say:
For a Government servant, if he is not married, he should get married; if he has no servant, he
may have one; if he has no house to live, he may build one and any one who exceeds this limit
is either a usurper or a thief.
This yardstick fixed by the Prophet of Islam should be kept in view while fixing minimum wages
in an Islamic state.
[Back to the start of this chapter]
VII- Contract of Service
Employment of labour by a capitalist is a civil contract and it is recommended by Islam that all
contracts should be reduced into black and white. Stressing the importance of writing down of
contract, al-Quran, the revealed book of Islam, states: ..Be not averse to writing down
(the contract) whether it be small or great, with (record of) the term thereof. That is more
equitable in the sight of Allah and more sure for testimony, and the best way of avoiding doubt
between you.. (2:282) Although the instructions of the Quran in this verse pertain to
business transactions and contracts of debt, but in fact they are applicable to every type of
contract. Thus it would be most appropriate if contract of service between an employer and an
employee is also reduced in writing and all the terms settled between the parties are recorded in
this contract. It is equitable in the sight of Allah and it would help resolving differences or
disputes which may arise in future between the employer and the employee.
The Holy Quran itself talks of a contract of service in the story of Prophet Moses in its chapter
28. After leaving Egypt when Moses reached Midian and helped daughters of Shuaib, Shuaib
called him and offered him employment which was accepted by Moses. The relevant verses of
the Quran throw light on this contract of service and terms thereof as follows:
He said: Lo! I fain would marry thee to one of these two daughters of mine on condition that thou
hirest thyself to me for (the term of) eight pilgrimages. Then if thou completest ten it will be of
thine own accord, for I would not make it hard for thee. Allah willing, thou will find me of the
righteous. He said: That (is settled) between thee and me. Which-ever of the two terms I fulfil,
there will be no injustice to me, and Allah is Surety over what we say. -(28:27-28)
In the above mentioned verses the Holy Quran not only makes mention of the terms of service
settled between two righteous men of God but also points out that both the parties to the
contract resolved to fulfil its terms and made God surety over it. The employers and the
employee of today should follow this example and should not only write down the terms and
conditions of service but should also express their determination to fulfil the same. It would help
them in resolving their mutual disputes and thus make their life peaceful and prosperous.
CHAPTER 4
DISTRIBUTION
Means of Equitable Distribution
1. Zakat
2. Law of Inheritance
3. Law of Will
4. Law of Waqf
5. Charity of Fitr
6. Monetary Atonements
7. Charity and Alms
8. Feeding the Poor
9. Goodly Loan to Allah
10. Charity of Surplus
11. Hoarding of Wealth Forbidden
12. Prohibitive Measures
The economics of distribution signifies the sharing of wealth produced by a community
among the agents, or the owners of the agents, which have been active in its
production. The theory of distribution is thus concerned with the evaluation of the
services of the factors of production like land, labour, capital and enterprise, and
distribution of the rewards among them. But here we are not concerned with economics
of distribution, rather we are concerned with social distribution of wealth which means
fair and even distribution of wealth amongst the members of a community. If distribution
of wealth in a community is unfair, unjust and inequitable, the social peace is always at
stake and the conflict between the haves and have-nots results in bloody revolutions.
Pockets of prosperity cannot survive in oceans of poverty and, therefore, fair and
equitable distribution of wealth is vital to a community for its peace, well-being and
ultimate prosperity.
Basic aim of Islam, as we have already stated earlier, is to ensure well-being (Falah) of its
followers in this world and in the Hereafter, and also to establish brotherhood among the
members of the Muslim community (Ummah). This aim cannot be achieved if
distribution of wealth among the members of Muslim community is uneven, the gulf
between the rich and the poor is very wide and class conflict exists in the society.
Therefore, the economic system of Islam tries to establish fair and equitable distribution
of wealth among the members of the Muslim community by taking very effective
measures. Al-Quran, the revealed book of Islam, declared in unequivocal terms:.
That it (wealth) become not a commodity between the rich among you.(59:7). It
means that the wealth should not form a circuit among the rich only, rather it should
remain in circulation amongst all the members of the community meeting the genuine
needs of all. That is why the Quran has strongly condemned, with threats of
punishment, those who hoard wealth. They who hoard up gold and silver and spend it
not in the way of Allah, unto them give tidings (O Muhammad) of a painful doom (9:34)
The theory of distribution of wealth as propounded by Islam is based on sound philosophy.
God is owner of everything in the heavens and the earth and He is the provider and
sustainer of every creature. God is real producer of wealth. No doubt man is inspired to
make efforts and his efforts are rewarded, but efforts of man are fruitless, his plans
abortive and his projects fail if Allah withholds His help. The Quran very often draws
attention of man to this fact: Have ye seen that which ye cultivate? Is it ye who foster it,
or are We the Fosterer? If We willed, We verily could make it chaff (56:63-65). The
Quran continues: Have ye observed the water which ye drink? Is it ye who shed it from
the rain cloud, or are We the shedder? If We willed We verily could make it bitter. Why,
then give ye not thanks? Have ye observed the fire which ye strike out; was it ye who
made the tree thereof to grow, or were We the grower? (56:68-72)
Since God is the real owner and producer of wealth, so Gods share in the wealth is major
and dominant. But it is also an un rebuttable fact that God is above all needs. Therefore,
Gods share, as logical corollary, must go to the poor, the needy, the destitute, the
helpless and the less fortunate members of the community. Share of God in the wealth
of the well-to-do is collected sometimes in the form of compulsory levies like Zakat, Fitr,
monetary atonements, etc. and sometimes in the form of voluntary charities and alms. It
helps, overall, in smooth distribution of wealth among the poorer members of Muslim
community.
For fair, just and equitable distribution of wealth, Islam prescribes positive as well as
prohibitive measures. Positive measures include Zakat, laws of inheritance and other
compulsory and voluntary contributions (Sadaqat). Prohibitive measures comprise
prohibition of interest, prohibition of hoarding, prohibition of drinking and gambling and
above all prohibition of all immoral, unfair, unjust and unlawful means of acquiring
wealth which, in fact, are the major cause leading to concentration of wealth in few
hands. In the following pages we will insha Allah (if God will) dilate on some of these
measures adopted by Islam for effecting fair and equitable distribution.
[Back to the start of this chapter]
1- Zakat
First such measure is Zakat which is compulsory levy or tax collected from rich by the
Islamic state or the community and distributed to or spent on the poor. Before
understanding its significant role in the distributive system of Islam, let us have a glance
through the relevant verses of the Quran and the Ahadith of Muhammad (PBUH).
Verses of the Quran:
1. Establish worship, pay the poor-due, and bow your heads with those who bow (in
worship).
-(2:43)
2. Establish worship, and pay the poor-due and whatever of good ye send before (you)
for your souls, ye will find it with Allah. Lo! Allah is Seer of what ye do.
-(2:110)
3. He it is Who produceth gardens trellised and untrellised and the date-palm, and crops of
divers flavour, and the olive and the pomegranate, like and unlike. Eat ye of the fruit
thereof when it fruiteth, and pay the due thereof upon the harvest day, and be not
prodigals. Lo! Allah loveth not the prodigals.
-(6:141)
4. Then, when the sacred months have passed, slay the idolaters wherever ye find them,
and take them (captive), and besiege them, and prepare for them each ambush. But if
they repent and establish worship and pay the poor-due, then leave their way free. Lo!
Allah is Forgiving, Merciful.
-(9:5)
5. The alms are only for the poor and the needy, and those who collect them, and those
whose hearts are to be reconciled, and to free the captive and the debtor, and for the
cause of Allah, and (for) the wayfarers: a duty imposed by Allah. Allah is Knower, Wise.
-(9:60)
6. Take alms of their wealth, wherewith thou mayst purify them and mayst make them
grow, and pray for them. Lo! thy prayer is an assuagement for them. Allah is Hearer,
Knower.
-(9:103)
7. Those who, if We give them power in the land, establish worship and pay the poor-due
and enjoin kindness and forbid iniquity. And Allahs is the sequel of events.
-(22:41)
8. And strive for Allah with the endeavour which is His right. He hath chosen you and hath
not laid upon you in religion any hardship; the faith of your father Abraham (is yours). He
hath named you Muslims of old time and in this (Scripture), that the messenger may be
a witness against you, and that ye may be witnesses against mankind. So establish
worship, pay the poor-due, and hold fast to Allah. He is your Protecting Friend A blessed
Patron and a blessed Helper !
-(22:78)
9. Establish worship and pay the poor-die and obey the messenger, that haply ye may find
mercy.
-(24:56)
10. That which ye give in usury in order that it may increase on (other) peoples property
hath no increase with Allah; but that which ye give in charity, seeking Allahs
countenance, hath increase manifold.
-(30:39)
Traditions of Muhammad (PBUH):
1. Ibn Omar reported that the Holy Prophet said: Islam is built on five things, to bear
witness that there is no deity but Allah and that Muhammad (PBUH) is His servant, to
keep up prayer, to pay Zakat, to make pilgrimage and to keep fast in Ramadan.
-(Mishkat-ul-Masabih)
2. Ibn Abbas reported that the Holy Prophet sent Muaz to Yemen saying: Certainly you will
come across a people, the People of the Book. Call them to bear witness that there is
no God but Allah and that Muhammad is the Messenger of Allah. If they submit to that,
teach them that Allah has made obligatory upon them prayer for five times a day and a
night. If they submit to that, teach them that Allah has made obligatory over them Zakat
which will be taken from the rich and will be given to the poor among them. If they then
obey that, avoid taking the best part of their property and fear the invocation of the
oppressed, because between it and Allah, there is no veil.
-(Bukhari and Muslim)
3. Abu Hurairah reported that the Messenger of Allah said: Whomsoever Allah gives wealth
but who does not pay its Zakat, his wealth will be made to appear to him on the
Resurrection day as a huge bald snake having two fangs for it. It will be put round his
neck on the Resurrection day and then take hold of him with its two fangs meaning its
two jaws. Afterwards it will say; I am your wealth, I am your hidden treasure. Then he
recited: And let not those think who are niggardly, the verse.
-(Bukhari)
4. Ibn Omar reported that the Messenger of Allah said: Whoever acquires wealth, there is
no Zakat therein till a year passed over it.
-(Tirmizi)
5. Ali reported that Abbas asked the Prophet about advance payment of his Zakat before a
year passed. He gave him permission for that.
-(Ibn Majah, Abu Daud, Tirmizi)
6. Abu Hurairah reported: When the Holy Prophet was dead and Abu Bakr succeeded him,
and those who returned to disbelief from desert Arabs returned to disbelief, Omar-bin-al
Khattab said to Abu Bakr: How can you fight with the people while the Messenger of
Allah said: I have been ordered to fight with the people till they utter: there is no deity but
Allah, his property and life are under my protection except for its tax, and its account is
upon Allah. Abu Bakr said: By Allah I shall surely fight against him who differentiates
between prayer and Zakat, because Zakat is a duty on property. By Allah, if they refuse
me to deliver young goats which they used to deliver to the Prophet of Allah, I will fight
against them inspite of their refusal. Omar said: By Allah, he was not except that I saw
that Allah expanded the chest of Abu Bakr for fighting. Then I recognised that it was
right.
-(Bukhari and Muslim)
7. Ali reported: Zohair said: I take it from the Prophet who said: Bring one-fourth of Ushr,
meaning there is one dirham for every 40 dirhams and there is nothing on you till it
completes 200 dirhams. So when it comes up to 200 dirhams, there are 5 dirhams due,
and what is in excess is upon that (proportionate) account. And as for goats, there is
one goat in every forty up to 120; if they increase by one, then up to 200 two she-goats
(of one year); if they increase then up to 300-3 goats of one year; if you have no more
than 39 goats, there is no Zakat due on you regarding them. And about cows, in every
thirty there is one calf of one year, and in every forty, there is one calf of full two years,
and there is no Zakat due for the cattle engaged in labour.
-(Abu Daud)
8. Amr-bin-Shuaib reported from his father from his grandfather who said that two women
came to the Holy Prophet with two bangles of gold in their hands. He asked them: Have
you paid its Zakat? No replied they. The Holy Prophet then asked them. Do you both
like that Allah will dress you with bangles of Hell? No replied they. He said: Then pay
its Zakat.
-(Tirmizi)
9. Samorah-bin-jundab reported: The Messenger of Allah used to direct us to collect Zakat
from that which we counted as merchandise.
(Abu Daud)
10. Abu Hurairah reported that the Messenger of Allah said: The wounds caused by
animals are exempted, well is exempted, and mines are exempted, and there is one-fifth
due from the buried treasure.
-(Bukhari and Muslim)
11. Abu Sayeed al-Khodri reported that the Holy Prophet said: There is no Zakat for seeds
or dates till they come up to 5 Wasaqs.
-(Nisai)
12. Ibn Omar reported that the Messenger of Allah said about (Zakat of ) honey: For every
ten leather bottles, one bottle falls due.
-(Tirmizi)
13. Abdullah-bin-Omar reported from the Prophet who said: There is one tenth in what is
watered by clouds or fountains or what grows in a fertile land. And there is half of one-
tenth in what is watered by camels.
-(Bukhari)
14. Musa-bin-Talha reported: We had with us a letter of Muaz-b-Jabal from the Holy
Prophet. He said: The Prophet ordered him to take Zakat from wheat, barley, and dates.
-(Sharhi Sunnat (Defective)
15. Ali reported that the Messenger of Allah said: There is no Zakat for vegetables, nor
there is Zakat for cultivated plants, nor there is Zakat for less than five Wasaqs nor
there is Zakat for animals of labour, nor there is Zakat for Jabha. (Saqar said: Jabha is
horse, mule and servants.)
-(Darqutni)
16. Abdullah-bin-Amr reported that the Messenger of Allah said: Zakat is not lawful for the
rich, nor for one possessing health and strength.
(Tirmizi Abu Daud).
Besides having religious importance, Zakat plays very important role in the socio-economic
life of the Muslim Ummah. It is the corner-stone of the financial structure of the Islamic
state. Zakat not only provides the required funds to Islamic state for its welfare activities
in sectors like education, health and social services but also enables it to discharge its
obligations regarding its poor and deprived of citizens. It also prevents the concentration
of economic power in the hands of few and ensures fair and equitable distribution of
wealth. It checks growing income disparities and bridges the gulf between the rich and
the poor. Thus its distribution aspect brings about social justice in the society and
protects the community from bloody revolutions and political upheavals which are
generally the result of ever growing disparities between the haves and have-nots.
[Back to the start of this chapter]
2- Law of Inheritance
Law of inheritance followed by a community plays a vital role in setting the pattern of
distribution of wealth among its members. Those communities who adopt law of
primogeniture, which makes the eldest son to inherit the whole of the property of his
father, have concentration of wealth in few hands. Those communities who confine the
inheritance to only male children and exclude the females also have a narrow base of
distribution. Only those communities who confer the inheritance on a larger number of
heirs without any discrimination between males and females have broad-based pattern
of distribution.
Islamic law of inheritance is perhaps the only such law in the world which conceives a very
broad-based distribution pattern. This law not only makes the male and female children
of the deceased his legal heirs but also includes among his legal heirs his spouse or
spouses and his parents. In case the deceased leaves no children and no parents, his
estate goes to his brothers and sisters and sometimes even to his distant kindred. In
case a deceased person leaves behind him no near or distant relatives, his property
may go to the community or the state for benefit of all the members or the citizens.
The basic principle of inheritance has been setup by verses 7 and 8 of chapter 4 of the Holy
Quran. According to these verses, both men and women of a family would inherit the
estate left by their parents and near relatives and something shall also be bestowed on
kinsfolk, orphans and the needy who are present at the time of division of inheritance.
These verses read:
Unto the men (of a family) belongeth a share of that which parents and near kindred leave,
and unto the women a share of that which parents and near kindred leave, whether it be
little or much a legal share. And when kinsfolk and the orphans and the needy are
present at the division (of the heritage), bestow on them therefrom and speak kindly
unto them.
-(4:7-8)
The verse No. 11 of chapter 4 of al-Quran prescribes the shares of the children and parents
of the deceased. This verse reads:
Allah chargeth you concerning (the provisions for) your children: to the male the equivalent
of the portion of two females, and if there be women more than two, then theirs is two-
third of the inheritance, and if there be one (only), then the half. And to his parents a
sixth of the inheritance, if he have a son; and if he have no son and his parents are his
heirs, then to his mother appertaineth the third; and if he have brethren, then to his
mother appertaineth the sixth, after any legacy he may have bequeathed, or debt (hath
been paid). Your parents or your children; Ye know not which of them is nearer unto you
in usefulness. It is an injunction from Allah. Lo! Allah is Knower, Wise.
-(4:11)
The verse No. 12 of chapter 4 of the revealed book of Islam prescribes the shares of the
husband and wife in each others heritage. It also prescribes shares of the distant
relatives in case the deceased leaves no children and no parents. This verse reads:
And unto you belongeth a half of that which your wives leave, if they have no child; but if
they have a child then unto you the fourth of that which they leave, after any legacy they
may have bequeathed, or debt (they may have contracted, hath been paid). And unto
them belongeth fourth of that which ye leave if ye have no child, but if ye have a child
then the eighth of that which ye leave, after any legacy ye may have bequeathed, or
debt (ye may have contracted, hath been paid). And if a man or a woman have a distant
heir (having left neither parent nor child), and he (or she) have a brother or a sister (only
on the mothers side then to each of them twain the brother and the sister) the sixth, and
if they be more than two, then they shall be sharers in the third, after any legacy that
may have been bequeathed or debt (contracted) not injuring (the heirs by willing away,
more than a third of the heritage) hath been paid. A commandment from Allah. Allah is
Knower, Indulgent.
-(4:12)
In case the deceased is not survived by parents and children but has brothers and sisters,
his or her estate shall be distributed in accordance with verse No. 176 of chapter 4 of
the Holy Quran, which reads:
They ask thee for a pronouncement. Say: Allah hath pronounced for you concerning distant
kindred. If a man die childless and he have a sister, hers is half the heritage, and he
would have inherited from her had she died childless. And if there be two sisters, then
theirs are two-thirds of the heritage, and if they be brethren, men and women, unto the
male is the equivalent of the share of two females. Allah expoundeth unto you, so that
ye err not. Allah is Knower of all things.
-(4:176)
The detailed discussion of Islamic law of inheritance is in fact subject of a law book or a
book of Fiqh and not that of the present book. However, we can briefly say that Islamic
law prescribes a long line of legal heirs who have been divided by the jurists into three
classes, namely: sharers, residuaries and distant kindred. In case of non-existence of
any legal heir, the estate goes to the Bait-ul-Mal (Public treasury of the Islamic state).
The main objective of the Islamic law of inheritance is, thus, the fair and equitable
distribution of wealth among a larger number of near and distant kindred of the
deceased, and so prevention of concentration of fortune in few hands.
[Back to the start of this chapter]
3-Law of Will
Law of will serves cause of charity and thus assists distribution of wealth among the poor
and the destitute. Before elaborating the law, however, let us glance through the
relevant verses of al-Quran and Ahadith of Prophet Muhammad (PBUH).
1. It is prescribed for you, when one of you approacheth death, if he leave wealth, that
he bequeath unto parents and near relatives in kindness. (This is) a duty for all those
who ward off (evil). And whoso changeth (the will) after he hath heard it the sin thereof
is only upon those who change it. Lo! Allah is Hearer, Knower. But he who feareth from
a testator some unjust or sinful clause, and maketh peace between the parties, (it shall
be) no sin for him. Lo! Allah is Forgiving, Merciful.
-(2:180-182)
2. Ibn Omar reported that the Messenger of Allah said: It is not proper for a Muslim who
has got something to bequeath that he should pass even two nights without his will kept
written near him.
-(Bukhari and Muslim)
3. Saad-bin-Abi Waqqas reported: The Holy Prophet came to me while I was ill. He
asked: Have you made bequest? Yes said I. He asked: To what extent? I replied: To
the extent of the whole of my property in the way of Allah. He asked: What then have
you left for your children? I replied: They are rich in wealth. He said: Bequeath one-
tenth. Then I continued to think it little till he said: Bequeath one-third and one-third is
too much.
-(Tirmizi)
4. Abu Omama told of hearing Gods messenger say in his sermon in the year of the
Farewell Pilgrimage, God has appointed for everyone who has a right what is due to
him, and no legacy must be made to an heir. (Abu Daud and Ibn Majah).
Before the revelation of the verses regarding division of inheritance, it was prescribed that
will or bequest should be made in favour of parents and near kindred. But when the
Quran (in its chapter 4) revealed the law of inheritance and prescribed the shares of
parents, children, spouses and other relatives, bequest is no longer valid in favour of an
heir, as declared by the Prophet. The Holy Prophet has also prescribed that will should
not be made in respect of more than one-third of total property which one is likely to
leave after death. Although, in the opinion of some jurists, will can be made in favour of
an heir provided all the other heirs agree yet the law of will generally understood is that
will of one-third property should be made in favour of persons other than legal heirs.
The law of will generally inspires rich and well-to-do Muslims to bequeth some fortune in the
path of God for charitable causes like relief of the poor, education and medical relief,
etc. This law has helped, in Islamic society, the establishment of waqfs, trusts, hospitals,
educational institutions. This law, thus promotes Jehad against poverty, misery, disease,
ignorance and illiteracy. Thus the institution of will helps transfer of wealth from the rich
