The Economic System in Islam
Generally speaking, scholars and researchers have not given sufficient attention to studies related to the field of Islamic economics. If we turn to the Islamic works dealing with financial matters, we would find that although Muslim scholars of the past were exposed to these studies, their general research methodology was quite different from economic studies in our contemporary age, particularly when it is contrasted with the great level of attention and care given to economic studies in our current age. Indeed, it would be no exaggeration to say that such studies represent the spinal column of modern societies, for the economy ought to be addressed with great care and attention, given its vital connection to the life of society and its progress. Thus, while the attention of the state in the past consisted primarily of securing public safety, political stability, and the repelling of aggressing nations, the priority of the state in our day and age goes beyond these duties to include comprehensive economic planning in order to enable its society to maintain high living standards, with a flourishing economy that has a strong and stable currency and that is able to export high quality products.
It is only natural that these highlighted aspects of economic study, such as what pertains to production, currencies, or economic planning, would not have received the same level of attention in the past as they do today, given the nature of life in the past, and for this reason, the Muslim scholars of the past were not well exposed to these issues.
We shall thus restrict ourselves in this study on the economic system in Islam to addressing a number of issues that relate to private property, the role and responsibilities of the state, the charging of interest, and the various modes of investment, all of which are very crucial aspects of any economic study.
The Key Features of Economic Thought in Islam
Economic though in Islam is marked by a number of distinguishing features that set it apart from conventional economic thought, for it does not favor individual liberties over those of the collective, and nor does it favor the rights of the collective over those of the individual; rather, it attempts to seek the common welfare of the individual and the collective at once, such that the individual is able to continue to exercise his or her freedom thereby without harming the public welfare and transgressing against it . . . Thus, if one is to speak of any individualist tendency in Islam, this individualism would be very different in its definition, nature and scope from the individualism of the capitalists, and if one were to mention any communitarian spirit, this communitarianism would certainly be different in terms of its humanity, comprehensiveness, and balance from the communitarian spirit of the socialists and communists. Islam is a heavenly religion with a Divine Law, and as such, it differs significantly in its origin from any conventional law, for its goals are of a humanist character, its teachings are based on a sound nature, and its features are essentially moderate.
For this reason, it is truly a gross error and a major offense to strip Islam of its distinguished nature in an effort to make it conform to any conventional ideological system, be it capitalist or socialist, because these ideologies were born under the pressures of particular circumstances that forced them upon the societies in which they emerged, developing in their lands and in response to the emerging evidence within them. As such, planting these ideological systems in diverse social settings that are very different from these societies in terms of their religions, beliefs, cultural heritage, history, general nature, and mentality will most certainly only lead to an increased sense of disorder, degeneration, and regression. Indeed, our society has suffered the fate of a compounded ignorance that has become a heavy burden, and it must now strive to develop a comprehensive reform plan that can enable it combat this ignorance and to secure the means to its progress, so that it may become once again a strong and prosperous society that is able to keep apace with the procession of modernity and contribute to the cultivation of itself and others . . .
Accordingly, from focusing on the distinguishing properties of the economic system in Islam, the following features emerge:
First: Human Nature:
This feature is not restricted to Islamic economic thought, but rather we find it in all aspects of Islamic thought, for Islam in terms of its religious dimension strives with utmost care to connect its legislative principles toits ethical foundations, in order to create with them a bridge that serves to secure happiness and tranquility for the human condition.
I believe that greatest resource at the disposal of the human being is human nature itself, and for this reason, every regime, legal system, or law must aim to contribute in cultivating this benevolent naturein the individualself, for the crisis of our contemporary societies stems from the weakness of this benevolent predisposition in the modern human being. For this reason, the modern human being is characterized by a ruthless energy that directs all its potential towards the destruction of the individual and the collective, and to the destruction of humanity itself, as we have amply witnessed in the two world wars, which occurred within less than a quarter century from each other, highlighting for us the great need for the cultivation of this sound human nature in today’s society, so that humans may return as brothers to one another, cooperating together for the advancement of the human race and contributing to the betterment of human societies that are burdened by the shackles of ignorance, poverty, and disease.
