Introduction

As a complete way of life, Islam has provided guidelines and rules for every sphere of life and society.  Naturally, a functioning economic system is vital for a healthy society, as the consumption of goods and services, and the facilitation of this by a common medium of exchange, play a major role in allowing people to realize their material and other goals in life.

Islam has set some standards, based on justice and practicality, for such economic systems to be established.  These standards aim to prevent the enmity that often occurs between different socioeconomic sections.  Of course, it is true that the gathering of money concerns almost every human being who participates in transactions with others.  Yet, while these standards recognize money as being among the most important elements in society, they do not lose sight of the fact that its position is secondary to the real purpose of human existence, which is the worship of God.

An Islamic economic system is not necessarily concerned with the precise amount of financial income and expenditure, imports and exports, and other economic statistics.  While such matters are no doubt important, Islam is more concerned with the spirit of the economic system.

A society that implements Islamic laws and promotes Islamic manners will find that it brings together all the systems – social, economic, and so forth – that it deals with.  Islam teaches that God has created provision for every person who He has brought to life.  Therefore, the competition for natural resources that is presumed to exist among the nations of the world is an illusion.  While the earth has sufficient bounty to satisfy the needs of mankind, the challenge for humans lies in discovering, extracting, processing, and distributing these resources to those who need them.

Islam consists of a set of beliefs which organizes the relationship between the individual and his Creator; between the person and other human beings; between the person and universe; and even the relationship of the person to himself.  In that sense, Islam regulates human behavior, and one type of human behavior is economic behavior.  Economic behavior is dealt by Muslims as a means of production, distribution, and consumption of goods and services.  In Islam, human behavior -whether in the economic area or others - is not value free; nor is it value neutral.  It is connected with the ideological foundation of the faith.

Economic System of Islam

Islamic Economic System implies a mood of satisfying the economics needs of the members of organized society in accordance with is injection of Quran and Sunnah. The mood of spending production, distribution and exchange of wealth is determined by the tenor of these injections. In this system the economic activities of the members of the society are regulative by the certain values of which pity, justice, benevolence, cooperation, brotherhood and equality are especially important. The sources and origin of these values are the Holy Quran and the Sunnah of Allah’s Apostle (PBUH). They are eternal and immutable. Consumers, producers and traders are must abide these values.At one level, the state can also use the its powers to implements and enforce these values, however, Islam mostly ensure their implementations and daily affairs of life through its system of education and training and by creating a general climate of piety in the society.

Some Fundamental features of Islamic Economics System are written below.

All the wealth belongs to Allah (SWT):

"And give them of the wealth of Allah which He has given you." [An-Nur: 33]

The community is the trustee of the wealth:

"Believe in Allah and His Messenger, and spend whereof He has made you  heirs."[Al-Hadid: 7]

Hoarding of wealth is prohibited:

"And those who hoard up gold and silver and spend not in the way of Allah;  announce to them a painful chastisement." [At-Tauba: 34]

. Circulation of wealth is a duty:

"Whatsoever Allah may restore unto His Messenger - is due unto Allah and unto His Messenger - the orphans and the needy. So, that it may not be confined to the rich amongst you." [Al-Hashr: 7]

LAND

The factors of production have been classified as land, labor, capital and organisation or enterprise. In this chapter, we shall discuss land while in following chapters we shall discuss labor, capital and enterprise.

The term land has been given a special meaning in Economics. It does not mean soil only, as understood in ordinary speech, but it is synonymous with all the natural resources available from air and water, from above the land surface ad below it, which yield income or useful produce. In the words of Marshall, land means “the materials and the forces which nature gives freely for man’s aid, in land and water, in air and light and heat.” Most of the economic activities of man depend directly on land even today, as in the past, such as hunting, fishing, breeding of cattle and sheep, agricultural produce, gardens, minerals, metals, industrial raw material, electric power, water and other natural resources.

Islam has recognised land as one of the most important factor of production. But in this chapter, we will discuss Islamic view-point regarding agricultural use of land. Since most of the matters pertaining to agriculture are of temporal character, Islam has not laid down any hard and fast rules to govern each and every affair so as to restrict the freedom of action of the people. Rather most of these matters have been left to the discretion of the people of each age and each place to decide the same according to their ever changing socio-economic situations. Only a few general instructions have been issued by al-Qur’an, the revealed book of Islam and Muhammad (PBUH), the Prophet of Islam, in the fields of land-ownership, land cultivation, reclamation of dead lands, peasant-landlord relationship, irrigation, etc.

1.       Aisha (Allah be pleased with her) reported that the Holy Prophet (peace be on him) said: “Whoever colonizes a land which does not belong to another, has the better right to keep it. Urwa bin Zubair states that Hadrat Umar (Allah be pleased with him) acted upon the same rule during his reign.”

-(Bukhari, Ahmad, Nisai)

2.       Jabir bin Abdullah (Allah be pleased with him) related the tradition that whoever reclaims dead land (i.e. colonizes wasteland), acquired proprietary right over it.

-(Ahmad Tirmidhi, Nisai, Ibn-e-Haban)

3.       Tawus (Tabii) reported that the Holy Prophet (peace be on him) had said: “Ownerless land which has no trustee or heir belongs to God and His Apostle and then it is open to use by you. Hence anyone who reclaims dead land shall keep it; and he who occupies it without using it shall lose his ownership right over it at the expiry of three years.”