to the poor.
[Back to the start of this chapter]
4- Law of Waqf
The institution of waqf in Islam gets its inspiration from the following verses of the Quran
and Ahadith of Prophet Muhammad (PBUH):
1. Ye will not attain unto piety until ye spend of that which ye love. And whatsoever ye
spend, Allah is aware thereof.
-(Quran 3:92)
2. Ibn Umar told that when Umar got some land in Khaibar he went to the Prophet and
said, Messenger of God, I have acquired land in Khaibar which I consider to be more
valuable than any I have ever acquired, so what do you command me to do with it? He
replied, If you wish you may make the property an inalienable possession and give its
produce as sadaqa. So Umar gave it as sadaqa declaring that the property must not be
sold, given away, or inherited, and he gave its produce as sadaqa to be devoted to the
poor, relatives, the emancipation of slaves, Gods path, travellers and guests, no sin
being committed by the one who administers it if he eats something from it in a
reasonable manner or gives something to someone else to eat, provided he is not
storing up goods (for himself). Ibn Sirin said, provided he is not acquiring capital for
himself.
-(Bukhari and Muslim)
The institution of waqf, thus, got its roots when verse 92 of chapter Three of the Holy Quran
was revealed and the well-to-do companions of the Prophet sought his guidance
expressing their desire to donate their property in the path of Allah. So the followers of
Islam throughout their history have been maintaining this institution to earn the pleasure
of Allah in this world and in the Hereafter. As stated earlier, a Muslim can bequeth one-
third of his property for charity after his death. But during his lifetime he has right to
spend whole of his property in the way of Allah. According to law of gift, one can donate
or gift as much of his property as he likes to any person during his life. Good-natured
and virtuous believers, who are rich, exercise their powers under the law of will or the
law of gift and establish waqf for a charitable cause.
Waqf, in the language of Shariah, means the dedication of the corpus of property to
Almighty God. The property thus transfers from the dedicator (waqif) to the ownership of
Allah but its usufruct or benefit is dedicated to the poor, sick, travellers, or any other
noble cause recognised by Islam.
The institution of waqf helps elimination of poverty, misery, disease, illiteracy and in this way
promotes the cause of equitable distribution of wealth.
[Back to the start of this chapter]
5- Charity of Fitr
The Prophet of Islam has prescribed for every well-to-do Muslim to pay Sadaqat-ul-Fitr to
the poor Muslims to enable them to participate in the celebrations of Eid after the Holy
month of Ramadan. Fitr means alms which is incumbent upon every Muslim possessing
property equal to the amount of Nisab of Zakat. The well-to-do are required to pay it not
only for themselves but also for their families, children, servants and slaves. The
measure of Eid charity in wheat, flour, barley, dates, etc. is one Saa which is equivalent
to 112 ounces, nearly 3.5 seers. It is also lawful to pay the equivalent price. The charity
can be paid in the month of Ramadan but it should certainly be paid before Eid
prayer sothat the wants of the poor in connection with the Eid festival are satisfied and
they also enjoy the festival.
Some of the Ahadith of the Prophet are reproduced below to understand the importance of
this charity and its rules:
1. Ibn Omar reported that the Messenger of Allah made obligatory the charity of Fitr-
one saa of dried dates or one saa of barley upon the slave and the free, male and
female, young and old from among the Muslims. He directed its payment before the
people go out for the prayer.
-(Bukhari, Muslims)
2. Abu Sayeed al-Khodri reported: We used to levy charity of Fitr-one saa from food
crops, or one saa from barley, or one saa from dried dates, or one saa from cheese,
or one saa from raisins.
-(Bukhari, Muslim)
3. Ibn Abbas reported that the Messenger of Allah made charity of Fitr compulsory as a
purification of fast from vile discourse and vain talks and also as food to the poor.
-(Abu Daud)
[Back to the start of this chapter]
6- Monetary Atonements
Monetary atonements have been prescribed by the Quran for certain sins. Those who
commit certain sins, offences or omissions intentionally or unintentionally have been
enjoined upon by the Quran to make prescribed charity in expiation of these sins. The
Verses of the Quran relevant to some atonements are reproduced as under:
1. (Fast a certain number of days) and (for) him who is sick among you, or on a journey,
(the same) number of other days; and for those who can afford it there is a ransom: the
feeding of a man in need But whoso doth good of his own accord, it is better for him:
and that ye fast is better for you if ye did but know.
-(2:184)
2. It is not for a believer to kill a believer unless (it be) by mistake. He who hath killed a
believer by mistake must set free a believing slave, and pay the blood-money to the
family of the slain, unless they remit it as a charity. If he (the victim) be of a people
hostile unto you, and he is a believer, then (the penance is) to set free a believing slave.
And if he cometh of a folk between whom and you there is a covenant, then the blood-
money must be paid unto his folk and (also) a believing slave must be set free. And
whoso hath not the wherewithal must fast two consecutive months. A penance from
Allah. Allah is Knower, Wise.
-(4:92)
3. Allah will not take you to task for that which is unintentional in your oaths, but He will
take you to task for the oaths which ye swear in earnest. The expiation thereof is the
feeding of ten of the needy with the average of that wherewith ye feed your own folk, or
the clothing of them, or the liberation of a slave, and for him who findeth not (the
wherewithal to do so) then a three days fast. This is the expiation of your oaths when ye
have sworn; and keep your oaths. Thus Allah expoundeth unto you His revelations in
order that ye may give thanks.
-(5:89)
4. Those who put away their wives (by saying they are as their mothers) and afterward
would go back on that which they have said, (the penalty) in that case (is) the freeing of
a slave before they touch one another. Unto this ye are exhorted; and Allah is Informed
of what ye do. And he who findeth not (the wherewithal), let him fast for two successive
months before they touch one another; and for him who is unable to do so (the penance
is) the feeding of sixty needy ones. This, that ye may put trust in Allah and His
messenger. Such are the limits (imposed by Allah); and for disbelievers is a painful
doom.
-(58:3-4)
These prescribed monetary atonements are also a channel of flow of wealth from the well-
to-do to the poor people.
[Back to the start of this chapter]
7- Charity and Alms
After discussing compulsory charities, now we turn to optional charities and alms. If Zakat
and other compulsory charities fail to satisfy the needs of the poor, the state can either
impose taxes or motivate the rich to donate voluntarily and generously to help eradicate
poverty and want. Let us reproduce the verses of the Holy Book and Ahadith of
Muhammad (PBUH) regarding Sadaqat or Infal fi Sabil Allah.
Verses of the Quran:
1. Who believe in the unseen and establish worship, and, spend of that We have bestowed
upon them; And who believe in that which is revealed unto thee (Muhammad) and that
which was revealed before thee, and are certain of the Hereafter. These depend on
guidance from their Lord. These are the successful.
-(2 : 3-5)
2. It is not righteousness that ye turn your faces to the East and the West; but righteous
is he who believeth in Allah and the Last Day and the angels and the Scripture and the
Prophets; and giveth his wealth, for love of Him, to kinsfolk and to orphans and the
needy and the wayfarer and to those who ask, and setteth slaves free; and observeth
proper worship and payeth the poor-due and those who keep their treaty when they
make one, and the patient in tribulation and adversity and time of stress, such are they
who are sincere. Such are the Godfearing.
-(2:177)
3. Spend your wealth for the cause of Allah, and be not cast by your own hands to ruin;
and do good. Lo! Allah loveth the beneficent.
-(2:195)
4. They ask thee, (O Muhammad), what they shall spend. Say: That which ye spend for
good (must go) to parents and near kindred and orphans and the needy and the
wayfarer. And whatsoever good ye do, Lo! Allah is Aware of it.
-(2:215)
5. And they ask thee what they ought to spend. Say: That which is superfluous. Thus
Allah maketh plain to you (His) revelations, that haply ye may reflect:
-(2:219)
6. O ye who believe! Spend of that wherewith We have provided you ere a day come
when there will be no trafficking, nor friendship, nor intercession. The disbelievers, they
are the wrong-doers.
-(2:254)
7. The likeness of those who spend their wealth in Allahs way is as the likeness of a
grain which groweth seven ears, in every ear a hundred grains. Allah giveth increase
manifold to whom He will. Allah is All-Embracing, All-Knowing. Those who spend their
wealth for the cause of Allah and afterward make not reproach and injury to follow that
which they have spent: their reward is with their Lord, and there shall no fear come upon
them, neither shall they grieve. A kind word with forgiveness is better than alms-giving
followed by injury. Allah is Absolute, Clement. O ye who believe! Render not vain your
almsgiving by reproach and injury, like him who spendeth his wealth only to be seen of
men and believeth not in Allah and the Last Day. His likeness is as the likeness of a
rock whereon is dust of earth; a rainstorm smiteth it, leaving it smooth and bare. They
have no control of aught of that which they have gained. Allah guideth not the
disbelieving folk. And the likeness of those who spend their wealth in search of Allahs
pleasure, and for the strengthening of their souls is as the likeness of a garden on a
height. The rainstorm smitheth it and it bringeth forth its fruit twofold. And if the rainstorm
smite it not, then the shower. Allah is Seer of what ye do.
-(2:261-265)
8. Whatever alms ye spend or vow ye vow, Lo! Allah knoweth it. Wrong-doers have no
helpers. If ye publish your alms-giving, it is well, but if ye hide it and give it to the poor, it
will be better for you, and will atone for some of your ill deeds, Allah is Informed of what
ye do. The guiding of them is not thy duty ( O Muhammad ) , but Allah guideth whom He
will. And whatsoever good thing ye spend, it is for yourselves, when ye spend not save
in search of Allahs countenance; and whatsoever good thing ye spend, it will be repaid
to you in full, and ye will not be wronged. (Alms are) for the poor who are straitened for
the cause of Allah, who cannot travel in the land (for trade). The unthinking man
accounteth them wealthy because of their restraint. Thou shalt know them by their mark:
They do not beg of men with importunity. And whatsoever good thing ye spend, Lo!
Allah knoweth it. Those who spend their wealth by night and day, by stealth and openly,
verily their reward is with their Lord, and there shall no fear come upon them neither
shall they grieve.
-(2:270-274)
9. Allah hath blighted usury and made almsgiving fruitful. Allah loveth not the impious and
guilty.
-(2:276)
10. Ye will not attain unto piety until ye spend of that which ye love. And whatsoever ye
spend, Allah is aware thereof.
-(3:92)
11. Believe in Allah and His messenger, and spend of that whereof He hath made you
trustees; and such of you as believe and spend (aright), theirs will be a great reward.
-(57:7)
12. And spend of that wherewith We have provided you before death cometh unto one of
you and he saith: My Lord! If only Thou wouldst reprieve me for a little while, then I
would give alms and be among the righteous.
-(63:10)
13. Let him who hath abundance spend of his abundance, and he whose provision is
measured, let him spend of that which Allah hath given him. Allah asketh naught of any
soul save that which He hath given it. Allah will vouchsafe, after hardship, ease.
-(65:7)
14. And in whose wealth there is a right acknowledged. For the beggar and the destitute;
-(70:24-25)
Ahadith of Muhammad (PBUH):
1. Anas reported that the Messenger of Allah said: verily charity appeases wrath of the Lord
and removes pangs of death.
-(Tirmizi)
2. Abdullah-bin-Masud reported: There are three whom Allah loves-a man who gets up at
night to read the Book of Allah, and a man giving alms with his right hand which he
conceals (I consider that he said) from his left hand: and a man, being in a battalion,
encounters the enemies, although his companions are routed.
-(Tirmizi)
3. Marsad-bin-Abdullah reported: Some of companions of the Holy Prophet informed me
that he heard the Prophet say: Surely the shade of the believer on the Resurrection Day
will be his charity.
-(Ahmad)
4. Abu Hurairah reported that the Messenger of Allah said: Had there been gold for me like
the mount of Uhud, it would have pleased me that three nights should not pass over me
with something with me therefrom except what I should keep in wait for debt.
-(Bukhari)
5. Asmmas reported that the Messenger of Allah said: Spend and dont count lest Allah
counts for you, and dont hoard up lest Allah withhold from you. Spend what you can.
-(Bukhari, Muslim)
6. Abu Hurairah reported that a man enquired: O Messenger of Allah! which charity is
greatest in reward? He replied: Your charity while you are sound, greedy, fear poverty
and hope for riches. Dont put off, till when it reaches the throat, you say: Such and such
is for so and so, such and such is for so and so, while it belonged to so and so.
-(Bukhari, Muslim)
7. Abu Hurairah reported that the Messenger of Allah said: The generous man is near
Allah, near Paradise, near the people and, far off from Hell; and the miser is far off from
Allah, far off from Paradise, far off from the people near Hell; and illiterate charitable
man is dearer to Allah than the pious miser.
(Tirmizi)
Voluntary charities to earn the pleasure of God almighty are rewarded in this world as well
as in the next one. These also help in flow of wealth from the rich of the community to
the poor and needy. Thus the cause of distributive and social justice is achieved through
this voluntary measure.
[Back to the start of this chapter]
8- Feeding the Poor
Feeding the poor is one of the voluntary charities and is a very common practice among the
generous and pious Muslims.
Rewards for this are very numerous and both the Quran and the Prophet of Islam inspire
the believers to feed the poor and the needy. This measure is also a good step to
mitigate want and misery from the Islamic society. The relevant verses and Ahadith are:
Verses of the Quran:
1. That they may witness things that are of benefit to them, and mention the name of Allah
on appointed days over the beast of cattle that He hath bestowed upon them. Then eat
thereof and feed therewith the poor unfortunate.
-(22:28)
2. And the camels! We have appointed them among the ceremonies of Allah. Therein ye
have much good. So mention the name of Allah over them when they are drawn up in
lines. Then when their flanks fall (dead), eat thereof and feed the beggar and the
suppliant. Thus have We made them subject unto you, that haply ye may give thanks.
-(22:36)
3. (Because) they perform the vow and fear a day whereof the evil is wide-spreading. And
feed with food the needy wretch, the orphan and the prisoner, for love of Him. (Saying):
We feed you, for the sake of Allah only. We wish for no reward nor thanks from you. Lo!
We fear from our Lord a day of frowning and of fate. Therefore, Allah hath warded off
from them the evil of that day, and hath made them find brightness and joy;
-(76:7-11)
Ahadith of the Prophet:
1. Abdullah-bin-Amr reported that the Messenger of Allah said: Serve the Merciful, give food
and spread peace; you will then enter paradise with peace.
(Tirmizi, Ibn Majah)
2. Ibn Abbas reported: I heard the Messenger of Allah say: No Muslim gives a cloth to a
Muslim except that he is in the protection of Allah so long as a piece thereof remains
upon him.
(Ahmad, Tirmizi)
3. Abu Hurairah reported that a man complained to the Holy Prophet about his hardness of
heart. He said: Pass thy hand over the head of the orphans and give food to the poor.
(Ahmad)
4. Anas reported that the Messenger of Allah said: The best charity is to satisfy a hungry
belly.
(Baihaqi)
[Back to the start of this chapter]
9- Goodly Loan to Allah
It is grace of Allah, the Almighty God, that any expense incurred by a person in His path on
charity or alms to the poor is regarded by Him as goodly loan to Him and He undertakes
to repay it manifold. The rich are inspired to give loan to God in the form of helping the
poor people and to earn many times big rewards for this. The verses of the Quran
pertaining to this subject are:
1. Who is it that will lend unto Allah a goodly loan, so that He may cause it increase
manifold? Allah straiteneth and enlargeth. Unto Him ye will return.
-(2:245)
2. Allah made a convenant of old with the Children of Israel and We raised among them
twelve chieftains, and Allah said: Lo! I am with you. If ye establish worship and pay the
poor-due, and believe in My messengers and support them, and lend unto Allah a kindly
loan, surely I shall remit your sins, and surely I shall bring you into gardens underneath
which rivers flow. Whoso among you disbelieveth after this will go astray from a plain
road.
-(5:12)
3. Who is he that will lend unto Allah a goodly loan, that He may double it for him and his
may be a rich reward?
-(57:11)
4. Lo! those who give alms, both men and women, and lend unto Allah a goodly loan, it will
be doubled for them, and theirs will be a rich reward.
-(57:18)
5. If ye lend unto Allah a goodly loan, He will double it for you and will forgive you, for Allah
is Responsive, Clement.
-(64:17)
Following are comments of two leading scholars of Islam on the concept of goodly lean to
God:
According to Abdullah Yusuf Ali: Spending in the cause of God is called metaphorically
a beautiful loan. It is excellent in many ways: (1) it shows a beautiful spirit of self-
denial; (2) in other loans there may be a doubt as to the safety of your capital or any
return thereon: here you give to the Lord of All in Whose hands are the keys of want or
plenty: giving, you may have manifold blessings, and withholding, you may even lose
what you have. If we remember that our goal is God, can we turn away from His cause?
According to Abul Ala Maududi: Good loan is that which is lent without any idea of
personal gain or interest but is given with the sole intention to please Allah. Allah in His
bounty credits the wealth thus spent in His Way as a loan to Himself. He promises
that He will not only return the actual debt but increase it manifold, provided that it is a
goodly loan in the real sense and is lent merely to please Him and for the sake of those
objects He approves.
[Back to the start of this chapter]
10- Charity of Surplus
The highest degree of charity, which has always remained an ideal for a Muslim, is the
charity of surplus (Anfaq al-Afw). It requires a believer to spend all his wealth which is
over and above his needs. The word Afw means that wealth which is left over after
meeting ones needs. The Injunction of the Quran on spending surplus wealth
is: And they ask thee what they ought to spend. Say: That which is
superfluous. Thus Allah maketh plain to you (His) revelation, that haply ye may
reflect. -(2 : 219)
If the principle of Anfaq al-Afw comes into play in its full force and all the believers voluntarily
spend all their wealth in the way of God, there will be no poverty, no disease, and no
illiteracy in the Muslim society. The cause of distribution of wealth cannot be served
better by any measure than this.
[Back to the start of this chapter]
11- Hoarding of Wealth Forbidden
Hoarding of wealth has been condemned by Islam with threats of severe punishment
whereas circulation of wealth has been ordained. This measure not only forces the
hoarded wealth out of coffers of the rich but also ensures its flow into investment
channels ultimately helping its natural distribution. Following are Verses of the Quran
and Ahadith of Muhammad (PBUH) which highlight Islamic view-point on hoarding:-
1. They who hoard up gold and silver and spend it not in the way of Allah, unto them give
tidings (O Muhammad) of a painful doom: On the Day when it will (all) be heated in the
fire of hell, and their foreheads and their flanks and their backs will be branded there
with (and it will be said unto them): Here is that which ye hoarded for yourselves. Now
taste of what ye used to hoard.
-(Al-Quran 9:34-35)
2. That which Allah giveth as spoils unto His messenger from the people of the
townships, it is for Allah and His messenger and for the near of kin and the orphan and
the needy and the wayfarer, that it becometh not commodity between the rich among
you.
-(Al-Quran 59:7)
3. But nay! for lo! it is the fire of hell, Eager to roast, It calleth him who turned and fled
(from truth), And hoarded (wealth) and withheld it.
-(Al-Quran 70:15-18)
4. Woe unto every slandering traducer. Who hath gathered wealth (of this world) and
arranged it: He thinketh that his wealth will render him immortal. Nay, but verily he will
be flung to the Consuming One.
-(Al-Quran 104:1-4)
5. Abu Hurairah reported that the Messenger of Allah used to store up nothing for the
morrow.
-(Tirmizi)
6. Ayesha reported that the Messenger of Allah said: This world is an abode for one who
has got no abode, and a property for one who has got no property, and one who has got
no wisdom hoards for it.
-(Ahmad, Baihaqi)
[Back to the start of this chapter]
12- Prohibitive Measures
It is a notorious fact that concentration of wealth in few hands usually takes place through
unlawful means and corrupt practices adopted for acquiring wealth. It is through unfair
and illegal means that few privileged individuals pile up big fortunes depriving the
multitude of people from their legitimate share in national wealth. If natural process of
distribution of wealth is allowed to flow unobstructed and all persons earn their
livelihood through lawful means there cannot be concentration of wealth in few hands
and there cannot be unbridgeable gulf between the rich and the poor. Thus the means
adopted for earning play a vital role in governing distribution of wealth in a state or a
community.
With a view to prevent concentration of wealth and ensure its fair and equitable distribution,
Islam has adopted certain prohibitive measures, i.e. all the unjust, unfair and illegal
means of earning have been declared Haram (unlawful) and hence prohibited. Following
are some of these measures:-
1. Riba or usury in every conceivable form has been abolished root and branch.
2. Bribery and corruption in every form is haram (unlawful).
3. Earning through wine, hard drinks, narcotics and other forbidden things is illegal.
4. Earning through gambling, speculation, forward sale, and games of chance is
absolutely prohibited.
5. Theft and robbery are prohibited and declared punishable offences.
6. Income through adultery, prostitution, music, dancing, blue films, obscene literature,
pornography, etc. is haram.
7. Business malpractices such as wrong measuring and wrong weighing, adulteration,
etc. are forbidden.
8. Usurpation of the wealth of orphans, women and other weak persons is haram.
9. Hoarding of commodities especially food items and other necessities of life with a
view to earn undue profits is prohibited.
10. Earning through exploitation, blackmail, fraud, duress, deception, false oaths,
misrepresentation of goods, is prohibited.
11. Financial benefits derived through misuse of office or power or through intercession,
favouritism, nepotism, etc., are illegal.
12. Non-payment of debt or loan including loans of banks and financial institutions or
remission of these loans secured through political or other influence is unlawful.
13. Embezzlement of individual or public money or misappropriation thereof, is absolutely
haram.
14. Non-payment of Zakat and other taxes or non-payment of dues for utilities and services
is strictly prohibited.
15. Non-payment of wages or salaries to the labourers or employees is forbidden.
The above mentioned means of earning livelihood or acquiring and accumulating wealth
have been prohibited directly or indirectly by the Quran and the Sunnah. These have
already been discussed under the head unlawful means of earning wealth in previous
chapter and, therefore, there is no need of repeating the discussion here.
ECONOMIC DISTRIBUTION
IN ISLAM

