Dr. Mohammed Maruf

So far as my study goes, the following was the original economic system,[1] in its pure form, as derived from the teachings of the Holy Qur’an and explained in his ahādīth by the Holy Prophet . This system continued in this original form till the death of the Second Caliph Sayyidina ‘Umar . Later on that the capitalist rends began to creep into it and this has unfortunately continued to this day, corrupting it almost beyond recognition. Again, what is still more important is that this is the only system wherein there is no place for usury (Ribā) which Islam has condemned out rightly and so severely.

Islam has offered an economic system which, if followed sincerely, will provide a remedy for all the economic ills which the world is facing since long. The fundamental principle of this system has been laid down in the chapter The Cow (baqarah) in the verse: “... They ask thee how much they are to spend; Say: ‘What is beyond your needs’. Thus doth Allah make clear to you His signs....[2] This verse is rich with meaning and if it is properly understood and honestly followed, most of economic ills will be remedied and the result will be a truly equitable and just society: a welfare society. According to this verse, there is no justification for possessing any additional property to be let or leased out for any pecuniary gain; each to possess only that much which is necessary for his personal needs and for the needs of his family, and whatever is beyond that is illegitimate. The Qur’an uses the word “‘afw” in the said verse which literally means “what is in balance”[3] which makes clear that nothing in excess to personal and family needs can legitimately be possessed. The Prophet of Islam himself practiced this principle in his life. ‘Ā’ishah said that during the illness of God’s messenger she had six or seven dinars belonging to him which he ordered her to distribute, but she was kept busy administering to his suffering. He asked her what had happened to the six or seven dinars, and when she replied she had done nothing about them because she had been kept busy administering to his suffering, he called for them, and placing them in his hand he said, “What would God’s prophet think if he were to meet God Who is great and glorious while possessing these?” [4] (Aḥmad transmitted it). This principle was not meant for the Prophet himself only. ‘Abū Huraira said that when the Prophet once visited Bilāl and saw he had a heap of dates, he asked him what it was. On his replying, “It is something I have stored up for tomorrow,” he said, “Are you not afraid of tomorrow you may see on account of it steam in the fire of jahannum (Hell) on the day of resurrection? Spend it, Bilāl, and do not fear poverty from the Lord of the Throne”.[5] Such episodes which are many in Islam show that the said verse is the corner-stone of the economic system which Islam has enunciated. A deeper analysis of the lesson contained in it will suffice for evolving an economic system which has a universal import and can salvage all the ills and problems the humanity is facing today. It may be added here that the word “needs” includes his financial commitments in business and industry also. What Islam discourages is the uncalled for accumulation of wealth which is not put to any proper use and is just stagnating in the coffers of a person.

This analysis shows how comprehensive and extensive significance this fundamental principle has. Just think of a society in which nobody keeps what is beyond his needs in the sense stated above. It discourages amassing of wealth, piling up of valuables, and adding to ones property either for self-aggrandizement or for the sake of some pecuniary advantage. In this system no extra house or building will be allowed to build for renting or leasing out. Islam encourages only that much which fulfils ones genuine needs; e.g., a person who runs his business is entitled to keep as much resources with him as his present business commitments and its further development necessitates. What this system demands is that wealth and other resources should remain in circulation, and what is left to stagnate is illegitimate; Islam condemns stagnation of any means of production which must remain in utilization. Just imagine a society in which each person is ready to give away whatever is beyond his needs, in the sense stated above, and what will be the skein of such a society: will there be anybody deprived of his bread and butter? Will there remain anybody starving on the roadside and finally meeting his painful end simply because of the apathy and callousness of his fellowmen who are far better-off and prospering? Most of the economic disparity which we are witnessing around us today shall vanish and a more equitable economic parity and justice will prevail. Hence, simply following this principle will suffice to remove most of the economic disparity from the society.

