Following notes on Islamic Economic System have been taken from An introduction to Islamic Ideology by Anwar Hashmi.
The Economic Principles of Islam:
Islam has laid down certain principles and limits for the economic activity of man so that the entire pattern of production, exchange and distribution of wealth may conform to the Islamic standard of justice and equity.
“Spend whatever remains over (your needs).”
“Don’t squander: Allah does not love the extravagant”
About charity, the Quran says: “You will never attain piety until spend of that what you love. And whatsoever you spend (in charity). Allah is aware thereof.”
Salient Features of Economic System
It is opposed to interest. The Holy Quran says in this respect:
“O ye! Who believe fear God and give up what remains of your demand for usury. If ye are indeed believers. If ye do not, take notice of war from God and His Apostle.” (Al-Quran ii : 277-79)
Islam is opposed to hoarding (accumulation of wealth).
“And there are those Who bury gold and silver And spend it not in the way Of GOD; announce unto them A most grievous penalty. (Al-Quran 9:34)
Islam stands for free enterprise in business. The Holy Quran says:
“And when the prayer is finished then disperse Ye through the land and seek the bounty of God” (Al-Quran 62:10)
According to Kanz-ul-Amal, Vol. II, the Holy Prophet (SAW) declared:
“Earning of Lawful livelihood is a duty only next to importance to the duty (of prayer)”.
In this system of free enterprise in the Islamic economic system women have also their definite status:
“To man is allotted what they earn and to women is what they earn.” (Al Quran 4:32)
Islam is opposed to concentration of wealth into few hands. The principle has been explained in the holy Quran while assigning items of expenditure for Fai:
“What God has bestowed on His Apostle (and taken away) from the people of the ownership belongs To God, to His Apostle and to kindred and orphans The needy and the wayfarers; In order that the wealth may not Make circuit (merely) Between the wealthy among you.”
ZAKAT: Islam prescribes compulsory social insurance through its system of Zakat. The order to pay Zakat occurs at least 27 times in the holy Quran, along with the order to establish prayers.
“And observe prayer, and pay the poor-rate and bow down with those who bow” (Al-Quran 2:43)
“The Zakat is only for the poor and the needy and those who collect them and those whose hearts are to be reconciled, and to free the captives and the debtors and for the cause of Allah, and for the wayfarers, a duty imposed by Allah; Allah is Knowing and Wise” (Al-Quran 9:60)
Employers should treat their employees properly.
“IT is the duty of employers to take only such work from employees as they can easily do. They should not be made to labour so that their health is impaired” (Al-Quran)
Holy Prophet said “Pay the laborer before his sweat is dry”
Right of Property:
Acquisition of private property on payment of compensation is permissible in Islam. Land was acquired for building the mosque at Medina and compensation was given by the Holy Prophet (SAW).
It is not right that things created by God for the benefit of mankind should be taken possession of, and then kept idle and useless. One should either benefit from them oneself, or make them available to others. On the basis of this principle Islam holds that no one can keep his land unused for more than three years.
One who cultivates the land has a better title of it. The Holy Prophet (SAW) allotted a piece of land to Hazrat Belal. During the Caliphate of Al-Farooq it was found that Hazrat Belal put under cultivation half of the land and left the other half fallow. The Caliph took away the fallow land from Hazrat Belal and allotted it to one who had no land.
The Problem of Equality:
God has not distributed His gifts and favours equally among mankind but, in His infinite wisdom, has given some individuals more than others.
Human existence has been so ordained that divergence, variety and inequality among men in their ways and standards of living seems to be natural. Variety is the spice of life, and the driving spirit behind human endeavour and excellence.
To social justice, Islam has commanded that Zakat should be levied at the rate of two and a half percent per annum on the total accumulated wealth (of each individual) in the country, as well as on invested capital; five percent or ten percent, depending on the method of watering, should be collected on agricultural produce; and twenty percent on certain mineral products. The annual Zakat should also be levied, at a specified rate, on cattle owned by anyone who has more than a certain minimum number. The amount of Zakat thus collected is to be spent on the poor, the orphans and the needy.
This system provides a means of social insurance whereby everyone in an Islamic society is provided with at least the necessities of life.
No worker can ever be forced, through fear of starvation, to accept conditions of employment which may be unfairly imposed on him by his employer.
Obligations and Restrictions:
Islam condemns as illegal all those means of livelihood which injure, morally or materially, the interests of another individual or of society as a whole.
Islamic law categorically rejects as illegal the manufacture and sale of liquor and other intoxicants, gambling, transactions of a speculative or fraudulent nature, transactions in which the gain of one party is absolutely guaranteed while that of the other party is left uncertain and doubtful, and price manipulation by withholding the sale of the necessities of life.
Islam accepts the right of ownership of an individual over the wealth earned by him by legitimate means; but these rights are not unrestrained. A man can only spend his legitimate wealth in certain specified ways. He may not waste his riches on idle luxury, nor may he use his wealth to behave arrogantly towards his fellows.
It is not at all objectionable in Islam if, working within these limits, a man becomes a millionaire; rather, this will constitute a Divine favour. But in the interests of the community as a whole, Islam imposes two conditions on the individual: first, that he should pay Zakat on his commercial goods and `Ushr (one tenth) on the value of agricultural produce; second, that he should deal fairly and honestly with those he does business with in trade, industry or agriculture, with those he employs and with the Government and the community at large.
For complete Islamiat notes click here.