PRESENTED BY
AL-BALAGH FOUNDATION
In the name of Allah, the Compassionate, the Merciful.
"Whatever spoils given by Allah to His Messenger from townspeople belongs to
Allah and to the Messenger, and to the nearest of kin, and to the orphans, and
the indigent, and the wayfarer, so that it may not circulate amongst the rich of
you. And what the Messenger gives you, take it then; but forsake what he forbids
you. And venerate Allah, for He is stern in retribution."
Holy Qur'an (59:7)
"Were it my money I would have distributed it among them equally. But it is
Allah's."
Imam Ali (a.s.)

PREFACE
Praise is due to Allah for His explicit and implicit favours. Peace and blessings are on
the brilliant light, the giver of good tidings and warnings, our master Muhammad and
on his infallible household and the righteous among his companions.
Today, the world appears to becoming more lost in self-generated chaoses economic
problems take precedence over all other hardships and haunt the rulers of both the
Eastern and Western blocks.
If the West suffers from high unemployment, high inflation...etc., the East complains
of decline in production, shortages in the supply of the basic necessities of life... Both
capitalism and socialism, including before being developed into communism, are not
only retracting their theoretical slogans and renouncing their doctrinal principles, they
are nearly perishing as each are riddled with ambiguities and shortcomings that have
failed to address even the most fundamental issues of con temporary society.
Satellite states, like in the Arab world, have been dominated by the Western
democracies and as a result, have been misled in setting up capitalistic systems or they
have reluctantly turned tificsocialism. The result from both should announce their
ideologies has been only bitter disappointment. Nothing has remained in their hands
except the ashes of aping foreigners, which are being scattered by the piercing wind of
the Islamic movement.
Both the East and the West have claimed their absolute dependence on the outcome of
abstract theories, not only in the fields of material sciences but even in their
ideological and philosophical views with regard to the universe, life and man. Each
attach the uppermost importance to tangible experiments to prove facts and adopt the
ensuing results. But, contrary to all their claimed developments, the examples of
socialism and capitalism in practice have proved to be fiascoes, neither imparting
happiness to man nor satisfying his basic needs, both physical and spiritual; in failing
to achieve worldwide security or putting an end to global catastrophes, instead
cultural erosion and moral collapse, continue to increase unabated, while there has
been no sign of pinpointing the root causes of anxiety and psychological misery that is
sweeping virtually all nations today.
As the Foundation presents this booklet about economic distribution in Islam, free of
charge, it is a single proof of the greatness of Islam and looks forward to the day when
humanity will shake worldly dust of fits communities and become arrayed with
celestial robes to walk in the light of Islam, where happiness can be won in both this
life and the Hereafter.
"...and to whomever Allah does not give light, he has no light."
Holy Qur'an (24:40)
Al-Balagh Foundation

