Understanding Islamic Finance - Doha Academy of Tertiary Studies

Distinguishing Features of the Islamic Economic System 27As the main theme of the Islamic economic system revolves around care for the poorand socio-economic justice, studying Islamic economics should be a strategic activity foreconomists and policymakers. The Islamic economic system can be studied properly only inthe context of the Islamic way of life as a whole. The Holy Qur’ān gives broad principlesof values regarding the economic aspects of man’s life, like an owner’s attitude towardshis property, society’s attitude towards the needy, the cooperative basis of the economicrelationship and the bias against a concentration of wealth. The individual must be mindfulof other ends while planning for economic ends. He has to subject each and every activityto thorough scrutiny, avoiding all those forms which are injurious to social interest.2.3.1 The Role of Islamic EconomistsThe early Islamic jurists mainly advised individuals and rulers on behaviour in economic mattersand economic policies. In the later period, they also analysed such economic thoughts astrading, prices, money, profit-sharing, taxes, development, etc. They gave special importanceto ethics and moral purposes and focused on justice, need fulfilment, efficiency, freedom,growth and development. Those who did work of outstanding nature included Imams ofjuristic schools of thought like Abu Hanifa, Malik, Shafii, Ahmad ibn-e-Hanbal, Zaid binAli, and others like Muhammad bin Hasan al Sheibani, Abu Yusuf, Yahya bin Adam, AbuUbaid, Qudama bin Jafar, Ali ibn Muhammad Al Mawardi, Nizamul Mulk Tusi, NasiruddinTusi, Abu Hamid Muhammad Ghazali, Ibn Taymiyah, Ibn Qayyim, Ibn Khaldun, al Maqriziand Shah Waliullah. The contributions from a few of the jurists are briefly given hereunder:• Ibn Khaldun’s 8 empirical social inquiry gave him the unique perception of causal interdependenceof political and economic power as well as pressures which are generated byvested interests in an organized society.• With regard to the activity of public and private sectors in an economy, it may berelevant to point out that Ibn Khaldun, in his Muqaddamah (literally an “Introduction toHistory”, which has been described by the renowned historian Professor Arnold Toynbeeas “the greatest work of its kind that has been created by any man in any time or place”)strongly supported free private enterprise and advocated that “capitalists amongst theinhabitants of cities need rank and protection”. He was against government meddling withthe market mechanism by inequitable taxation or by direct participation in productionand distribution. He believed that a State monopoly in commerce and agriculture ruinsthe economy.• Ibn Khaldun anticipated Adam Smith in his theory of labour value; Malthus for thetheory of population and Keynes for a normative role for the State. He also presenteda coherent theory of economic growth. As such, he can be treated as the founder ofeconomic science. His ideas on the market system, production, exchange and consumptionof wealth, macroeconomics, taxation, role of the government, money, labour, etc. providea valuable study of economic thought and the system.• Ibn Khaldun states: “The finances of a ruler can be increased and his financial resourcesimproved only through the revenue from the taxes. The revenue from taxes can be8 Abu Zayd, Waliyuddeen ’Abdur Rahmaan Ibne Muhammad, popularly known as Ibn Khaldun – the greatest Muslim socialscholar of the Middle Ages (ad 1332–1406). For his contribution to economics, see Boulakia, 1971. Also see a note on him athttp://www.islamicissues.info/essays_others.html.