Ribā and Trade:

Islam enjoins investment of money and other resources; it issues clear injunctions on the legitimate ways of investing them. The Jews confused “Ribā” with trade; they would call “Ribā” a kind of trade. The Qur’an emphatically rejected this claim saying: “... That is because they say: ‘Trade is like usury’, But Allah has permitted trade and forbidden usury...”[6] It adds, “Allah will deprive usury of all blessing, but will give increase for deeds of charity;...”[7] It lays stress on the investment of wealth and property lest ‘Zakāt ’ and ‘ṣadaqah’ should consume it all. In connection with the property of an orphan the Holy Prophet is reported by Amr b. Shu‘aib on the authority of his grandfather to have said, “If anyone is guardian of an orphan who owns property, he must trade with it and not leave it till the ‘ṣadaqah’ consumes it”[8] (Tirmidhī transmitted it). Thus, investing ones resources in legitimate directions is obligatory for his own benefit and for that of the whole society, for otherwise property will cease to be in circulation and hence stagnate which has been condemned by Islam. It ensures that all the resources bestowed on man by Allah remain in circulation which is the only way to guarantee well-being of the society. Islam lays down clear-cut rules for investing money in trade, as man is not left free to invest his resources as he pleases; it makes a clear distinction between the legitimate and illegitimate ways of doing trade. The Qur’an lays the following general principles for any legitimate transaction:

1. ‘... ! When ye deal with each other, in transactions involving future obligations in a fixed period of time. Reduce them to writing ...’[9]

2. ‘...Let him who incurs the liability dictate, but let him fear his Lord Allah, and not diminish aught of what he owes...’[10]

3. ‘... But if be a transaction which ye carry out on the spot among yourselves,          there is no blame on you if ye reduce it not to writing. But take witnesses whenever ye make a commercial contract; and let neither scribe nor witness suffer harm...’[11]

4. ‘If ye are on a journey, and cannot find a scribe, a pledge with possession             (may serve the purpose)...’[12]

5. ‘... Conceal not evidence; for whoever conceals it,-- his heart is tainted with sin. And Allah knoweth all that ye do.’[13]

The above are the general principles which a believer is called upon to follow if he fears Allah, his Lord. Beside these principles, other rules for fair transaction have been delineated in the aḥādīth ( the Sayings of the Holy Prophet which are interpretations of The Qur’an).

6. Ḥakīm b. Niẓām reported the Holy Prophet as saying: ‘The buyer and the seller have the option to cancel or to confirm the deal, as long as they have not parted or till they part, and if they spoke the truth and told each other the defects of the things, then blessings would be in their deal, and if they hid something and told lies, the blessings of the deal would be lost.’[14]

7.         The seller should not swear to prevail upon the buyer. Abū Huraira reported the Allah’s Messenger as saying: “The swearing (by the seller) may persuade the buyer to purchase the goods but that will be deprived of Allah’s blessing”.[15]

If the above conditions are followed in all transactions, the result will be fair dealing in the society and there will be very little chance for deceiving. These conditions will ensure honest and fair dealing; any community that follows these instructions will be prosperous and peaceful. Thus, Islam has laid down solid principles for business transactions that ensure peace and security to all concerned.

The Holy Qur’an has condemned ‘Ribā’ (usury) very severely. It says very emphatically in the chapter The Cow (‘Baqarah): “Those who devour usury will not stand except as stands one whom the Evil One by his touch hah driven to madness...”[16] Again it says: “Allah will deprive Usury of all blessing, but will give increase for deeds of charity...”[17] Again, in the chapter Āl i ‘Imrān it says: “O you who believe! Eat not Ribā (usury) doubled and multiplied but fear Allah; that you may be successful’[18]. According to the Holy Prophet, ‘Ribā’ is of two kinds: (A) Ribā Nasi’a, i.e., interest on lent money; (B) Ribā al-Faḍl, i.e. taking a superior thing of the same kind of goods by giving more of the same kind of goods of inferior quality, e.g. dates of superior quality for dates of inferior quality in greater amounts’.[19] A deeper study and analysis of the concept of Ribā (Usury) reveals that Ribā (Usury) in Islam means that any amount of wealth or property acquired without personal effort; Islam insists on acquiring a legitimate amount through effort in a legitimate direction (it includes not a massing wealth beyond one’s personal and family needs as described above). All this proves how big an enemy of capitalism, which is the basis of the Western economy following the lead of the Jewish tradition, Islam has been and is. Again, of those who were practicing ‘Ribā’ in the pre-Islamic days of Ignorance. The Qur’an allows them to take back their capital only and to forego interest. It says: ‘...Fear Allah, and give up what remains of your demand for usury, ...”[20] It adds: “...But if ye turn back, ye shall have your capital sums;...”[21] And again it says: “If the debtor is in a difficulty, grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you...”[22] Thus, in these verses a situation has been created in which the ‘Ribā’ is dissolved, while the capital is retained for ones personal needs and for running business. It is also clear how much emphasis Islam lays on charity which is a key to salvation.     