ISLAM'S CARE FOR MAN'S LIVELIHOOD
Today, economic problems come at the head of man's present plights. They may be
considered the root of life's problems that leave a pervasive impact on man's material
interests and social conditions. The result has a direct effect not only on the life of the
individual but also on the community and on the level of their material progress and
civil development.
Economic conditions of the ummah (Muslim community), like elsewhere, have a
backlash on security and stability, and consequently, advances in health, scientific
gains and the process of achieving social justice. In Islam, life's stability is viewed as
a base in up a committed Muslim community. Similarly, catering man's basic
necessities is a factor conducive to solidifying piety and winning divine rewards in the
Hereafter.
Present life and the Hereafter, economic welfare and moral and spiritual ascendancy
are tightly connected together through a sound insight in having all-embracing way of
life, which only Islam can offer.
Allah, the Exalted, says:
"And seek by means of what Allah has given you the future abode, and do not
neglect your portion of this world,..."
Holy Qur'an (28:77)
A Prophetic tradition from the Holy Messenger (s.a.w.) pointedly records:
"He is not from us who gives up his worldly life in favour of his Hereafter, nor is
he who gives up his Hereafter in favour of his worldly life."
The Prophet (s.a.w.) is further quoted to saying:
"How excellent is wealthiness in strengthening man's fear of Allah".[1]
Imam al-Sadiq (a.s.), in interpreting the following verse,
(...Our Lord! grant us good in this world and in the Hereafter, and save us from
the punishment of the fire) (Qur'an 2:201) has elaborated that the good referred is
associated together in seeking the pleasure of Allah and Paradise in the Hereafter
and the provision and good morals in worldly life.[2]
Imam al-Sadiq (a.s.) is quoted himself to have said:
"There is no good in him who does not like to collect wealth lawfully, by which
he satisfies his needs, pays off his debts and keeps up his relations with his
relatives".[3]
"How excellent is worldly life when it helps one to prepare oneself for the
Hereafter".
"Wealthiness that prevents you from wronging others is better than poverty that
leads you to do evils."[4]
The Prophet (s.a.w.) has also said:-
"O Lord! make bread blessed for us. Do not separate us form it. If it were not for
bread we would not have kept up prayers, fast not have discharged our divine
duties."[5]
"It is better for the faithful to wake in the morning or in the evening at the loss of
a beloved one than to go in the morning or the evening plundering others'
property. We take refuge in Allah from plundering others' possessions."[6]
Through these Islamic texts about the importance of the economic side of man's life,
the role of the growth of money and wealth in a Muslim's life, in relation to his quest
on earth can be seen. They present a clear understanding of Islam's concern with
economic life and the necessity of fair distribution of wealth, and the providing of a
satisfactory standard of living to every individual so as to keep his faith sound and his
life stable.
Based on this plain concept is Islam's stress on man's managing his financial life and
its concern to set up a fair economic system based on the belief in man's lawful right
to satisfy his natural needs. These include providing an adequacy of foodstuff,
clothing, residence and the rest of material, ideological and psychological needs on
whose availability, the justice of an economic system and the betterment of the
community's welfare depend.
Qur'anic ayahs (verses) and Prophetic traditions are bountiful in dealing with thc
concerns of everyday economic life of individuals. So exactly and meticulously they
attend to production, earnings, distribution of wealth, management of money and all
aspects of the economy that they never fail to draw admiration of economists and
political scientists the world over.
How excellently perfect is the Qur'anic concept of Islam's view of daily economic life
in which it confirms man' s right to gain comfort. It is vividly expressed in this
Qur'anic address to Adam (a.s.):
"Surely it is (ordained for you that you shall not be hungry therein nor bare of
clothing."
Holy Qur'an (20:118)
Man's economic needs should be met, whether he himself, achieves this goal or
someone else, be it an individual, a group of people or the state. The following verse
enriches this concept:
"...so let them worship the Lord of this House, Who feeds them against hungry
and gives them security against fear."
Holy Qur'an (106:3-4)
It makes it clearer and more positive the connection of Allah's worthiness of being
worshipped to favouring man by providing his basic necessities of life. Tackling
starvation and furnishing the basic economic needs of man, in the shadow of peace
and security and is explained by this verse. It is a sacred feature of man's relationship
with Allah and a stimulus to worship and submit to His will.
It is quite evident, in Islam's view, that the issues raised and questions emerging from
thanksgiving, or to which worship is related, must be the focus of man's concern.
They must be provided, for they form the path leading to worship and the causes of
thankfulness and gratitude.
In a nutshell, Islam's view of man's rights to earn a daily living, can be outlined as:-
1. Money and property are Allah's. People are equal in gaining them and making use
of them. Imam Ali (a.s.) is reported to have said:
"Were it my money I would have distributed it among them equally. But it is
Allah's."
2. Man has an inalienable right to earn his livelihood. Under no circumstances should
he be deprived of it and at the time of infirmity or incapability, it must be provided for
him.
3. Man is obliged to exert his utmost efforts in working and utilizing nature's
resources to his interests. Allah, the Exalted, says:
"...therefore go about in the spacious sides thereof, and eat of His provision, and
to Him is the return after death."
Holy Qur'an (67:15)
4. The system of economic life and the methods of earning money, distributing wealth
and consumption should be in accordance with a specific moral and legal line. Man's
freedom and his economic rights should be similarly subjected to this lawful
commitment, which safeguards the rights of all and balances everyone's interests.

MISCONCEPTIONS
Two main points related to the economic system and the distribution of wealth and
productivity in Islam, need further consideration as a prelude to delve into related
issues. Primarily they are:
1. Islamic economic thought has become vague in the minds of many scholars and
cultured people and has led them to deny the existence of such system in Islam. This
has been caused on the basis that Muslim thinkers have not studied economic and
financial percepts and concepts and presented them in a related way in which
contemporary thought has tackled them and treated within modern idioms and
methodology.
It is due to this lack of development that Islamic economic thought has remained texts
and concepts scattered in the Holy Qur'an, books of traditions, books of history and
Islamic studies on fiqh (jurisprudence).
Muslim researchers did not consider them except in the recent past and in a limited
and narrow scope. The need has been to have them to be more meticulously
examined, gathered, studied, analyzed, deduced and reshaped and where the outcome
should be easily comprehensible and encapsulates all man's economic problems as
well as covering all related aspects, such as the themes of wealth, its production and
distribution within the Muslim community.
In respect, the fuqaha' took great pains to study these items extensively on the basis
of fiqh. They also examinedzakat (poor-rate), khums (an Islamic tax), kharaj (land tax
levied on non-Muslims), working systems for companies, trade, ijarah (hiring
someone or something for specific purposes), hawalah (transfer of debt from one
person to another), purchases, usury, farming, speculation, usurpation, property,
conduct of business...etc. By so doing, they provided basic ideological material
conducive to form an economic view, and a clear-cut viewpoint on an Islamic
economic system. Many contemporary Muslim intellectuals have made use of this
basic ideological material and studied economic systems, ownership, distribution,
consumption...in its light. They have also developed it in analyzing production
relationships and offering an explanation to economic problems and so forth.
When Muslim intellectuals systematically delve into this field, in line with Islam's
methodology of research and employing a comprehensive economic method, an
economic overview can be presented, that make up entire systems providing solutions
for man's problems, for which he has failed to find an answer. Instead man has been
left groping in the long dark tunnels of the communist, socialist and capitalist theories,
when satisfactory answers are at hand to alleviate doubts adduced by the enemies of
Islam. Such have spared no effort to present, to the sons of Islam and others, that
Islamic economic thought is a shallow mould, which is unable to accommodate
today's problems. They charge Islam, due to their ignorance, obstinacy, and fear from
its justice, as well as its threat to their boundless self-centeredness and greed, that it
falls short of successfully treating the more complicated daily economic issues.
Islamic economic system is still, as they maliciously claim, composed of a set of
varying charity-oriented questions and moral commandments, which cannot tackle
deep-seated problems, nor can it resolve the ever-complicated crises of inhumanity
because of the immense phenomena, related to financial considerations present in
human society.
These efforts are clearly made in a bid to turn attention of Muslims and others from
returning to an economic system that frees humanity from exploitation, injustice and
avarice and leads it to an economic life of welfare, where man finds comfort, care and
dignity.
2. The second misconception, which must be warned of, is the mixing up of Islam
with other economic systems and without distinguishing between the two. Many
researchers and academics, be they Muslims or non-Muslims still mingle the Islamic
economic system with the capitalist and social systems. Even, some of them go to the
extent of mixing it up with the communist systems. This confusion can be ascribed to
the comprehensible concepts found in Islam, including the principles of freedom,
sponsorship, insurance or through the intervention of the Islamic state in directing the
economy and keeping watch over the distribution and production.. etc.
Those, who examine the conception of economic, political and individual freedom in
Islam, look at Islam within a capitalist framework. Yet those, observe Islam's rejection
of, for instance, the capitalist amassing of wealth or the state's role in economic life,
think Islam is a socialist system.
Re-examining these ideological aspects and analyzing them scientifically,
meticulously and unbiasedly, it will be noticed however, that there is a wide gap
between Islam's view and cures and those of capitalism and socialism. The only
conclusions that can be made about attempts to converge manmade systems with
Islam is that they are clear distortions in line with other misconception that are
invented to belittle the everlasting message of the Holy Prophet (s.a.w.).
To emphasize the difference, the following four points underline the key difference
between Islam and these two ideological system, in particular, and other social and
political systems, in general:
1. Islam differs from socialism, capitalism and communism and other theories and
perspectives in its ideological and doctrinal bases. Islam is a Divine Message with a
special conception of the universe, life and man. It basically disagrees with socialist
and capitalist views, which have their roots in their materialistic vision that has no
religious base, nor any belief in Allah.
Socialism, capitalism and communism and the like are merely concepts devoid of
spiritual and moral values. The distance between them and Islam is unmistakably
great. Islam has an all-embracing ideological and legislative make-up. In it, no
barriers are to be found between morals, laws, worships, concepts and existence.
2. Islam differs from all man-made systems in that it has a lawful executive
framework, which exactly expresses political, economic, and social concepts.
Regarding the social system[7], laws, which are the second stage of its ideological
ladder, are based on founding principles of their own. They manage related affairs
quite differently from man-written laws and legislation, in all domains whether they
be economical, political, sociological, or appertaining to individual behaviour...etc.
Such matters as ownership, investment, economic, consumption are tackled in a
unique way by Islam.
3. In its aims and objectives, Islam is distinguished from other systems, like, it differs
from them on the basis of contents and the legal organization of life. It treats related
subjects in separate ways with specific points. The ultimate goal of Islam is to
worship and seek the pleasure of Allah, the Exalted.
In implementing the divine law and adhering to the divine order, a Muslim
demonstrates he is a worshipper. His objective is to seek the reward and pleasure of
Allah, the Exalted.
Contrarily, the human objective in capitalist and socialist societies is purely a
materialistic one, expressed in terms of materialistic gain regardless of the cost and
fall out on society.
4. Even though there is a sort of analogy between Islam and other systems in certain
respects, Islam has its own way and method of implementing its economic concepts
and objectives.
For example, Islam believes in social justice and so it adopts just principles in
distribution and production growth.
Socialism and capitalism attempt to call for similar concepts, which can be seen as
generally logical and which man, by no means, can shun. But in trying to develop the
conceptions and implement them, we will find the difference between Islam and
secular systems in both method and way. In capitalism, freedom knows no
boundaries. In theory, individuals can do what they desire to. In doing so, it believes
that the non-existence of limits or restrictions results in economic freedom, in
competition and the increase of production. But to achieve a suitable and satisfactory
economic level is for all people, makeshift and inexorable laws have to be enforced,
based upon such theories as the laws of wages, supply and demand...etc. while, on the
other hand, socialism subscribes to the methods of confiscating the sources of wealth
and means of production. The state, thanks to this system, becomes a massive
capitalist party monopolizing all means of economic resources and turns individuals
into production units, who take nothing from the fruit of their toil except that which
the state allows them to have.
Unlike these two systems Islam adopts its own methods. It never opens the gates for
individual selfishness to flourish like in capitalism, nor does it confiscate the means of
production and acquiring wealth, turning people into machines on behalf of the state,
like socialism. Islam believes in individual ownership, community ownership and
state ownership, as it is expounded in the books of fiqh, traditions and in the Holy
Qur'an. Lest selfishness and urges of greed prevail, and to prevent exploitation and
economic injustice from sweeping over the community, Islam has laid down lawful
and moral restrictions related to ownership, investment and consumption in defense of
manipulation and deprivation.
The aim, which has in view, as duly explained, is to liberate man from both the greedy
capitalist grip solidified by the democratic system and state capitalism thrust upon
productive individuals in the socialist system by means of coercion and force, which
are the monopoly of the government. In conformity with a delicately set economic
plan, Islam grants freedom and responsibility to the Muslim individual and
community within bounds so each balance the other.