-(Abu Yusuf : Kitab-ul-Kharaj)

Labor:

The term labor in Economics is used in a very wide sense. Any work whether manual or mental which is undertaken for a monetary consideration is called labor. Any work done for the sake of pleasure and pastime only having no consideration of any reward or compensation is not labor. 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 labor. Labor in this sense includes the very highest professional skill of all kinds as well as the labor of a mass of unskilled workers. Thus it includes labor 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 labor into productive and non-productive labor. It is productive if it adds some material value like labor in the agricultural sector and manufacture. If it does not result in some material value then it is unproductive. According to Adam Smith, labor 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 labor is called productive provided it is done to earn an income.

Labor 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 labor, 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 labor. Al-Qur’an, the revealed book of Islam, promulgates the fundamental principle regarding role of labor 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 labor have been emphasised in Islam. The Qur’an refers to manual labor 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 labor when it relates the story of Prophet Joseph who was appointed incharge of treasures of Egypt by its king.

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)

Interest

At the time of emergence of Islam, the institution of interest existed in the Arabian society both in the transactions of money loans and barter transactions of commodities. Since it was deeply rooted in the economic life of the people, the injunctions of the Holy Qur’an on its prohibitions were gradually revealed, like those regarding prohibition of wine, so that the economic life of the people may not be abruptly disrupted. Following are the verses of the Holy Qur’an which deal with interest :

1.   Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say: Trade is just like usury; whereas Allah permitteth trading and forbiddeth usury. He unto whom an admonition from his Lord cometh, and (he) refraineth (in obedience thereto), he shall keep (the profits of) that which is past, and his affair (hence-forth) is with Allah. As for him who returneth (to usury) – such are rightful owners of the Fire. They will abide therein. Allah hath blighted usury and made almsgiving fruitful. Allah loveth not the impious and guilty.

-(2:275-276)

2.   O ye who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury, if ye are (in truth) believers. And if ye do not, then be warned of war (against you) from Allah and His messenger. And if ye repent, then ye have your principal (without interest). Wrong not, and ye shall not be wronged.

-(2:278-279)

3.   O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful.

-(3:130)

4.   Because of the wrong-doing of the Jews, We forbade them good things which were (before) made lawful unto them and because of their much hindering from Allah’s way: And of their taking usury when they were forbidden it, and of their devouring people’s wealth by false pretences. We have prepared for those of them who disbelieve a painful doom.

-(4:160-161)

5.   That which ye give in usury in order that it may increase on (other) people’s property hath no increase with Allah; but that which ye give in charity, seeking Allah’s countenance, hath increase manifold.

-(30:39)

If put in the order of revelation, the above verses gradually prohibited interest. The first verse of the Holy Qur’an (30:39) which was revealed regarding interest compares it with Zakat and states that interest does not increase one’s wealth, in fact it decreases it, whereas Zakat increases it manifold. In the next verse (3:130), the believers are told not to devour compound usury doubling or quadrupling the sum of loan. In the next two verses (4:160-161), the Muslims are warned to obey the Qur’anic injunctions of prohibition of interest lest they suffer the fate of the Jews who infringed prohibition of interest and will meet a painful doom. Then comes the famous para of the revealed book of Islam (verses 275,276,278 and 279 of chapter 2) which finally prohibited interest. It distinguishes between trade (Bai) and interest (Riba). It condemns usury and the usurer and praises the fruitfulness of charity. It absolutely prohibits charging of usury and commands the believers to give it up and get back only their principal amounts of loans. Finally, it warns them to take notice of war from Allah and Allah’s Messenger if they violate prohibition and revert back to usury.

II- Ahadith of Prophet Muhammad (PBUH) on Interest

In this section we are reproducing some of the well-known Ahadith of the Prophet of Islam which show that the Prophet has not only condemned ‘Riba’ (interest) in possibly the most serverest terms but has also identified it in money as well as in commodity transactions in very clear words. These Ahadith facilitate our understanding of the Islamic concept of ‘Riba’ and bring into focus its various aspects for our guidance. The relevant Ahadith are:

1.   Abu Sayeed al-Khodri reported that the Messenger of Allah said: Gold for gold, silver for silver, wheat for wheat, barley for barley, date for date, salt for salt and like for like in hand to hand (transaction). Whoso gives more or takes more, then the taker and the giver are equal in taking interest therein.

(Muslim)

2.   Abu Sayeed al-Khodri reported that the Messenger of Allah said: Don’t sell gold for gold unless like for like and don’t increase something of it upon something, and don’t sell silver for silver unless like for like and don’t increase something of it upon something, and don’t sell the absent therefrom for the present. Agreed upon it. In a narration: Sell not gold for gold, nor silver for silver unless like for like.

(Bukhari, Muslim)

3.   Abu Sayeed reported that Bilal came to the Holy Prophet with Barni dates. The Prophet asked him: whence is this? He replied. There were old dates with me and I sold out of them two sa’as for one. He said: Alas! Veritable interest! Don’t do (it), but when you intend to purchase, sell the dates for purchasing another kind, and then purchase therewith.

(Bukhari and Muslim)

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