Understanding Islamic Finance - Doha Academy of Tertiary Studies

30 Understanding Islamic Financeimplications for both the formulation and implementation of policies. Before this is done,Islamic economics can be introduced in parts only. This choice rests with individual countries.2.4 ISLAMIC ECONOMICS: WHAT SHOULD IT BE?To understand the possible structure of Islamic economics, enabling a society to realize theobjectives identified above, we may first of all discuss the concepts of economics properand normative economics. Economics proper, which is also called positive economics,is concerned exclusively with the scientific explanation of behaviour under conditions ofscarcity. It is a science, value neutral and is concerned with empirical and not normativeaspects. Even where it deals with values and purposes, it deals with them objectively asfacts, which, along with other relevant data, determine what is or may be, but not whatshould be. It describes, but does not prescribe. The definition of “Economics” by LionelRobbins is an example of positive economics. 11The second kind of economics is normative or welfare economics, which is sometimescalled “political economy”. In the case of normative economics, policy recommendationsmust involve some value judgements. The Islamic approach is that economic developmentand creation of abundant wealth are means to satisfy human needs and support society.These are not sought for boasting or spending in offence, arrogance or oppression. Linkingthis world with the Hereafter, Islam enjoins Muslims to seek the Hereafter through whatthey earn and not to forget their share of the worldly life. The Holy Qur’ān says:“And seek the abode of the Hereafter in that which Allah has given you, and do not neglect yourportion of worldly life, and be kind as Allah has been kind to you, and seek not disorder/corruptionin the earth”. (28: 77)Therefore, Islamic rules of economics make it binding for human beings not only to abideby the Sharī´ah tenets relating to dos and don’ts but also to keep in mind the impact oftheir activities on others and society as a whole. To realize the goal, the State should try tocontrol the wants of the people through a filtering process, motivate the people to abstainfrom activities injurious to others and restructure the socio-economic system for the transferof resources from one use/sector to others to ultimately realize the dual objective. 12It is the welfare content which makes normative economics different from positive economics.Broadly, welfare economics comprises the aims, goals and aspirations of societyand these are reduced into the utilitarian principle of greatest satisfaction of the maximumnumber of people in society. Islamic economics tries mostly to remove injustice and inequalityfor promoting progress. To realize the objective, it accepts the basic concomitants ofthe system of market economy, like the innate right of ownership, freedom of enterpriseand the competitive environment in business and industry. However, the vision of Islam inthis regard is different from the role models of present market systems which have becomeoutdated with the march of events. The Sharī´ah indicates the directions of transformationtowards a social order of justice, well-being, security and knowledge, but it does not imposethese laws. It tends to provide equal chances to all for earning a livelihood leading to equitable,not equal, distribution of income and wealth, just like blood in the human body that11 Robbins, 1962.12 Chapra, 2000a, pp. 357–369.