NATURE OF ECONOMIC PROBLEM
The central question which presents itself in the world of economics and wealth and
which needs a comprehensive and exact answer is: What is the economic problem and
what is its cause?
The answer to this question depends upon what is the approach and the nature of the
system chosen. The identity of the economic system, which manages the distribution
of wealth among human beings, conversely is outlined in accordance with the general
comprehension of the problem and its nature. The solution to any economic problem
thus lies within the system, in its formula. It gives the answer to the question, what the
economic problem is and how it can be dealt with.
To analyze the problem overall from a philosophical point of view needs a
comprehensive grasp of the nature of both man and wealth, the value of each and their
significance in life as a prerequisite. It further relies on a deep, exact and efficient
comprehension of the problem on one hand, and on the other, an objective analysis of
the implemented system, which is immune to any prejudice that may caused by the
personal bias of the concerned economist and those who invented its perspectives.
These factors, put together, help to give the shape of the answer and to plan an
economic system with its stated hallmarks.
Now, let us see what answer Islam gives to our question: What is the economic
problem and what is its mainspring?
1. Allah, the Exalted, says:
"Corruption has appeared in the land and the sea on account of what the hands
of people have wrought, that he may make them taste a part of that which they
have done, so that they may return."
Holy Qur'an (30:41)
2. And Allah has also said:
"And you love wealth with exceeding love."
Holy Qur'an (89:20)
3. "Decked out fair to mankind is the love of desires -Women, children, hoarded
treasures of gold and silver, marked horses, cattle and tilth. That is the
enjoyment of the life of this world; but Allah - with Him is the fairest return.
Say: 'Shall I tell you of better than that?' For those that are godfearing, with
their Lord are Gardens underneath which rivers flow, therein dwelling forever,
purified spouse, and Allah's good pleasure. And Allah sees His servants."
Holy Qur'an (3:14-15)
4. "...most surely man is ungrateful to his Lord. And most surely he is a witness
of that. And most surely he is tenacious in the love of wealth..."
Holy Qur'an (100:6-8)
5. "And those who made their abode in the city and in the faith before them love
those who have fled to them, and do not find in their hearts a need of what they
are given, and prefer (them) before themselves though poverty may afflict them,
and whoever is preserved from the niggardliness of his soul, these it is that are
the successful ones."
Holy Qur'an (59:9)
6. "Therefore be careful of (your duty to) Allah as much as you can, an hear and
obey and spend, it is better for your souls; and whoever is saved from the
greediness of his soul, these it is that are the successful."
Holy Qur'an (64:16)
7. The Messenger of Allah (s.a.w.) is reported to have said:
"Refrain from doing injustice, for it is the darkness of the Judgement's Day.
Avoid misery, it was misery that cut down those who were before you. It made
them shed their blood and do haram (what is forbidden and harmful)".
8. And the Holy Prophet (s.a.w.) is also quoted to have said:
"Two fierce wolves entering a pen of sheep are not as much harmful as avarice
and love of a social rank to the faith of a Muslim."[8]
Examining these quotations and compile their content, the following conclusions can
be reached:
1. In the first quotation, the Qur'an blames man for causing his own problem.
Corruption, be it political, economic or moral, is only man's making. Man
encapsulates a host of stimuli and desires and he himself is spurred on to extremes in
peculiar proclivities, to cause corruption, injustice and tyranny under which humanity
suffers greatly.
"Corruption has appeared in the land and the sea on account of what the hands
of people have wrought, that he may make them taste a part of that which they
have done, so that they may return."
Holy Qur'an (30:41)
2. Quotations 2,3,4 and 8 emphasize that man' s selfishness, avarice, his excessive
love for properly and wealth and his tendency to amass them, is the main cause of all
his daily problems, in general, and his economic problems, in particular.
3. Quotations 5,6 and 7, from the Qur'an and holy Prophetic traditions, how that
avarice itself which is a vice used with great eagerness and desire to obtain and keep
wealth away from the bands of others, is the latent, effective factor behind man's
greed and his predilection to monopoly wealth and deprive others from it.
In summary, we can assert an important fact in the world of economics, as clearly
stated by Islam and known as the causeehind the problem of wealth distribution, is
man's self-centeredness and his greed. For the worlds of the holy Qur'anic verses and
Prophetic traditions lay great stress on avarice and greed as the root causes of the
economic problems in the fields of distribution and consumption.
This view rules out the effect of external conditions, including means of production,
whether in abundance or scarce, and distribution, for man, himself, controls
distribution, His will controls it. His awareness identifies his view of justice, the value
of money and wealth and the meaning of life. It is this very awareness that principally
outlines the way he adopts in dealing with himself and others.
Everywhere and every time subjective factors are the root causes of the problems and
the sources of economic injustice, regardless of the variation in conditions, means and
quantity of production, which tend themselves to be by-products resulting from the
original misdiagnosis.
The only way to save man from economic injustice and confusion is his daily life, re-
shaping his existence and re-formulating his conceptions, his view of life, money,
wealth, profit and moral pleasure, in a sound and objective way and in harmony with
the Qur'an and in agreement with its deep, analytical views.
Allah, the Exalted, says:
"...surely Allah does not change the condition of a people until they change their
own condition;..."
Holy Qur'an (13:11)
Unless an independent, economic system is adhered to this change cannot be fully
successful; a system, which takes upon itself the task of re-distributing human wealth
and managing economic life in agreement with the principles of Islamic justice and
equality and not on high-fluting theories that lose the essence of what the basic
problem is:
Allah, the Exalted, says:
"And that if they should keep to the (right) way, We would certainly give them to
drink of abundant water."
Holy Qur'an (72:16)
"And if the people of the towns had believed and guarded (against evil) We
would certainly have opened up for them blessings from the heaven and the
earth..."
Holy Qur'an (7:96)
There is no way to better man's life other than effecting a complete, psychological and
ideological transformation. Yet to achieve this, a just system and law must be brought
about, both socially and legally, to serve as a prelude in the building of a human
community, where man can bask in righteousness and happiness and taste the flavor
of freedom and dignity.
The Qur'an, in many of its ayahs and conceptions, emphasizes this method of
transformation:
"until they change r own condition". "and that if they should keep to the (right)
way". "believed and guarded (against evil)."
By scrutinizing these words, we can arrive at the conclusion that the Qur'an made
psychological change, and treading on the right path (shari'ah and the Divine system),
having faith in them and insisting on adhering to their profound principles. Islam is
prerequisite to human change for the better and the sources of good and man's
economic welfare.
This is the true dimensions of the problem and overcoming it. But what of the external
factor that perpetuate and self-propel the ill-effects?

EXTERNAL FACTORS
Identifying human faults as an internal cause of the economic problem, Islam turns its
attention to specify the external factors, which constitute the chief reasons behind
exacerbating the problem. Islam, attributes the economic problems to two factors:
1. The Human Factor. The subjective one and root cause as already has been
explained.
2. External Factors. The objective ones.
These factors can be deduced, by concerned researchers of Islamic economics, from
the sources of legislation, morals, and concepts that deal with the social and economic
aspects of man's life. Briefly they can be summed as:
1. INADEQUATE PRODUCTION.
2. ILL-DISTRIBUTION.
3. ILL-CONSUMPTION.
By referring to the Qur'an, Prophetic Sunnah, books of fiqh, studies on morals, we can
compile many texts, principles and thoughts which deal with each of these causes. To
present a more clearer picture of the Islamic view of the economic problem, it is
necessary to consider all three causes separately.

1- INADEQUATE PRODUCTION:
The main cause of poverty as well as being a principle factor behind the economic
problem, under whose burden man is still suffering, is the decline in production in the
view of Islam. That is why Islam has focused attention on it and blamed two main
factors for it:
A. Unemployment and disusing of human resources:
Islam looks upon work as a holy and esteemed asset. It puts it on the same footing
with jihad and worship. The Prophet (s.a.w.) is reported to have said:
"Worship is of seven parts the best of which is seeking halal (lawful)
provision."[9]
Islamic traditions and texts dealing with the importance of work are bountiful. They
have one aspect in common urging man to work, mobilizing human beings to raise
their production capabilities and fighting sloth and unemployment as the prime
reasons of poverty and materialistic and social decline.
Of the traditions reported in regard to this point is one quoted from Imam Ali (a.s.):
"When things coupled, sloth and helplessness got together and engendered
poverty."
Imam al-Ridha (a.s.) quote his father Imam Musa al-Kadhim (a.s.), on the same
subject that he said to one of his sons on his death-bed:
"Beware of laziness and boredom, because for they prevent you from your share
of this world and in the Hereafter."[10]
B. Ignorance and lack of experience about methods of productions, including the
under-utilization of natural resources and man's creative powers. These factors play a
critical and undeniable role in the decline of production and spread of need and
destitution. Islam, for such consideration, urges Muslims to seek knowledge, make
use of natural resources and gain in knowledge about work and management. The
Prophet (s.a.w.) is quoted to have said:
"Allah surely loves the trustworthy professional."
Islam works towards mobilizing man bodily, psychologically and intellectually,
employing his technical and scientific abilities for the sake of production, adequate
supplies of needed commodities, and creating wealth. The Prophet (s.a.w.) reproached
whoever has no interest in increasing his wealth through halal (lawful) work and
expanding his ability to spend and meet his needs and the needs of his dependants.
In the words of the Holy Prophet (s.a.w.):
"There is no good in whoever who does not like earning his living from halal
work to satisfy his needs, pays his debts, and strengthen his ties of kinship".
This Prophetic tradition emphasizes the necessity of man striving to earn his own
way; that his earnings should outweigh his expenses. The Prophet (s.a.w.) laid stress
Oil this point in: "relation to the good of his family and the community as a
whole".
Islam's plan is simple and precise, directing man's energies into productive
employment as a moral responsibility and a legal duty that fits into building a healthy
Muslim society, where there is no unmet wanting.

2. ILL-DISTRIBUTION:
Bad distribution is the second gravest external cause of the economic problem, which
also results in the spread of poverty and need, and unbalanced economic life. As
clearly seen from secular systems, different social classes have arisen. One of them
lives in the lap of luxury, enjoying every kind of material pleasure, a massing wealth,
monopolizing means and sources of riches. While the other is hardly able to have
daily bread and scrape together a subsistence living.
This gross inequality in economic life, which represents a dangerous and harmful
schism in society, has its main causes principally in bad distribution and the
implementation of bland, man-made economic systems which have their own
momentum is aggravating the catastrophe. Feudalism, capitalism, and communism
and the like have merely exacerbated the crisis all the more.
Ill-distribution, has a long historic experience, regardless of whatever secular
economic system has been tried. Its consequence of an unjust spread of wealth is a
prime basis of today's social tragedy of mankind.
Such is well established, by Muslim and non-Muslim experts alike, as exampled by
one report in an Italian publication, and translated and published in the Kuwaiti daily
"al-Qabas", back on August 15-8-1976 in its issue 1525:-
"Experts in the fields of development, food and population unanimously agree that the
available natural resources in the world are so abundant that they can meet all the
needs of the nations if goodwill was shown and if these resources were equally
distributed among all nations. The root cause is the unjust distribution of the
resources...and the failure of many nations to win their real independence, decide the
fate of their wealth and distribute it justly and fairly.
"Russian scientist Ivan Shatilov has also said that cultivated areas now could satisfy
the hunger of tens of billions of people if their crops were distributed equally and
fairly among the nations of the world. He further points out: 'On the other hand, we
must not lose sight of the fact that the advanced industrialized world has not, sofar,
made use of the marine sources of food. The oceans constitute 71 percent of the total
surface of the earth, whereas they produce no more that 1 percent of man's foodstuff.'"
Man will never be able to taste the flavor of happiness and dignity, as historical
records testify, unless he sheds the shackles of short-sighted man-made systems, and
blot out forever their traces in the human community, souls and life. Such systems
proved themselves a failure. They only record their flagrant, tragic defeat, which
victimize humanity and brings forth unspeakable cries of starvation, wars and
deprivations. Man was metamorphosed into a machine working incessantly in favour
of the ruling classes, whether being individuals as is the case in the capitalist and
feudalis systems, or authorities, and parties as it is in the socialist and communist
systems.
Only when man recovers his consciousness from the anaesthesia of propaganda
manipulated by those who covet these principles from their won vested interest and
breaks the fetters of servitude which subdues him by force and coercion, man will see
the fountain of light and find the path to an honorable, free life, where he finds his
righteousness and dignity. Only when man strives to seeks and intensifies his efforts
to win good and happiness will he find the key presented by Islam.
This concise discourse, is not intended to delve into great detail the major principles
and important lines drawn by Islam in its unmatched economic system. It is but an
outline of its just view.

3. ILL-CONSUMPTION:
The major third factor conducive to the economic problem and perpetuating the
spread of poverty and destruction of human resources is ill-consumption, which the
misuse of wealth and the non-usage of assets that could preserve and satisfy human
demands in a calculated balanced way.
Like all other fields, Islam has a unique diagnosis for consumption in its particularly
caring way of embracing a complete formula for life. Its guidelines show the
following steps:-
1. Limiting Consumption:
Consumption is the most critical stage in dealing with the wealth and making use of it
and Islam did not neglect this vital area but set a system with clear moral aspects that
controls the process, utilizing the graces and favours bestowed on man by Allah.
So that man would not act excessively or unreasonably in regard to consuming life's
resources, Islam projects a well-laid system, calculated and in accordance with its
message and its distinctive way of handling matters at man's disposal.

2. Prohibition of Extravagance and Wastefulness:
Extravagance and wastefulness are nothing but harmful misusages of wealth. Islam
exhorted man to confine himself to the necessities of life and to keep his lusts, avarice
and the untoward behaviour in check.
Allah, the Exalted, says:
"O children of Adam! attend to your embellishments at every time of prayer,
and eat and drink and be not extravagant; surely He does not love the
extravagant."
Holy Qur'an (7:31)
"And they who when they spend, are neither extravagant nor parimonious, and
(keep) between these the just mean."
Holy Qur'an (25:67)
"And give to the near of kin his due and (to) the needy and the wayfarer, and do
not squander wastefully. Surely the squanderers are the brothers of the Satan
and Satan is ever ungrateful to his Lord."
Holy Qur'an (17:26-27)
"And do not make your hand to be shackled to your neck nor stretch it forth to
the utmost (limit) of its stretching forth, lest you should (afterwards) sit down
blamed, stripped off ."
Holy Qur'an (17:29)
These exhortation and restrictions were purely to keep a balanced economy . perfectly
organized. If wealth is employed in the interest of man, used as it was ordained and
planned by Allah, all human needs are met.
Islam, in its legislation and perceptions, erect a structure of logical bases compatible
with human make-up and instinctive needs.
Because man cannot always handle wealth, Allah's given services and favours are
bestowed upon him in a strategically productive way, Islam puts before him the way
according to which he can utilize and consume wealth efficiently and justly. If,
however, these are ignored and neglected, the specific objective outlined by Allah will
be lost to man with disastrous consequences as can be seen by the widespread plight
of people all over the world.
All activities, including commodities and services, are put into two categories that
best suit their nature, halal (lawful) and the haram (unlawful). Wine, gambling,
revelry, debauchery, wasteful entertainment...etc, are strictly prohibited because they
only dissipate man's wealth.
Instead of being wasted in vain, such huge sums of money should be spent in the
services of human society to satisfy fundamental human needs and preserve wealth
from being squandered and lost. It is an ailment that plagued all societies who lack the
sound planning Islam presents to man.
Thousands of millions of dollars are wasted daily on wine, gambling, extravagant
entertainment, debauchery, as well as on accumulating weapons of mass destruction
and annihilation for wars and terrorizing other nations, whilst millions of people are
straddled with hunger, deprivation and misery.
Islam makes such perverse and corrupt consumption haram because its aims are to
employ wealth in fields that secure welfare for humanity.
With its exact and perfectly planned economic system, Islam has placed in the hands
of mankind the economic gifts of securing the cure of all financial woes and salvaging
an equitable world from the abyss of poverty, deprivation and injustice in which
millions still painfully suffer from and seemingly will continue to do so with ill-
founded man-made equivalents.