The above verse in the chapter The Cow (Baqarah), according to Ibn ‘Abbās, was the last verse revealed to the Prophet and it did pertaining to ‘Ribā’; and this reveals how Islam was serious in condemning and eliminating the menace of ‘Ribā’.[23] Thus, as compared to the prevalent modern economic system, Islam recommends a counter system which is free from ‘Ribā’ (Usury) and is based on human relations of mutual fraternity, justice and kindness. Abū Huraira has quoted the Prophet as saying: “whoever is pleased that he be granted more wealth and that his lease of life be prolonged they should keep good relations with his kith and kin”.[24] This amply evinces how much emphasis Islam lays on mutual relationships between men. Again, the modern system (which is interest-orientated), not only enslaves the individuals, it also enslaves nations and states, which proves its cruelty and inhumanity. The proposed system, on the contrary, tries to off-burden the individual involved of his financial problems and difficulties. Herein lies the fundamental difference between the two systems, and establishes the superiority of the Islamic system over the modern system.

‘Zakāt and Ṣadaqah:

 In Islam ‘Zakāt ’ is a compulsory charity incumbent on every Muslim and it is levied according to fixed rates on all valuables, i.e. ornaments, money, livestock, immovable property, etc. It is an official institution and there is a state department to realize it and even the wages of the officials engaged in realizing it are to be paid out of the collection; in modern terminology, it may be called a ‘tax’ levied by the state. Islam has a full institution of ‘Zakāt ’ and a Muslim is duty-bound to pay it else he will be treated as a rebel of the state and religion and war will be waged against the defaulter. The Qur’an over and again stresses: “And be steadfast in prayer and regular in charity: and whatever good ye send forth for your souls before you, ye shall find it with Allah:...”[25] It is reported that after the death of the Prophet, some Arabs became renegades and refused to pay ‘Zakāt ’ on which S. Abū Bakr, the new Caliph, decided to wage war against them. S. ‘Umar forbade him as those Arabs believed in one Allah. S. Abū Bakr replied, “By Allah! I will fight those who differentiate between the prayer and the ‘Zakāt ’... By Allah! If they refuse to pay me even a she-kid which they used to pay at the time of Allah’s Messenger, I would fight with them for withholding it.”[26] On that S. ‘Umar agreed with him and said: “By Allah! It was nothing but Allah opened Abū Bakr’s chest towards the decision (to fight) and came to know that his decision was right.”[27]

To pay ‘Zakāt ’ on ones wealth and property is extremely obligatory for a Muslim. Abū Huraira has reported God’s Messenger as saying: “If God gives anyone property and he does not pay the ‘Zakāt ’ on it, his property will be made to appear to him on the day of resurrection as a large bald snake with black spots over its eyes. It will be put round his neck on the day of resurrection, then seize his jaws, then say, ‘I am your property; I am your treasure.”[28] Again, Abū Dharr reported the Prophet saying: “If any man has camels, cattle, or sheep on which he does not pay what is due, they will be produced as large and fat as can be on the day of resurrection and will trample him with their hoofs and gore him with their horns. As often as the last of them pass him the first of them will be brought back to him until judgment is pronounced among mankind”[29] (Bukhārī and Muslim). The wealth or property which is stored up and on which no ‘Zakāt ’ is paid is called, in Islamic terminology, ‘Kanz’ i.e., a buried treasure.[30] According to The Qur’an, ‘Zakāt ’ purifies one’s earnings and property.[31]

