Islamic economics is in fact the application of economic knowledge and facts according to the rules of Shariah. Islamic economic literature not only promotes an interest free banking system all over the world but it always strictly condemns the interest or Riba. Islamic economic literature was came into picture in the late 1940’s for the very first time and in mid 1970’s the first ever Islamic banking system was developed in Egypt. The key features of Islamic economic system are to ensure equitable distribution of money and wealth among the people according to the rules of Shariah.
Islamic Economic Philosophy
According to Islamic scholars, the main objective of Islamic economic philosophy is to develop:
- Faith on God and to develop clear conept of Tauhid(Oneness of God)
- The concept of Rububiyah(The God Almighty is the Greatest Creator)
- The Concept of Purification of a body or soul(Tazkiyyah)
- The concept of Trutee(Man as the Deputy or Caliph of the God) in the minds of the people
- Brotherhood and Equility in the society
- Positive and Normative economy
Basic Principles of Islamic Economics
- Prohibition of Accumulation of Wealth to a Certain Group
Islam has forbidden the concept of interest on the capital and thus has foreclosed the door of collecting wealth without doing any hard work or without exposing to risk. The general rule of collecting wealth is Islamic economics is to earn a profit by assuming the risk factor as well. In simple words, no risk means no gain.
- Individual Liberty
Islam pictures a society where an individual or a person is not dependent on others. Islam wants that every individual actualize his own abilities and potential in the society. That is why, Islamic economic and Islamic laws gives so much priority to the self employment or Mudarabah and Shirkah forms of business partnership. The Mudarabah or Shirkah is the form of business where individuals work together as partners, not as workers or an employee.
- Wider Circulation of Wealth
The wider circulation of wealth in the Islamic society is made possible through the concept of Zakat, Riba and Gharar. The Zakat and Riba are two great but important features of Islamic economics. The Zakat is actually the fixed percentage of tax on certain commodities or goods, like that on gold. These tax are then distributed like an aid to the poor or the needy person.
Along with Zakat and Riba, Gharar is also an important terminology of Islamic economics. Gharar actually means uncertainity, risk and hazard. In Islamic economics, gharar is generally considered as of less significance vale than riba. Riba is the interest on goods or capital and it is strictly forbidden in Islam.