GENERAL BASES OF DISTRIBUTION IN ISLAM
1. The distribution system of Islam is grounded in a general ideological base that
"Allah is the Only Real Owner." As for man, he is not more than a deputizing
vicegerent. He can only manage what he owns within certain limits, specified by
Allah.
Allah, the Most High, says:
"And certainly you have come to Us alone as We created you at first, and you
have left behind your backs the things which We gave you, and We do not see
with you your intercessors about whom you asserted that they were (Allah's)
associates in respect to you; certainly the ties between you are now cut off and
what you asserted is gone from you."
Holy Qur'an (6:95)
"Believe in Allah and His Apostle, and spend out of what He has made to you to
be successors of; for those of you who believe and spend shall have a great
reward".
Holy Qur'an (57:7)
2. Man has natural, instinctive needs which must be met, and under no-
circumstances can he be deprived of this right. The aim of Islamic economic
legislation is to provide needed commodities for man. Thus in unmistakably made
clear in this Prophetic tradition.
"Allah, the Exalted and mighty, looked at the wealth of the well-off. And He
looked at the destitute. He ordained a portion from the wealth of the rich to be
delivered to the poor to satisfy them. If it had not satisfied them He would
certainly have increased their share."[11]
The ability to earn wealth is put at man's disposal to better his life. It is not a goal in
itself. Rather it is a means to manage man's economic and daily life. Wealth,
therefore, has a social role. It serves man and makes him attain a nobler, and more
comfortable life. In its distribution, it must be spread into every cell of the human
society's body so that it can cater for all needs.
"Whatever Allah has restored to His Apostle from the people of the towns, it is
for Allah and for the Apostle, and for the near of kin and the orphans and the
needy and the wayfarer, so that it may not be a thing taken by turns among the
rich of you, and whatever the Apostle gives you, accept it, and from whatever he
forbids you, keep back, and be careful of (your duty to) Allah; surely Allah is
severe in retributing (evil)".
Holy Qur'an (59:7)
3. In Islam, ownership in various forms is lawful including individual, communal
and state ownerships and which is an axiomatic fact in fiqh and Islamic legislation.
4. The method of gaining money, property and economic resources are
restricted to certain laws as Islam puts restraints on any tendency of greediness or
other unscrupulous motives including exploitation.
Islam adopts two important methods to tackle this critical point to frustrate the urges
of greediness and exploitation. They are:
A - Rearing and cultivating Muslim individuals and society, both morally and
spiritually, in a way that promotes virtuous aspirations to steer clear of greediness
and selfishness and present the reality of wealth being only transitory aspects of a
temporary life on earth. It is a life that belittles so much attention being paid to
competition and making material gains merely for their own sake as man's existence
has much greater goals to be achieved for his salvation.
Islam turns its attention to the process of upbringing and focuses its attention on
developing the spirit of thrift, innovation and productive goals in line with its cultural
values and guidance. Man is advised to overlook the fierce rat race, which in merely
for grabbing more wealth and warns him not to drown himself extravagantly and
excessively in lusts and corporal pleasures.
Islam calls on man, to vie with his brothers, to create good and give up a part of his
property if able in favour of others in need. Man is spurred on by Islamic teachings to
shun methods and amass wealth and property, which pollute the spirit, kill the
conscience and dispose man to the wrath of Allah. In return, man's reward is ensured
in the Hereafter. Undesirable and unproductive ways of accumulating wealth such as
usury, hoarding, cheating and other unprincipled methods are forbidden by Islam.
There are bountiful texts and concepts in the Holy Our'an and the Prophetic sunnah
that instead nurture a noble human spirit and promote the qualities of altruism and
benevolence deep in man.
Allah, the Almighty, says in the Our'an:
"And those who made their abode in the city and in the faith before them love
those who have fled to them, and do not find in their hearts a need of what they
are given, and prefer (them) before themselves though poverty may afflict them,
and whoever is preserved from the niggardliness of his soul, these it is that are
the successful ones."
Holy Qur'an (59:9)
"Say: In the grace of Allah and in His mercy, in that they should rejoice; it is
better than that which they gather."
Holy Qur'an (10:58)
B- Laws are the second method employed by Islam to limit ways of accumulating
riches and prohibit amassing through unlawful means that do the utmost harm to
the community and feeds off the blood of the impoverished social class.
It is the state that takes the responsibility of achieving economic justice as it is
responsible far justice in every social realm. That is why laws strictly forbid usury,
hoarding, cheating and manipulating prices ...etc. The state's responsibility is to
protect and enforce laws and also to prevent such unlawful practices.
The letter written by Imam Ali (a.s.) to Malik al-Ashtar, his governor in Egypt, clearly
testifies to this required intervention, when saying:
"Keep an eye on the activities of traders and industrialists, whether they are
nearby or live in far-flung areas in your country.
"Let it be known to you, however, that they are usually stingy misers, intensely
self-centered and selfish, suffering from the obsession of grasping and
accumulating wealth. They often hoard their goods to make more profit out of
them by creating scarcity and black markets. Such practice is extremely
injurious to the public on one hand, and defames the ruler on the other.
"So put an end to hoarding up wares because the Holy Prophet (s.a.w.) has
prohibited it. Remember that trade should go on between purchasers and
suppliers according to correct measures and weights, and on such responsible
terms that neither the consumers nor the suppliers should have to face losses. But
if traders and industrialists carry on hoarding and black marketeering, even
though you have explicitly warned them earlier, then you must punish them
according to the intensity of their crime."
5. Economic balances by means of Islamic taxes:
Islam has laid down certain taxes like zakat (poor-rate) and khums (one-fifth of a
Muslim's income paid to the treasury every year). They are taken from the well-off
according to certain provisions, and delivered up to the destitute to satisfy their needs,
solve the problem of poverty, and in doing so achieve economic justice. The ultimate
goal of Islam here is to meet the economic needs of all Muslim individuals, so that no
one is left deprived in the whole Muslim World.
Imam Ja'far bin Muhammad al-Sadiq (a.s.) is reported to have said:
"Surely, Allah the Almighty and Exalted ordained a portion from the wealth of
the rich to be handed out to the poor which satisfies them. Otherwise, He would
certainly have increased their share. If they, however, remain unsatisfied, that is
because some people deny them their undisputed right."[12]
In a dialogue between the Prophet (s.a.w.) and a man who came asking him about
faith, the Prophet (s.a.w.) described zakat as a redress for the poor and a means to
ensure a balance between the needy and the rich.
The man narrated that he had asked the Messenger of Allah (s.a.w.) what he called for
and describes the following dialogue.
"I call the servants of Allah to serve Allah," the Prophet (s.a.w.) replied.
"What do you say?," I enquired.
"Bear witness," the Prophet (s.a.w.) said, "that there is no god but Allah and that
I, Muhammad, am the Messenger of Allah. You must believe in what He revealed
to me, deny the deity of al- at and al-Uzzah, keep up prayer and pay zakat."
"And what is zakat?," I asked him.
"The well-off among us," he told me, "hand back the money set aside to the poor
among us."[13]
Looking at the statement of the Messenger of Allah (s.a.w.) in his using of the
verb "hand back," the Prophet (s.a.w.) reveals the objective basis on which the
process of economic distribution in Islam depends, and the secret of the balance of its
concept of eeonomic justice in human society. The Prophet (s.a.w.) thus points out the
effective role of Islamic taxes in addressing defeats in economic life. The reason
behind that, in the light of the Prophet's statement, is that surplus wealth that ought to
be distributed fairly and evenly among individuals, goes directly, due to
mismanagement, to the pockets of the well-off and tips the scale at the expense of the
poor. Hence, the redress is made by handing back the money to their original and
lawful owners, namely the poor.
The Prophet's statement sheds a glaring light on Islam's view of one of the main
pillars on which distribution is based.
It is the belief that these taxes are a lawful guarantee to protect the right that slips out
of the hands of the poor, due to the self human attempts to bend the law or on the
account of human failure in raising itself to the level where it can implement this
natural law in economic life. These taxes underpin the ground on which the pillars of
just distribution stand, in order to preserve the economy's stability, secure welfare to
everyone and ensure balance is addressed on both sides of the economic scale.

6. Reciprocal social responsibility:
Reciprocal social responsibility among Muslims is a further important safeguard
towards a just distribution of wealth and combatting destitution and poverty in the
Muslim community.
From an Islamic education, Islamic sentiments are developed for a Muslim to feel
responsible for his brother. On no account should be bask in life pleasures and
luxuries whereas his brothers suffer from the severe pains bitter hunger, and
unsatisfied needs.
Islamic law lays down the principle of reciprocal social responsibility on spiritual and
moral grounds to implement such concerned behaviour. By so doing, Islam build up a
strong, tenacious society, in which the individual shoulders his duties by identifying
with his suffering brothers.
Numerous traditions and narrations emphasize this principle and urge Muslims to
share the burden uniformly.
The Noble Messenger (s.a.w.) is quoted to have said:
"Never does he believe in me who goes to bed full while his neighbour is hungry.
Never shall Allah on the Day of Judgement look with favour at the people of a
place who pass their night satisfied but among them is a hungry one."[14]
He also said:
"Surely he is not a Muslim who does not take interest in the affairs of Muslims.
And surely he is not a Muslim who hears a Muslim calling for help and does not
respond to his call."[15]
He further said:
"All of you are leaders and all of you are responsible for your subjects."
On this point Imam Ja'far al-Sadiq (a.s.) is quoted to have said:
"The right of the Muslim on the Muslim is that he should never eat his fill while
his brother suffers, never should be quench his thirst while his brother suffers
thirst, never should he clothe himself while his brother suffers inadequate
clothing."[16]
Another tradition reads:
"Any believer who denies another faithful something he can certainly offer him
or can do for him, on his own or with others' help, Allah shall certainly resurrect
him on the Day of Judgement black-faced, with withered eyes and hands tied up
to his neck. Someone shall cry out, 'This is the traitor who betrayed Allah and his
Messenger.' Then he shall be ordered to be thrown into hell-fire."
Deep in themselves, Muslims feel great human sentiments. With such cooperative,
kindly manners, Muslims treat one another. They only act incompatible ways with
Islam's excellent teachings, which leave their mark far more than any material and
corporal power could do. Muslims move to act, urged by the reward stored for them
and by their implanted benevolence more than by the whip of the dictatorial authority.

7 Economic security:
In Islam, state is liable for the demands and needs of every single subject, be he
Muslim or non-Muslim, should he be unable to provide for himself, through his own
personal resources or his sponsor.
This point is best explained again in the letter Imam Ali (a.s.) wrote to his governor in
Egypt, Malik al-Ashtar:
"Then I want to caution you about the poor. Fear Allah about their condition
and your attitude towards them. They have no support, no resources and no
opportunities. They are poor, they are destitute and many of them are crippled
and unfit for work Some of them, come out begging and some (who maintain
self-respect) do not beg, but their condition screams about their distress, poverty,
destitution and wants. So, protect them and their rights. Allah has laid the
responsibility of this on your shoulders. You must fix a share for them from the
government treasury. Beside this reservation in cash, you must also reserve a
share in kind of crops...etc. from government grain stores in cities, in which such
grain are collected and cultivated on state-owned lands. Because in this
collection, the share of those living far away from any particular city is equal to
the share of those living nearby".
Islamic law, made by this quotation, allots sums of money from the treasury to
support the infirm and needy, who can no longer work or that their incomes fall short
of covering their expenses. It states clearly the principle the state's responsibility for
economic security that applies to every citizen, irrespective of his/her religion.
It is narrated that one day Imam Ali (a.s.) saw a Christian dimmi (non-Muslim citizen
living in an Islamic state) begging. Amir al-Mu'minin (a.s.) asked:
"Who is this?"
"Oh Amir al-Mu'minin!," said people, who were present.
"He is a Christian."
"You employed him," Amir al-Mu'minin (a.s.) retorted, "until he become old and
infirm then you denied him help. Spend on him from the treasury."[17]

8. Lawful sources of wealth.
Sources of ownership, or the means by which man can gain wealth, property and
amenities of life, are looked upon by Islam as important matters, which define the
identity of the economic system, its method of distributing wealth among members of
society, fighting poverty and need, and rooting out greed, exploitation and unlawful
ways of gaining wealth.
Islam sets two key ways of gaining wealth which are work and need. They are
lawfully accepted ways of ownership.[18]

A- Employment and natural resources:
One may work in agriculture, mining, industry or any field of production or one may
give one' s services in the fields of medicine, engineering, transportation, education,
trade...etc. In Islam, employment in any field of lawful activity, is the chief way of
acquiring wealth and money. Islam lays out great emphasis on the personal role in
securing wealth and obtaining money, as we have previously detailed.

B- Need:
In the same way Islam made work a legal way of getting money and wealth, it made
need a source of ownership for wealth to fight destitution and poverty. But ownership
here is different from the former one.
For ownership, in the first case, is the fruit of the direct interaction between man,
nature or raw materials, or services rendered to satisfy some needs. Man here becomes
entitled to ownership in return for the fruits of his labour.
As for ownership by need, it is the process of conveying property or wealth from one
owner to another one on account of the need for it by the new owner. In order of
precedence, the latter kind of ownership comes second to the first one. Ownership by
need is placed in the category of owning something by inheritance and maintenance as
in the case given by the husband to his wife.
The needy, who cannot work, due to bodily infirmity or can finds no work, has a share
in the money set aside from the taxes of zakat and khums, or from the money allotted
by the state to meet the needs of the impoverished.
The ultimate result of this economic system being put into practice is that every single
member of the Islamic community becomes economically secure. He neither fears
poverty nor does he worry about his daily life. On the contrary he feels secure, and
has confidence in the community and state he lives under its shade.
Once this unmatched economic system is implemented, and security in welfare
prevails along side with stability. All man's efforts then are channelled into one
conduit, which is the competition to do good and to work for building and
constructing a society far removed from in fighting and aggressive and destructive
erosions.
Praise be to Allah, Lord of the world.
Salient Features of Islamic Banking and Finance
SEPTEMBER 28, 2012 EBTIHAJ OBAIDI NO COMMENTS
Islamic Shariah is not only the law but beyond the law. It is a compound of Religious, Economical, Social,
Political and personal private life. Islam is based on three pillars which are called Aqidha, Shariah, and
Akhlaq. And what we are trying to discuss is the other economic activities. In this field of life, all the
banking and financial activities are performed. For the Muslims, these activities have to be according to
the principles of Islamic Shariah. Here, I would like to mention the four (4) sources of Shariah.
Primary source of Shariah is Quran which gives main beliefs, principles and wide-ranging directives of
Allah (SWT). Quran say; Verily, this Quran guides to that which is best, and gives glad tidings to the
believers who do good that there will be a great reward. (17:9). All the Rulings derived explicitly from
Quran are Obligatory (Farz) and its refusal is Kufr.
The secondary source of Shariah is called Sunnah which includes Sayings, Practices, Silent Approvals
of Hazrat Muhammad (SAWS) and the practices of four Caliphs and other companions of Hazrat
Muhammad (SAWS). Sayings of Hazrat Muhammad (SAWS) are also called Ahadith. Ahadith act for
Quranic teachings and directives as interpreter and explainer.
Third source of Shariah is called Ijmaa. It is the consensus of Islamic Jurists on a specific issue. In
Ijmaa, there should be a consensus of all the Islamic Jurists to the rulings. Fourth source of Shariah is
called Qiyaas the Analogy. In order to apply Qiyaas to similar cases, the reason of the Islamic rule must
be clear.
Basic concepts and philosophy of banking system is the financial intermediation between the financier
and entrepreneur. Lending and borrowing is very much easy with these financial institutions. It is very
helpful sector to settle the recoveries. Government is controlling banking sector with the help of State
Bank of Pakistan (SBP).
Salient features of Islamic Banking and Finance can be explained as;
There is no financing for activities which are prohibited be Islamic Shariah.
Interest is prohibited, so there is no involvement of Interest in Islamic Banking transactions.
Risk sharing, all the Islamic Banking product are considered as a risk sharing. Risk sharing is the base
of Islamic Banking.
Sanctity of the contracts, purity is the main focus of Islamic Banking in its contracts.
All the financing of Islamic Banking is for economic purposes, economic well being is the utmost
priority of Islamic Banking
There is no exploitation for financier and borrower in Islamic Banking. All the dealings are fair.
Islamic Banking values goods and services which produces real wealth in the economic well-being.
Profit is shared on the pre-agreed profit ratio in Islamic Banking between the financier and fund
manager.
Islamic Banking is actively participating in trade and production of the economy.
An Islamic Approach to Business Ethics
Dr Sabahuddin Azmi
[1]



What is Ethics?
Ethics may be defined as the set of moral principles that distinguish what is right
from what is wrong. Ethics has a twofold objective: it evaluates human practices by
calling upon moral standards; also it may give prescriptive advice on how to act
morally in a given situation. Ethics, therefore, aims to study both moral and immoral
behaviour in order to make well-founded judgments and to arrive at adequate
recommendations. Sometimes ethics is used synonymously with morality. An action,
which is morally right, is also called an ethical one. Codes of morality are called
ethical codes. Business ethics can also be defined as business morality.