Ṣadaqah in Islam is a term used for voluntary charity, as opposed to ‘Zakāt ’ which is compulsory. It is used in a very wide sense, including what one spends on one’s family, on guests after three days, on orphans, the needy, the wayfarers, and the poor (including those who ask and those who ask not);[32] even that portion which is spent on one’s parents is called ‘ṣadaqah’.[33]ṣadaqah’ is ‘Liberality’ and the Prophet is reported to have said: “Liberality is a tree in paradise of which he who is liberal will seize a branch, and the branch will not leave him till it brings him into paradise...”[34] (Baihaqī transmitted it). ‘ṣadaqah’ saves the giver from the hell-fire. The Prophet is reported to have said over and again: “So, whoever among you can save himself from the Fire, should do so even with one half of a date (to give in charity);[35] in Islam even a kind word said to a suffering person is ‘ṣadaqah’.[36] Again, S. ‘Ali reported God’s messenger as saying, “Give the ṣadaqah before delay; for it stands in the way of calamity”[37]. Thus, Islam lays special emphasis on ‘ṣadaqah’ which is a saviour from the Hell-fire and enjoins that it should be practiced before it is too late; it is also a means to averting all kinds of calamities. So, it is a saviour in this world as well as in the hereafter. The Qur’an, as we have seen, emphasizes both the establishment of prayer and giving out of charity; the two having been treated as the most fundamental principles. Thus, we have seen that where ‘Zakāt’ purifies our earnings and property, ‘ṣadaqah’ saves us from all kinds of torments in both the worlds.[38] The Qur’an uses the term “Alms” (Charity) to cover both “Zakāt ” and “ṣadaqah”. It says, “Alms are for the poor and the needy; and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to Truth); for those in bondage and in debt; (and) in the cause of Allah; and for the wayfarer; (thus is it) ordained by Allah,...”[39] Of charity The Qur’an says, “They ask thee what they should spend (in charity). Say: Whatever ye spend that is good, is for parents and kindred and orphans and those in want and for wayfarers...”[40] This enunciates how vast is the range of charity (ṣadaqah) in the terminology of Islam.

Islam has condemned begging out rightly; but as in other matters, it always keeps in view the actual human situation. According to the Holy Prophet, begging “will appear as lacerations on his face on the day of resurrection and as heated stones which he will eat from jahannum...”[41] (Tirmidhī transmitted it). But Islam permits begging in extremely straitened circumstances: it is “allowable only to one of three classes: a man who has become a guarantor for a payment, to whom begging is allowed till he gets it,...; a man whose property has been destroyed by a calamity which has smitten him,... and a man who has been smitten by poverty, the genuineness of which is confirmed by three intelligent members of his people,...”[42] (Muslim transmitted it). This special permission is withdrawn as soon as the straitened circumstances are over.

Islam against Stagnation of Wealth:

The basic object of the Islamic economic system is to ensure circulation of wealth; to make sure that wealth does not concentrate in a few hands. The Qur’an lays down clear rules for the distribution of the “Anfāl ” (the Spoils of War), the “Fai ” (which technically means the “property abandoned by the enemy or taken from him without a formal war), and “Varāthat” (Inheritance). Of the “Fai ” the Qur’an says: “Fai’ belongs to Allah, to His Apostle, and to kindred and orphans, the needy and the wayfarers in order that it may not (merely) make a circuit between the wealthy among you...[43] Similarly, “Anfāl ” have to be distributed according to the rules laid down in The Qur’an.[44] Thus, there are set rules for the distribution of the state money and property among the needy and indigents. The Qur’an has severely condemned the hoarding of wealth. It says: “Who piles up wealth and layeth it by, thinking that his wealth would make him last for ever! By no means! He will be sure to be thrown into that which Breaks to Pieces”.[45] Hoarding is condemned also because “the miser’s hoards block up the channels of economic service and charity, and the circulation of goodwill among men.”[46] Thus, according to Islam, stagnation of wealth not only leads to uneven and unjust distribution of wealth among the members of a community; it also causes “hardening of the heart” which renders man callous and his “milk of human kindness” is gradually dried up till it becomes harder than a rock even;[47] it dries up feelings of love, sympathy, fraternity and justice which are among the basic values taught by Islam. As we have seen before, any valuables on which ‘Zakāt ’ is not paid will become his torment on the day of Resurrection. Imagine a society which is devoid of all the emotions mentioned above, which lacks all tender feelings, the result will be self-destruction and man will be living his life at a level far below even the animal level. Islam wants to ensure equitable circulation of wealth among all the members of the society; wealth has to flow from the more privileged to the less privileged and only such a scheme can guarantee a truly welfare state in which each has according to his deserts and performance.


