Economic System of Islam - The Purplish City®

Islam views life as a compact whole and does not divide it into many separate and conflicting parts. The economic aspect is one of the most important parts of our life, while not being the whole of it. The Islamic system is balanced and places everything in its right place. Islam has given detailed regulations for the conduct of our economic life which concerns mainly the earning and use of wealth.

Everything in Islam is for the benefit and welfare of mankind. The economic principle of Islam aim at establishing a just society wherein everyone will behave responsibly and honestly, and not as ‘cunning foxes’ fighting for as big a share of something as possible without regard for honesty, truth, decency, trust and responsibility.

The Islamic Economic System is based on the following fundamental principles:

1. Earning and expenditure by Halal means.

Islam has prescribed laws to regulate earnings and expenditure. Muslims are not allowed to earn and spend in any way they like. The must follow the rules of the Qur’an and the Sunnah:

Any earnings from the production, sale and distribution of alcoholic drinks are unlawful (Haram), as are earnings from gambling, lotteries and from interest (Riba) transactions (5:90-91, 2:275).
Earning by falsehood, deceit, fraud, theft, robbery and burglary is unlawful. Deceitful acquisition of orphans' property has been particularly banned (2:188, 4:2, 6:152, 7:85, 83:1-5).
Hording of food stuff and basic necessities, smuggling and the artificial creation of shortages are unlawful (3:180, 9:34-35).
Earnings from brothels and from such other practices which are harmful to society are also unlawful (24:23).

Islam strikes at the root of the evil and wants to establish a just and fair society. A Muslim must earn his living in Halal ways and he should always bear in mind that what ever he does, it is known to Allah. He will be accountable for his actions on the day of judgement. He cannot hide anything from Almighty Allah.

2. Right to property and individual liberty

Islam allows a person to own his earnings. The Islamic state does not interfere with the freedom of speech, work and earnings of an individual provided this freedom is not harmful to the greater good of society. Every individual will be answerable to Allah swt for his or her actions (4:7, 36:71, 16:111).

3. System of Zakah (welfare contribution).

Compulsory payment of Zakah is one of the main principles of an Islamic economy. Every Muslim who owns wealth more than his needs must pay the fixed rate of Zakah to the Islamic state. Zakah is a means of narrowing the gap between the rich and the poor. It helps the fair distribution of wealth. It is a form of social security. The Islamic state is responsible for providing the basic necessities of food, clothing, housing, medicine and education to every citizen. No-one should have any fear of insecurity or poverty (9:69, 103, 98:5).

4. Prohibition of interest (Riba).

An Islamic economy is free of interest. Islam prohibits all transactions involving interest.Interest is neither a trade nor a profit. It is a means of exploitation and concentration of wealth. The Qur’an says:

"They say, trade is like interest and Allah has allowed trade and prohibited interest." (2:275).