Business Ethics
Business Ethics is the branch of ethics that examines ethical rules and principles
within a commercial context; the various moral orethical problems that can arise in
a business setting; and any special duties or obligations that apply to persons engaged
in commerce. Generally speaking, business ethics is a normative discipline, whereby
particular ethical standards are formulated and then applied. It makes specific
judgments about what is right or wrong, which is to say, it makes claims about
what ought to be done or what ought not to be done. Generally speaking, business
ethics is concerned with the study of what is good and bad, right and wrong, and just
and unjust in business.

Ethics in Islam
Islam places the highest emphasis on ethical values in all aspects of human life. In
Islam, ethics governs all aspects of life. Ethical norms and moral codes discernable
from the verses of the Holy Quran and the teachings of the Prophet (sws) are
numerous, far reaching and comprehensive. Islamic teachings strongly stress the
observance of ethical and moral code in human behaviour. Moral principles and codes
of ethics are repeatedly stressed throughout the Holy Quran. Besides, there are
numerous teachings of the Prophet (sws) which cover the area of moral and ethical
values and principles. Says the Holy Quran:

You are the best nation that has been raised up for mankind; You enjoin right
conduct, forbid evil and believe in Allah. (3:110)

The Prophet (sws) also says:

I have been sent for the purpose of perfecting good morals. (Ibn Hambal
[1]
, No:
8595)

This goes without saying that there is a general consensus among human beings
about certain fundamental ethical values. However, the Islamic ethical system
substantially differs from the so-called secular ethical systems as well as from the
moral code advocated by other religions and societies. In the Islamic scheme of
things, adherence to moral code and ethical behaviour is a part of I%man (faith) itself.
According to the Islamic teachings, Muslims have to jealously guard their behaviour,
deeds, words, thoughts, feelings and intentions. Islam asks its believers to observe
certain norms and moral codes in their family affairs; in dealings with relatives, with
neighbours and friends; in their business transactions; in their social affairs, nay in all
spheres of private and public life.
Islam has its own distinctive value-based ethical system for business dealings. It
prescribes certain specific guidelines for governing business ethics. It (i) enumerates
the general ethical rules of business conduct, (ii) identifies ethically desirable forms of
business, and, (iii) specifies the undesirable modes of transactions.
Given the nature of Islamic ethical and moral codes, it would be beyond the capacity
of one paper to fully comprehend the subject. In the following pages, our effort will
be to confine ourselves to the discussion of some specific principles of business ethics
in Islam.

Freedom of Enterprise
Islam gives complete freedom to economic enterprise. Each individual in an Islamic
society enjoys complete freedom in the earning of his livelihood. He can start, manage
and organize any kind of business enterprise within the limits set by the
Islamic Shariah. However, freedom does not and must not operate without a sense of
responsibility. An individual is free to pursue his economic activities provided he
respects the code of conduct prescribed for the profession, which broadly means
choosing things lawful and shunning matters unlawful. The dictates of the
Holy Quran and the teachings of the Prophet (sws) serve to set a scale in everybodys
mind to distinguish between the lawful and the unlawful means of earning, and to
prohibit or disapprove of all things that are either morally wrong or socially
unacceptable.
Islam, as a matter of principle, prohibits all activities which may cause harm either to
the traders or the consumers in the market. It encourages the prevalence of free market
where everyone earns his sustenance without government intervention. However, it puts
certain restraints in order to eliminate the incidence of injustice and check malpractices
and unlawful operations. In all other respects market in Islam is free from any state
intervention. However, if the people fail to take guidance from the Holy Quran in
matters relating to business transactions, an Islamic state will strive to organize the
market transactions on sound Islamic principles. Freedom of enterprise in an Islamic
market will, therefore, be regulated by the (i) dictates of the Holy Quran and the
teachings of the Prophet Muhammad(sws) and (ii) the directives of the temporal
authority. During the early centuries of Islam, this function was mainly performed by
the institution of Muhasbah (headed by a Muhtasib or market inspector). The institution
of Muhasbah was an important institution whose functions were broad-based and
multifarious, chief among them being keeping a watch on the harmful practices
prevalent in the market and the society and checking the incidence of injustice and
malpractices in the market.

Islamic Tenets Concerning Business Transactions

Islam demands a certain type of behaviour from the economic agents the
consumers and the producers. The behaviour prescribed for the economic units of the
society are so devised as to lead to a happy state of affairs, which is the ultimate goal
of Islam. An Islamic market is characterized by certain norms that take care of the
interests of both the buyer and the seller. There are a number of rules of ethical
discipline in Islamic commercial transactions without which business contract would
be regarded as lacking perfection in the light of the code of good manners, decency
and ethical excellence. Some of these tenets are as follows:

Keenness to Earn Legitimate (Halal) Earnings
Islam places great emphasis on the code of lawful and unlawful in business
transactions. Many Quranic verses disapprove the wrongful taking of the property.
Says the Holy Quran:

Do not devour one anothers property wrongfully, nor throw it before the judges in
order to devour a portion of others property sinfully and knowingly. (2:188)

Do not devour anothers property wrongfully unless it be by trade based on
mutual consent. (4:29)

The above verses prohibit the believers in no uncertain terms to devour the property
of others by illegal means. The Prophet (sws)endorsed the importance of legitimate
ways of earning in the following words:

Asked what form of gain is the best? [the Prophet] said, A mans work with his
hands, and every legitimate sale. (Ahmad, No: 1576)

From the above it is clear that a Muslim trader must be determined to earn only
through legitimate means. He should not only avoid illegitimate means in earning his
provisions and livelihood but also distance himself from matters dubious and
doubtful. The Prophet(sws) is also reported to have said:

Leave what makes you doubt for things that do not make you doubt. (Tirmidhi, No:
2442)

Things legitimate and illegitimate are clearly defined in Islam and, in between them,
are doubtful things, which should be avoided. A true Muslim businessman should be
wary of the doubtful things in order to keep himself clear in regard to his faith and his
honour because one who falls into doubtful matters is sure to fall into that which is
unlawful (Haram). A tradition of the Prophet (sws) states:

A time will come upon the people when one will not care as to how he gets his
money whether legally or illegally. (Bukhari, No: 1941)

Foremost among the unacceptable business practices strongly condemned in Islam
is Riba. Riba (interest), by definition, is the extra sum the moneylender charges from
the borrower for deferred payment. Islam has forbidden all forms of Riba since it
involves both oppression and exploitation. Islam strictly forbids this form of
tyrannical dealings and condemns it in severe terms. The Holy Quransays:

Allah has permitted trading and forbidden Riba (usury). (2:275)

Devour not Riba doubled and re-doubled. (3:130)

It further states:

O you who believe! fear Allah and give up what remains of your demand for usury
if you are indeed believers. If you do it not, take notice of war from Allah and his
Apostle: but if you turn back you shall have your capital sums; deal not unjustly
and you shall not be dealt with unjustly. (2:278)

The Sunnah
[2]
is equally emphatic in denouncing Riba. The Prophet (sws) is
reported to have said:

May Allah send down His curse on the one who devours Riba and the one who
pays it and on the two witnesses and on the person writing it. (Ahmad, No: 624)

These and many other verses of the Quran and traditions of the
Prophet (sws) clearly demonstrate that all those business transactions which involve
interest in one form or other, are unlawful in the sight of Islam. According to
the Quranic teachings there is a clear distinction between genuine business profits
and interest; while the former is recommended and desirable, the latter is hated and
undesirable.

Trade through Mutual Consent
Mutual consent between the parties is a necessary condition for the validity of a
business transaction. It, therefore, follows that a sale under coercion is not acceptable
in Islam. A sale transaction is to be regarded as legal only if it is made through the
mutual consent of the parties concerned. Taking advantage of someones plight and
charging high price is also a form of pecuniary exploitation and as such forbidden in
Islam. The Holy Quran says:

O you who believe! eat not up your property among yourselves in vanities: but let
there be amongst you traffic and trade by mutual goodwill: nor kill [or destroy]
yourselves: for verily Allah has been to you Most Merciful. (4:29)

Thus two key elements of general theory of contract are endorsed emphatically in
these verses: mutual consent and gainful exchange. One can also find importance of
mutual consent for legality of a business deal. The Prophet (sws) is reported to have
said:

A sale is a sale only if it is made through mutual consent. (Ibn Majah, No: 2176)

Truthfulness in Business Transactions
Islam encourages truthfulness in business transactions and raises the status of a
truthful merchant so much so that he will be at par with the holy warriors and martyrs,
in the Hereafter. The Prophet (sws) is reported to have said:

The truthful merchant [is rewarded by being ranked] on the Day of Resurrection
with prophets, veracious souls, martyrs and pious people. (Tirmidhi, No: 1130)

The Prophet (sws) has also exhorted the believers to strictly adhere to truthfulness in
business transactions. He says:

The seller and the buyer have the right to keep or return the goods as long as they
have not parted or till they part; and if both the parties spoke the truth and
described the defects and qualities [of the goods], then they would be blessed in
their transaction, and if they told lies or hid something, then the blessings of their
transaction would be lost. (Bukhari, No: 1937)

The tradition implies that Allah blesses business dealings if both the buyer and the
seller are true to each other. Telling lies and hiding facts will result in the loss of
divine blessing. A tradition reads.

The Holy Prophet said: Traders are wicked people. The Companions asked: O
Messenger, has Allah not permitted business? The Messenger replied: Of course
He has declared trading lawful. But they (i.e. the traders) will swear by Allah and
do evil, they will not speak but tell lies. (Ahmad, No: 14982)

Trustworthiness in Business Transactions
Trustworthiness is one of the most important principles of ethical discipline in
commercial transactions. Trust is a moral virtue and duty incumbent on a Muslim in
the performance of his affairs. It demands sincerity in work and purity of intention
from every believer. A true Muslim trader will not, therefore, barter
his Akhirah (hereafter) for worldly gains. He will avoid fraud, deception, and other
dubious means in selling his merchandise. The sense of mutual trust demands that the
pros and cons of commodity be revealed to the buyer so that he purchases the
commodity in full satisfaction. Says the Holy Quran:

O you believers! Do not betray Allah and the Messenger, nor knowingly, betray
your trusts. (8:27)

Generosity and Leniency in Business Transactions
One should be lenient and generous in bargaining. Therefore, whoever demands his
debt back from the debtor should do so in a decent manner. The Prophet (sws) invokes
Allahs mercy thus:

May Allahs mercy be on him who is lenient in his buying, selling, and in
demanding back his money [or debts]. (Bukhari, No: 1934)

The Prophets exhortation to Muslims means that a creditor should be easy and
generous in demanding back his money. The debtor, in turn, should also give back the
debt to the creditor on time with due thanks and politeness. The Prophet (sws) was the
best of all people in repaying the debts.

Abu Rafi reports that the Prophet (sws) took a young camel on loan. When camels
came to him in charity, he asked Abu Rafi to give the creditor a young she
camel. Abu Rafi pointed out that there was no young camel except for a fouryear
old camel of a very good quality. The Prophet (sws) said: Give him the best one, for
the best amongst you is he who repays the rights of others handsomely. (Muslim,
No: 3002)

Honouring and fulfilling Business Obligations
Islam attaches great importance to the fulfilment of contract and promises. Islamic
teachings require a Muslim trader to keep up his trusts, promises and contracts. The
basic principles of truth, honesty, integrity and trust are involved in all business
dealings. The HolyQuran emphasizes the moral obligation to fulfil ones contracts
and undertakings. A verse states thus:

O you who believe! Fulfil [your] obligations. (5:1)

A tradition of the Prophet (sws) states thus:

The Muslims are bound by their stipulations. (Abu Daud, No: 3120)

Another tradition condemns promise-breaking as the hallmark or trait of a hypocrite:

If he makes a promise, he breaks it, and if he makes a compact, he acts
treacherously. (Bukhari, No: 32)

In order to safeguard the interest of both the buyer and the seller it is desirable,
according to the Islamic teachings, to clearly define all the necessary details
concerning the business deal. Each business contract should clearly specify the
quality, the quantity and the price of the commodity in question. Thus, in a business
contract the offer and acceptance should be made between the parties concerned on a
commodity which is with the buyer and, which he is able to deliver. Any commodity
which is non-existent or not deliverable is not allowed to be transacted. A contract
must be explicit with regard to the rights and obligations of the parties concerned so
that it does not lead to disputes and disagreements between them.

Fair Treatment of Workers
Islam puts certain conditions and restrictions to obviate the chances of bitterness
between the employer and employees. Islam encourages and promotes the spirit of
love and brotherhood between them. According to the Islamic teachings it is the
religious and moral responsibility of the employer to take care of the overall welfare
and betterment of his employees. Fair wages, good working conditions, suitable work
and excellent brotherly treatment should be provided to the workers. The last Prophet
of Allah (sws) has explained this principle in the following words:

Those are your brothers [workers under you] who are around you, Allah has
placed them under you. So, if anyone of you has someone under him, he should
feed him out of what he himself eats, clothe him like what he himself puts on, and
let him not put so much burden on him that he is not able to bear, [and if that be
the case], then lend your help to him ( . Bukhari , No: 2359 )

The Prophet (sws) also said :

I will be foe to three persons on the Last Day: one of them being the one who,
when he employs a person that has accomplished his duty, does not give him his
due . ( Bukhari , No: 2109 )

The Prophet (sws) is also reported to have said :

The wages of the labourers must be paid to him before the sweat dries upon his
body. (Ibn Majah, No: 2434)

Prohibited Matters in Business Transactions

So far we have focused on one aspect of the business ethics guidelines prescribed
by Islam for conducting business transactions. Another aspect of business ethics is the
various forms of unethical business practices a Muslim businessman must avoid in his
business dealings. Some of these prohibited and undesirable business practices are as
follows:

Dealing in Prohibited (Haram) Items
Dealing in unlawful items such as carrion (dead meat), pigs and idols is strongly
prohibited in Islam. Dead meat would mean the flesh of any bird or animal dead from
natural causes, without being properly slaughtered in an Islamic way. A Muslim,
therefore, will not eat the flesh of such an animal or bird. Flesh of an electrocuted
animal, or of an animal killed by the blow of a blunt weapon, and of the strangled one
is also proscribed in Islam. Also proscribed is the flesh of the animal that has been
killed or slaughtered in ways other than Islamic. It is, therefore, not permissible for a
Muslim to trade in dead meat. Likewise, trading in pork or intoxicants and sale of
idols and statues is not permitted in Islam. A verse of the Holy Quran says:

Forbidden to you [for food] are: dead meat, the blood, the flesh of swine and that
on which name of other than Allah has been mentioned. (5:1)

The Holy Quran also says:

O you who believe! intoxicants and gambling [dedication of] stones and [divination
by] arrows are an abomination of Satans handiwork: so avoid it in order that you
may prosper. (5:90)

The Prophet (sws) is also reported to have said;

Allah and His Messenger made illegal the trade of alcoholic liquors, dead animals,
pigs and idols. (Bukhari, No: 2082)

The Prophet (sws) also said;

If Allah makes something unlawful, he makes its price also unlawful. (Ahmad, No:
2546)

Sale of Al-Gharar (Uncertainty, Risks, Speculation)
In Islamic terminology, this refers to the sale of a commodity or good which is not
present at hand; or the sale of an article or good, the consequences or outcome of
which is not yet known; or a sale involving risks or hazards where one does not know
whether at all the commodity will later come into existence. Such a sale is strictly
prohibited in Islam because the quality, whether good or bad, is not known to the
buyer at the time of the deal and there is every possibility that the contract may give
rise to disputes and disagreements between the concerned parties. The Prophet (sws),
therefore, prohibited the sale of what is still in the loins of the male; or sale of
whatever is in the womb of a shecamel; or sale of birds in the air; or the sale of fish
in the water, and any transaction which involvesGharar. (i.e. anything that involves
deception). He also forbade the sale of fruits before they look healthy and also the sale
of crops until the grain hardens. Nevertheless, such advance sales would be acceptable
if the element of Gharar does not exist and the quality and the quantity of the goods
are pretty well known and predictable.