Islam promulgates an extensive system of ‘Varāthat’ (Inheritance) again for the equitable and just distribution of wealth and property. It lays down in detail shares of each close relative, but there is a share for the poor and indigent also. On his death-bed, a man is enjoined to make a Will (Waṣīyat) in the presence of reliable witnesses, and preferably his Will is written down by a scribe very honestly and faithfully, and any alteration in the Will is liable to God’s punishment.[48] The Qur’an apportions “to the male, a portion equal to that of two females:...”[49] But this does not entail any injustice to the female, nor is she treated as inferior; it is because a woman gets her share from her husband also, and if she gets an equal share with a male then it would entail injustice to the latter which Islam has carefully avoided. As compared with other systems of inheritance, it is certainly more realistic, natural and workable. A close scrutiny of the Qur’anic system of inheritance reveals that it has a very wide range and ensures justice to all the parties concerned, which includes ascendants as well as descendants. There are systems in the world in which the whole bequest goes to the eldest son which encourages concentration of wealth in a few hands; in most of the systems the female segment of the community is deprived of any share. Islam, on the other hand, encourages circulation of wealth and property among a vast range of claimants, irrespective of their sex and status. The Qur’an clearly says, “From what is left by parents and those nearest related there is a share for men and a share for women, whether the property be small or large—a determinate share”.[50] “But if at the time of division other relatives, or orphans, or poor, are present, feed them out of the (property), and speak to them words of kindness and justice”.[51] Moreover, division of the property has to be effected “after the payment of legacies and debts”.[52] It is obvious from these verses that from the bequest of a person the legacies and debts have to be disbursed, and some portion has to be spent on the poor, the orphans, the indigents, and even other relatives present at the moment, before the legacy is divided among the true heirs which, as said above, includes a wide range. Thus Islam ensures that the bequest goes to the maximum number of beneficiaries and even some other members of the society benefit from it. Islam has, hence, promulgated a broad-based system of inheritance and its fruits are tasted by a large majority.

In the above pages we have discussed Islamic economic system which is very elaborate and has various aspects. The system is the most natural, realistic and comprehensively workable, and if followed sincerely and faithfully will remedy most of the ills, modern world is facing. However, the fundamental principle of Islam, as we have seen above, is contained in the verse quoted from chapter The Cow, which purports that nothing in excess of genuine needs is to be retained, as it would be illegitimate. Islam condemns ‘Ribā’ (Usury) which was a Jewish practice since the Pre-Islamic days and is prevalent to this day; it, on the other hand, lays special emphasis on ‘Zakāt ’ and ‘ṣadaqah” (i.e. Charity); and lays down such rules for the utilization and distribution of wealth and property, including the rules for business and Inheritance, which ensure that wealth is not concentrated in a few hands —rather a vast majority of the community benefits from it. Islamic system, as compared with any other system, is highly human and is the only system which can cure the ills of modern capitalism, which is killing all higher values and aspirations, and is estranging man from man.[53] As said before, the modern system is not only enslaving the individuals, but also the nations and states, which proves its cruelty and inhumanity. A deeper study of the Islamic system, on the other hand, will prove that the world cannot propose a better system, which is both human and humane, despite all its philosophical and scientific advancements.