Second: A Moderate Middle Ground:
These features are made clear for us when we observe the program ofeconomic and financial legislation in Islam, which may be characterized as striking a very clear balance between individualism and communitarianism. Every system that subscribes to this balanced program guarantees for itself its continuity and durability and would be better off in facing any challenges or crises than more radical systems, for radicalism often points to a state of constriction and is often the result of severe psychological reactions, and it often ends when the conditions leading to such reactions begin to dissipate.
Indeed, a simple glance through the Noble Qurʾān’s verses reveals that the Qurʾān has maintained throughout its program of guidance and legislation a moderate middle paththat is balanced, as Allah, the Most Exalted, states, “And do not keep your hand tied to your neck (out of stinginess), nor stretch it out too readily, lest you sit down blamed and destitute” [al-Isrāʾ: 29], and also, “And those who, when they spend in charity, are neither extravagant nor niggardly but adopt a just balance between the two (extremes)” [al-Furqān: 67]. Furthermore, with regards to the prohibition against the squandering of wealth in charity,He states, “And give the relative his due, and the needy, and the wayfarer, but do not squander your wealth extravagantly, for verily, the squanderers are brothers to the devils, and the Devil was most ungrateful to his Lord” [al-Isrāʾ: 26-27].
This sense of moderation is most readily manifested in the Islamic position on private property, as its position on private property consists of a moderation that is free from extremes, for the ownership of property in Islam is considered an absolute individual right and nor is it regarded as an absolute communal right; rather, it is regarded as both an individual and communal right, and the individual right is apparent in Islam’s explicit affirmation of this right to private property and its guarantees for its protection against any transgression against it, while the communal right can be seen in the restrictions placed on it in terms of its development and use for the common weal.
Third: Positive Realism
Economic thought in Islam is characterized by a positive realism that is well received by the individual and by society without much difficulty or hardship, for Divine Laws and legislation should not simply aim to be idealistic. This is because with regards to what is overly idealist in an imagined unrealistic sense becomes to too difficult for people to live by and is thus often abandoned. This, however, should not mean that legislation ought to conform to people’s whims and desires, for with this form of deference lawmaking fails to take on a constructive role in the advancement of society. Indeed, the Divine Laws have not come for any other reason other than to advance people and assist them such that they become elevated in their understanding, honest in their dealings, and sincere in their work.
What is considered ‘realistic’ in the Islamic sense is that which the individual finds no burden in taking on and fulfilling its responsibilities, while at the same time it is an idealistic (positive) form of realism in the sense that it is able to practically assist in advancing the human being. It is for this reason that we see the general Islamic teachings have historically shunned from busying people with the excesses of asceticism and physical detachment, as they are aimed at making the individual a well-rounded soul with a balanced personality.
In terms of Islamic economic thought, its realist focus can be seen in the balance struck between the individual and the community and between the community and the state. Thus, the right to private property is instituted to meet the natural psychological instinct for ownershipin the human being, while it is simultaneously restricted by the demands of the public weal in order to achieve a sense of balance, for this is the foundation that leads to the actualization of social advancement and progress and to a sense of stability and fulfillment.
If we thus look to the independent legal reasoning (ijtihād) of the greatest Companions (Ṣaḥāba), we would find that they were very much concerned with a realistic assessment of day-to-day affairs when it came to their interpretation and understanding of the sacred sources, and it is for this reason that their legal opinions were able to actualize the public weal and to respond to the conditions of their social setting.
Fourth: Restricting individual welfare to the demands of the public weal
This is one of the principles upon which Islamic economic thought is based, which consists of guaranteeing the autonomy of individual decision-making as long as it is in accordance with the public weal by restricting individual freedoms to accord with the collective good, which is the ostensible objective behindthe institution of any legislation or regulation, for (individual) rights are tied to social benefits, which are the objectives of the Law.
And if we were to go back to the established sources of the Sharīʾā, we would find that they fully affirm the need to restrict the principle of individual autonomy in decision-making to the dictates of the common weal. Examples of this are those texts prohibiting such things as monopolization, harm, or exploitation;even when these individual actions may serve to actualize some tangible benefits for the individual concerned, they nonetheless cause him to harm others who should not have to bear the cost of this ugly exploitation, and it is thus the duty of the state to ensure that the welfare of the collective is always preserved by monitoring individual freedoms to ensure that they do not constitute ugly forms of exploitation.