Arbitrarily Fixing the Prices
Islam grants absolute freedom to traders provided they adhere to the code of
lawfulness. It does not, therefore, encourage the practice of pricefixing and leaves the
traders to earn the profits from each other within the lawful limits. As a matter of
principle public authorities are not allowed to fix the prices of commodities by force.
This is because rise and fall in the prices are linked to various factors other than the
greediness of the traders and fixing the prices may endanger both public and private
interests.
It is reported that once the prices shot up during the period of the Prophet (sws). The
people said:

O Messenger of Allah! Prices have shot up, so fix them for us. Thereupon the
Messenger of Allah said: Allah is the One Who fixes prices, withholds, gives
lavishly, and provides, and I hope that when I meet Allah, none of you will have
any claim on me for an injustice regarding blood or property. (Tirmidhi, No: 1235)

However, the role of public authorities comes into play if it becomes absolutely
essential to do so, especially in order to prevent exploitation and other unjust practices
in the market. Thus, if a trader adopts unfair means, charges unjust prices and indulges
in undercutting with a view to doing harm to the smaller traders, public authorities
have the right to intervene in the market. They can and should take steps to fix or
control the prices so as to eliminate injustice from the market and allow the trader to
earn reasonable profit and the buyer to pay a just and equitable price.

Hoarding of Foodstuff
The Arabic word for hoarding is Ihtikar. It means storing foodstuffs or withholding
them in expectation of rise in their prices. Sometimes, a handful of traders operating
in the market buy the entire quantity of an item, rice for example, and store it up with
the object of selling it later at the time of scarcity to draw maximum profit out of it
and to dictate the prices. The consumers are left with no choice but to purchase the
article concerned from the one who hoards, as he is the only one in the market who
holds it. Sometimes, a trader hobnobs with the suppliers who will only sell their
merchandise to him. As a result, he holds the entire stock of the essential items that
other traders do not possess. He is, therefore, in a position to dictate his terms in the
market and sell them at an exorbitantly high price to the needy people. This is an
unjust practice and a clear case of exploitation and deservedly condemned by Islam.
The Prophet (sws) is reported to have condemned the hoarders when he said:

No one hoards but the traitors (i.e. the sinners). (Abu Daud, No. 2990)

He (sws) also said:

The importer [of an essential commodity] into the town will be fed [by Allah], and
the hoarder will have [Allahs] curse upon him. (Ibn Majah, No: 2144)

Exploitation of ones Ignorance of Market Conditions
One of the most common unethical practices in modern business is to exploit ones
ignorance of market conditions. Sometimes it may happen that a buyer arrives in a
town with objects of prime and general necessity for selling them in the market. A
local trader may persuade the new-comer to transfer all of the goods to him so that he
will sell them on his behalf in the market. He obtains the commodities on a price that
is lower than market price and then sells them at a high or exorbitant price. Islam
condemns this act of intermediary intervention which involves exploitation of ones
ignorance of market conditions. The practice was prevalent in pre-Islamic society. The
Prophet (sws) has prohibited this practice through a number of instructions. A
tradition reads:

A town dweller should not sell the goods of a desert dweller. (Bukhari, No: 2006)

Al-Najsh (Trickery)
The term Al-Najsh means an action in which a person offers a high price for
something, without intending to buy it, but just to cheat or defraud another person
who really means to buy it. The person practising it may collaborate with the seller to
offer high prices in front of the buyers merely as a means to cheat them. This type of
fraudulent transaction is totally prohibited in Islam. The Prophet(sws) is reported to
have said:

Do not harbour envy against one another; do not outbid one another [with a view to
raising the price]; do not bear aversion against one another; do not bear enmity
against one another; one of you should not enter into a transaction when the other
has already entered into it; and be fellow brothers and true servants of Allah.
(Muslim, No: 4650)

As is clear from the above, Islam also forbids the practice of sale over sale and
purchase over purchase. This means that it forbids someone to offer a higher price for
a commodity after the deal has been accomplished between the parties. Obviously he
is offering a higher price in order to spoil the agreement reached between the parties.
As a result of this offer the buyer may feel tempted to cancel his contract to sell it at a
higher price. It may give rise to disputes and disagreements between brothers. Hence
it is strictly prohibited in Islam.

Cheating and Fraud in Business Transactions
The traders and businessmen generally have a tendency to motivate the customers by
adopting fraudulent business practices. Islam strongly condemns all such practices in
business transactions (Al-Ghashsh). The Messenger of Allah has commanded the
believers not to indulge in cheating and fraudulent practices in business transactions.
Sale of dead animal, dubious and vague transactions, manipulating the prices, selling
the items belonging to a desert dweller by a townsman Al-Najsh (trickery), false
eulogy and concealment of defects are all examples of cheating and fraud i.e. Al-
Gashsh. The Prophet (sws) has strongly condemned all such practices in a number of
traditions and the believer to abstain from them.
The Prophet (sws) is reported to have said:

The seller and the buyer have the right to keep the goods or return them as long as
they have not parted. He also said that if both the parties have spoken the truth and
described the defects as well as the merits thereof (the goods), they would be
blessed in their deal. If they have told lies or concealed something, then blessings
of their transaction would be lost. (Bukhari, No: 1937)


Swearing
The traders often take recourse to swearing to emphasize that their items are of good
quality. They claim qualities in the merchandise, which dont exist. They try to
persuade the buyers to purchase their commodity by invoking Allahs name. Swearing
in business for such purposes is forbidden in Islam, be it false or true. False swearing is
an act of sin punishable by hellfire. Swearing by Almighty Allah is too great a thing to
be used as a means to sell a commodity. The desirable thing in business transaction is
that both the buyer and the seller remain straightforward and truthful in their dealings,
so that no one will feel the need to swear by Allah in order to create conviction in the
mind of the other party. The Prophet (sws) is reported to have said:

Swearing [by the seller] may persuade the customer to purchase the goods but the
deal will be deprived of Allahs blessing. (Bukhari, No: 1945)

Giving Short Measures
Another form of deceit is to manipulate weights and measures. It refers to the act of
taking full measures from others and giving them short measures in your turn. Giving
short measures was a common malaise plaguing the pre-Islamic days. The community
of the Prophet Shuayb (sws) was known for practising it with impunity.
Consequently, they were destroyed for their persistence in deceit and disbelief in
Allah and His Messenger. Allah the Almighty has repeatedly commanded exactitude
in weights and measures. One of the verses says:

And give full measure when you measure, and weigh with a just balance. That is
good and better in the end. (17:35)

Dealing in Stolen Goods
Almighty Allah has declared thievery unlawful and warned of severe punishment such
as cutting the hand of the thief from the wrist joint if the necessary legal conditions for
the award of punishment are met. Even if the thief escapes worldly punishment and gets
away with stolen goods, it is not permissible for a Muslim to knowingly purchase or
sell these items. The stolen items are neither to be bought nor sold by those who know
the reality. The Prophet (sws) made the person knowingly buying a stolen commodity a
partner to the crime. He said:

The one who knowingly purchases a stolen good, is a partner to the act of sin and
the shame. (Kanz Al-Ammal, No: 9258)

Conclusion
In modern times business ethics has become a major topic of discussion among
business communities and other related organizations. Each and every society has
evolved ethical and moral codes of conduct for business transactions. However, the
Western secular ethical values are by and large supposed to be utilitarian, relative,
situational and devoid of any spiritual sanctioning power. The Islamic ethical codes, on
the contrary, are humane rather than utilitarian or relative. They are good for all times
and absolute. Ethical and moral codes in Islam are part of the overall Islamic faith and
observing them will not only lead to a happy state of affairs in this world but also holds
the promise of manifold returns in the Hereafter. Islamic ethical and moral codes thus
create a sense of responsibility and accountability in the minds of the believers, be they
buyers or sellers.
Our effort in this paper has been to present the Islamic perspective concerning
business ethics. As we saw, the ethical code of Islam is multidimensional, far
reaching and comprehensive. Islamic ethical framework is repeatedly stressed
throughout the Holy Quran , and the teachings of the Prophet and encompass all
spheres of life including business financial dealings and obligations. The fundamental
codes of moral behaviour such as truthfulness, trustworthiness, generosity and
leniency, adherence to business commitments and contracts, fair treatment of
workers, avoidance of evil practices (such as fraud, cheating, deceit, hoarding of
foodstuff, exploitations, giving short measures etc.) provide, to a large extent, the
general background of Islamic business ethics. The writer believes that there is a
pressing need to study and implement Islamic moral values in the context of the
present day business situations .
Business Ethics in Islam
By Dr. Muzammil Siddiqi
As Muslims, we have to adhere to ethical standards, not only in business but also in
all aspects of life. Both business and ethics are interrelated. There is a reference to this
point in the Quran: For you in the Messenger of Allah is a fine example to follow
(Al-Ahzab 33:21).
It is worthy stressing here that when Muslims stick to ethics in their daily lives, they
will become good examples to emulate. Perhaps this will help rectify some aspects of
the distorted image about Islam. Thus they will to some extent become worthy
ambassadors of their religion.

Prophet Muhammad (pbuh) was an ideal human being. He was the best teacher,
preacher, and guide; the best statesman, lawgiver, judge, diplomat, negotiator of
treaties, and military commander; the best family man, a good husband, a kind father,
a good neighbour, and friend of his people. He was also a very honest and successful
businessman.
The Prophet was chosen by God to be His last prophet at the age of 40. Before that he
was very much involved in business. He was born in Makkah, frequented by caravans
from Syria in the north and Yemen in the south. The Prophet would join these
caravans and that is how he traveled to Syria, Yemen, Bahrain, and many other places
in Arabia. Some historians have also suggested that he probably traveled to Iraq and
Ethiopia.
From his early age, he was involved in commerce. He had a good reputation as a
hardworking, truthful businessman. It was due to this reputation that Khadijah, a
wealthy businesswoman, hired him to work for her business. Many people in Makkah
had asked for her hand and worked for her, but they either cheated her or she was not
satisfied with their work. Finally, she found Muhammad (he was not a prophet at that
time) and she asked him to work for her. He made several business trips. She was
impressed with his work as well as his impressive personality, they later got married.
After marrying Khadijah, the Prophet took several business trips throughout parts of
Arabia. Ancient Arabia used to have commercial fairs in almost all major towns and
regions; it is probable that the Prophet visited some of these commercial fairs. After
becoming a prophet, his business activities decreased, although he would occasionally
participate in business transactions. His vast business experience helped him in
dealing with people with great care. He often used to mention the names of people and
tribes whom he met in his journeys. People were often amazed of his knowledge of
people and their regions.
The Prophet emphasized that honesty and kind dealings with customers are the secrets
of success in business. He said, The truthful and honest merchant is associated with
the Prophets, the upright and the martyrs (Al-Tirmidhi). God shows mercy to a
person who is kindly when he sells, when he buys and when he makes a claim (Al-
Bukhari). The Prophet gave many teachings on business and economic issues, he
covered almost every aspect of business and economics. Here are only a few major
principles of fair business dealings according to Islam.
1. No fraud or deceit, the Prophet (pbuh) is reported to have said, When a sale is
held, say, Theres no cheating (Al-Bukhari).

2. Sellers must avoid making too many oaths when selling merchandise. The Prophet
(pbuh) is reported to have said, Be careful of excessive oaths in a sale. Though it
finds markets, it reduces abundance (Muslim).
3. Mutual consent is necessary. The Prophet (pbuh) is reported to have said, The sale
is complete when the two parties involved depart with mutual consent (Al-Bukhari).
4. Be strict in regard to weights and measures. The Prophet (pbuh) is reported to have
said, When people cheat in weight and measures, their provision is cut off from
them (Al-Muwatta). He told the owners of measures and weights, You have been
entrusted with affairs over which some nations before you were destroyed (Al-
Tirmidhi).
5. The Prophet forbade monopolies. Whoever monopolizes is a sinner (Abu
Dawud).
6. Free enterprise, the price of the commodities should not be fixed unless there is a
situation of crisis or extreme necessity.
7. Hoarding merchandise in order to increase the prices is forbidden.
8. Transaction of haram items, such as intoxicants, are forbidden.
The Prophets general advice to all people was, What is lawful is clear and what is
unlawful is clear, but between them are certain doubtful things which many people do
not recognize. He who guards against the doubtful things keep his religion and his
honour blameless, but he who falls into doubtful things falls into what is unlawful,
just as a shepherd who pastures his flocks round a sanctuary will soon pasture them in
it. Every king has a sanctuary, and Gods sanctuary is the things he had declared
unlawful (Al-Bukhari).
The Role of Business Ethics Today
Business people and their enterprise require to be reminded about their role and
responsibilities. The following issues need special attention in the present scenario.
1. Globalization should mean that all people are considered to comprise one family.
All human beings should be treated with respect, equality, and fairness. Exploitation
of one group by another should stop. There should not be any division among people
because of their race, colour, nationality, gender, or faith.

2. The resources of the Earth are not only for us, we share this biosphere with other
species, and so we take care not to waste or destroy them.

3. We should use the Earths resources with great care and should remember that we
have a duty to leave this world in a better condition for the posterity.

4. Human beings are one family, although we have our differences. Diversity is
natural and beautiful. We should try to understand other peoples religions and
cultures and we should be sensitive to their feelings and emotions.

5. The universal golden rule states, Like for others what you like for yourself. We
should try to empower others and work to eradicate poverty, hunger, illiteracy,
disease, and unsanitary conditions in order to live in peace and tranquility.

6. Businesses should promote ethical standards in their enterprise, People involved in
business should always be honest, truthful, and fulfil all promises and commitments.
We must eliminate fraud and cut-throat competition.

7. We should also promote more political freedom, open debates, participatory
democracies.

8. We must encourage and support an educational system that promotes openness,
dialogue and that which guards against fanaticism. Our educational system should not
teach every view in the absolutist terms. Our children should be taught about the
multitude of perspectives and one should be open to other points of view.