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The Ten Characteristics of Islamic Economics

Wednesday, May 22, 2019

Did you know that Islamic economics is not a newfound concept? Since the time of the Prophet Muhammad SAW, the concept of Islamic economics had been practiced. The way the Prophet practiced the principles of Islamic law in his economic activities should be a guideline for every Muslim. The Prophet put forward the values of honesty, justice, ethics, and morals, as long as they are in the corridors of Islamic law, prohibiting usury transactions, and so on. The profit-sharing system that has been widely talked about has long also been practiced. Islamic economic conversations that are re-emerging should not only be considered as alternatives to the current conventional system. Islamic economy is a necessity whose values can be applied to everyone, not only for Muslims.

Islamic economics has specific characteristics that need to be understood. Why do we have to study these characteristics? There are three goals of learning the characteristics of Islamic economics. First, the characteristics of Islamic economics need to be well understood to correct the existing conception. There is an existing conception that Islamic economics is the same as the capitalist and socialist economic systems. On the contrary, the socialist and capitalist economic system is not in accordance with Islamic economic values. Moreover, the characteristics of Islamic economics can help Muslim economists who have been involved in conventional economic theory in understanding Islamic economics. These characteristics also help enthusiasts of muamalah fiqh studies in conducting comparative studies between Islamic economics and conventional economics. The source of the characteristics of the Islamic economy itself is Aqidah, Akhlak, and Muamalah. There are at least ten Islamic economic characteristics that need to be understood and practiced by Muslims in the economy as mentioned in Al Mawsu'ah Al Ilmiyah wa al amaliyah al Islamiyah which are summarized as follows :


  1. God is the owner of wealth, while the man is the Caliph (ruler) of wealth.


The wealth that we have today, in essence, belongs to God. Why is that? Because God has created everything. We as humans are given the opportunity by God to make the best use of it. As stated in Surah Al Baqarah [2:284] "Allah is the sole proprietor of everything in the heavens and on earth." Also, in Surah Al Hadid [57:7] that Allah also says that humans spend part of the wealth that God has given. The Prophet also said: "This world is green and sweet. Allah has made you the caliph (ruler) in the world. Therefore, you should discuss how to rule the wealth in this world."

This characteristic distinguishes the concept of ownership in Islamic economic systems with capitalist and socialist economic systems. In Islam, individual ownership is highly respected, but not absolute. Its use must also not conflict with Islamic law. Whereas in a capitalist system, ownership is absolute and free in any way to use it. In contrast to the socialist system, this system does not recognize individual ownership; the state has full authority over everything.


  1. Economics is bound by aqidah, sharia (law) and morals


In every part of our lives, including in our economic activity, the connection with aqidah is very close. We know that the foundation of all activities is unity and the purpose of human beings is to worship. Thus, economic activities in Islam related to aqidah and Islamic law have to have religious content. Also, the Islamic economy makes morals as the central pillar. For example, we must not violate Islamic law in transactions like manipulating scales. Why? Because we believe that God knows everything we do and what we do must be based on the intention to worship. We also must not harm ourselves or others in daily economic activities. In addition, consumptive behavior that leads to redundant (excessive/wasteful behaviour) is also prohibited because it is a useless thing and leads to damage.


  1. The balance between spirituality and materiality


Can Muslims think of worldly activities? Do we always have to pray and leave other activities such as study, work? Of course not. Islam does not separate the life of the world from the hereafter. The balance between the two is essential for the happiness of a Muslim. Allah says in Surah Al Qasas [28:77] ;

But seek, through that which Allah has given you, the home of the Hereafter; and [yet], do not forget your share of the world. And do good as Allah has done good to you. And desire not corruption in the land. Indeed, Allah does not like corrupters."


  1. Justice and balance in protecting the interests of individuals and society


Islam sees a balance in the social system. Islam does not recognize absolute rights and freedoms, because everything has limitations, including property rights. To prosper in life, humans must not sacrifice the interests of others. Allah says in QS Al Hasyr [59:7] ;

And what Allah restored to His Messenger from the people of the towns - it is for Allah and the Messenger and for [his] near relatives and orphans and the [stranded] traveler - so that it will not be a perpetual distribution among the rich from among you. Moreover, whatever the Messenger has given you - take; and what he has forbidden you - refrain from. And fear Allah; indeed, Allah is severe in penalty.”

This is proof that Islam pays attention to the interests of individuals and also society in general. This needs to be implemented in every policy by individuals and institutions. This characteristic also distinguishes it from the capitalist economy which tends to emphasize individual interests and socialist economics which emphasize the public interest more.


  1. Individual freedom guaranteed in Islam


Everybody in this world is given the freedom to move to achieve their respective goals. The principle is not to violate the rules of the Islamic law that have been set out in the Qur'an and Hadith. Allah has said in Surah Al Baqarah [2:188] ;

And do not consume one another's wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful].”

Islam has halal-haram restrictions, consequently impacting human life both in the world and in the hereafter. Thus, our activities as Muslims must not violate the halal and haram restrictions.


  1. State Authority in the Economy


Can we imagine how it would be like if the economy is not regulated in this country? How can basic needs be met by everyone?

Islam authorizes the state to regulate its economy. This is done to fulfill the needs of the community. The state is obliged to protect the interests of the public from injustice both by the individuals and groups, institutions, or even other countries. The community’s security to live well and properly is also a state obligation. The state should be able to fulfill basic needs in terms of food, education, and health of its population.


  1. Consumption guidance


Luxury and excessive things are prohibited in Islam. In addition, feeling above the law is also prohibited. There are many examples of how modern law can be traded by wealth. Allah SWT said in Surah Al A'raf [7:31] ;

O children of Adam, take your adornment at every masjid, and eat and drink, but be not excessive. Indeed, He likes not those who commit excess.”


  1. Investment Guide


The investments made must not conflict with Islamic law. There are five things that can be used as guidelines in assessing investment projects, namely:

  1. A project is good based on Islamic principles
  2. Wealth must be distributed as broadly as possible to the community
  3. Eradicate paganism, improve income, and wealth
  4. Maintain and develop assets
  5. Protect the interests of the community


  1. Zakat


Zakat is one of the economic characteristics of Islam that does not exist in other economic systems. The wealth that we have is essentially God's property, so we need to spend this treasure to provide for the Islamic cause. The purpose of zakat is to cleanse the soul of envy, misery, and revenge. From every property that we have, not only must we pay taxes, but we are obligated to pay zakat if it reaches its limit (nishab), this zakat is called zakat mal (wealth). However, the zakat fitrah must be paid by every Muslim during the month of Ramadan.


  1. Prohibition of usury


Usury is additional money obtained without sacrifice. For example, we lend our money, then ask for more interest when the money is returned. Islam strongly emphasizes the function of money as a means of transaction and valuation of goods, not commodities. Misappropriation of money from both functions will usually cause transactions to be usury. One example is bank interest.

The ten characteristics of Islamic economics above guides us to practice economy in a just and correct way. As Muslims, we must be fully aware that we are only temporary in the world; everything in the world belongs to Allah. Whatever we do may be valued as worship if it is intended to seek Allah’s blessing. We may seek profits financially; even Muslims are strongly encouraged to become rich people, to help more people. This wealth must, of course, be obtained in a way that is not contradictory to Islamic principles. In one of the Prophetic Hadiths, it is said that poverty is close to kufr. Hopefully, we are motivated to work hard and help the needy to keep them in the path of Allah.

Read Also : 6 Common Misconceptions about Islamic Finance


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