For this reason, many individual actions that have been mentioned in the Qurʾān are considered permissible only to the extent that there are no harmful consequences to others associated with them, such as the case of a Sharīʾā compliant will, which cannot be written with the intention harming one’s inheritors, holding on to one’s wife (denying her a divorce) with the intention of harming her, or divorcing her with the intention of fleeing from any inheritance obligations; asthe Most Exalted states, “after the payment of any bequest that may have been bequeathed or of any debt, without any intention to cause any harm or injury. This is an injunction from Allah, and Allah is Wise, Forbearing” [al-Nisāʾ: 12], and concerning the wives, “and do not retainthem out of malice so as to transgress (against them).”
The Noble Messenger has said, “There shall be no harming and no being harmed,” and this ḥadīthreport is considered amongst the most important foundational principles upon which Islamic legislation relies and that serves to prohibit any harms that may be directed against the public weal. There are many similar principles of Islamic substantive law (fiqhi) that are used to limit unfettered individualism if it results in any harms to the community; among these are the permissibility of detaining the ignorant doctor who has harmed his patients with his treatment, the permissibility of detaining the incompetent from squandering his money incompetently, so as to secure his welfare and that of his inheritors and broader society, the permissibility of confiscating monopolized wealth and what is sold at the monopoly price, such that the monopoly does not become a means to instant prosperity, and the permissibility of fixing profits so that entrepreneurial greed does not result in the exploitation of consumers and harming them.
As can be seen from these examples, it becomes very clear that Islam endorses the restriction of individual actions for the sake of protecting the common weal, such that it does not remain at the mercy of the frivolous and the exploitative.
Fifth: Encouraging economic activities throughout the lands
Islam is very concerned with encouraging economic activity and exhorting Muslims to hard work that is productive and profitable, and it has strongly opposed unemployment, dependency, and idleness and prohibited the hoarding of wealth and depending on it. For this reason Islam has not mandated spending on the poor who are capable of working, so that it does not lead to their dependence on charity and to laziness and idleness.
In terms of agriculture, Islam has strongly encouraged the reviving of dead lands, and the manuals of Islamic law there are specific chapters devoted torevival of uncultivatedlands. Whoever revives a dead land, it becomes his property, as in the saying of the Messenger, peace be upon him, “Whoever revives an uncultivated land, it shall be his.” He also said, “The common land is for Allah and His Messenger and then to you after that, and whoever revives an uncultivated plot of land, it becomes his.” By the grace of this call to farming and by the grace of this encouragement to cultivate the land, people dispersed to revive any abandoned uncultivated lands, and they began to revive them by plowing and irrigating them, for by doing this, the land becomes their property. The Islamic state, however, was not merely satisfied with this but resorted to the redistribution of public lands to whoever was able to cultivate and develop them, for the state is incapable of fulfilling this development, and by giving these lands to those who would develop them contributes to the redevelopment of abandoned lands, allowing them to produce a yield.
Sixth: Restrictions on the expansion of private wealth
If are to consider the rulings related to money in the Islamic Sharīʿā, we would find that it is very concerned with placing restrictions on the expansion of private wealth, so as to ensure that this wealth is not wielded by its owners as a weapon against the public weal. Given that Islam has safeguarded people’s wealth from any attacks against it, its owners must then ensure not to use it in ways that are harmful to others.
From among the most important restrictions that Islam has placed on the expansion of wealth are the following:
1. Wealth cannot be raised excepted through lawful means, and any wealth that is raised through prohibited means remains unprotected and unsupported by Islam. The lawful means for expanding one’s wealth is through working and earning in a manner that is free from any form of exploitation or harm to others. Any profitsgained through exploitative or harmful means is a corrupt profit that is unworthy of any respect, as it violation of the basic moral principles that ought to be observed by the possessor of such wealth.
2. It is not permissible for wealth to be used in any manner that is harmful to individuals, the wider society, or the state. Thus, if this wealth is amassed and becomes powerful enough to be used for altering currency rates or engaging speculation that is harmful to the public weal, then it is the duty of the state to seek legitimate and just Sharīