Islamic economics is a term used to describe economic policies which are supported by Islamic self identified groups. Some of the Islamic concepts that are related to economics include the following:
- Gharar-This refers to ‘Interdiction of chance’ which is also uncertainty presence in a contract excluding lending of money and insurance without the existence of risks.
- Zakat-This refers to taxing of specific goods like harvest with the aim of allocating the taxes collected to expenditures which are defined explicitly in order to assist the needy.
There are those who argue that Islamic economics theory as well as the practice is a coherent system that ensures everyone enjoys equal rights and they are treated fairly. For instance, Michael Bonner has written that until the thirteenth and fourteenth centuries, an economy of poverty prevailed in Islam but under the Islamic economics system.
God’s guidance ensured that there was flow of goods and money. These were purified through channeling from those with plenty to those who had little by encouraging charity (zakat) and discoursing interest/usury (riba) on loans. Michael also maintains that the prophet helped traders who were poor by allowing tents rather than permanent structures in the Medina market and not charging rents or fees there.
Islam was a religion born in a territory that had limited agricultural potential but the commercial possibilities were numerous and they included tourism and trade. Prophet Mohammed was a successful merchant and businessman as such Islam regards merchants with esteem and honor.
By setting up its own economic system, Islam laid the rules to be followed in the acquisition of commodities and wealth as well as how they could be utilized and the manner to dispose them. Ownership freedom was not made the basis of the economic system nor was the socialist principle of ‘from each according to his ability, each according to his needs’.
The basic problem was also not described as ‘unlimited resources, unlimited wants’ but rather, Islamic views upheld that there was enough to meet the basic needs of everyone. Therefore, among the rules of Islamic economics is the securing of all basic needs such as clothing, housing and food for all citizens.
Islam also described how humans should acquire wealth in order to prevent the minority from controlling the largest portion of the wealth. This ensured that majority of its people are not deprived of the ability to satisfy their needs. Islamic economics is built on three core principles which include:
- Ownership disposal
- Wealth distribution among all the people
There are also laws that facilitate the acquisition of services and goods without raising any complications. Islamic sociology stresses social responsibility and precisely because of this reason, Islamic economics and banks were developed.
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