Notes And References

[1] Though this system is over fourteen centuries old, it has been totally overlooked and forgotten even by the Muslim World itself.

[2] The Holy Qur’an, Eng. tr. with Com. by A. Yusuf Ali, Two-Volume Ed.,(Lahore: Sh. Ashraf,1980),II:219

[3] Steingass F., Pioneer Arabic- English Dictionary, (Delhi: Kutub Khana Ishayat-ul-Islam, 1980), p.710.

[4] Mishkāt al-Maṣābīḥ, Eng. Tr. Dr. James Robson, (Lahore: Ashraf, 1981),p. 400.

[5] Ibid.

[6] The Holy Qur’an, 2: 275.

[7] Ibid, 2: 276.

[8] Mishkāt ,p.376.

[9] The Holy Qur’an, 2: 282.

[10] Ibid.

[11] Ibid.

[12] Ibid, 2: 283.

[13] Ibid.

[14] Saḥīḥ Bukhārī, Vol. 3, Hadith 296.

[15] Ibid., Vol. 3, Hadith 300.

[16] The Holy Qur’an, 2: 275.

[17] Ibid, 276.

[18] Ibid,3: 130.

[19] Bukhārī, Vol. 3, Hadith 506 & Vol. 9, Hadith 449; see also The Noble Qur’an, Eng. Tr. By Dr. Muhammad Taqi-ud - Din Al-Hilali & Dr. Muhammad Muhsin Khan, under the supervision of Islamic University, Al-Madina al-Munawwara, (Lahore; Kazi Publications, 1992), Vol. 1, p. civ of Glossary.

[20] The Holy Qur’an, 2: 279.

[21] Ibid.

[22] Ibid, 280.

[23] Ibid, 2: 278-81; cf. The Noble Qur’an, p. 112

[24] Bukhārī, Vol. 2, Hadith 479 & Vol. 8, Hadith 14.

[25] The Holy Qur’an, 2: 43 & 277; also The Noble Qur’an, Vol. 6, p. 110.

[26] Bukhārī, Vol. 2, Hadith 483.

[27] Ibid.

[28] Mishkāt, p. 372; also The Noble Qur’an, Vol. 6, pp.182-83.

[29] Ibid, 373.

[30] The Noble Qur’an, IX: 34; cf. Part 2, p. 375.

[31] The Holy Qur’an, XCII: 18-21; see also Mishkāt, p. 374: “God has made the ‘Zakāt’ obligatory simply to purify your remaining property...”

[32] Ibid, II: 215; IX: 60; also Mishkāt, p. 410.

[33] The Holy Qur’an, 2: 215.

[34] Mishkāt, p. 400-01.

[35] Bukhārī, Vl. 8, 547.

[36] Ibid, 548.

[37] Mishkāt, p. 401.

[38]ṣadaqah,’ according to Islamic system, serves as a saviour from calamities in this world and also from Hell-Fire in the next world.

[39] The Holy Qur’an, 9: 60.

[40] Ibid. 2: 215.

[41] Mishkāt, p. 391.

[42] Ibid. p. 389.

[43] The Holy Qur’an, LIX:7; also see 1522 f.n.

[44] Ibid. ch. ‘Anfāl ”, vs. 1 & 41.

[45] Ibid. CIV: 2-4.

[46] Ibid. 6268 f.n.

[47] Ibid. 2: 264-65 where The Qur’an makes a beautiful comparison of those who spend for just show-off and those who spend for the good pleasure of none but Allah. It likens the hypocrite to “a hard, barren rock, on which is a little soil” and a true believer to “a garden, high and fertile”.

[48] Ibid. 2: 180-81.

[49] Ibid. IV: 11.

[50] Ibid. 7.

[51] Ibid. 8.

[52] Ibid. 11.

[53] Iqbal, Dr. M., The Reconstruction of Religious Thought in Islam, (Lahore: Ashraf, rep. 1968), p. 187.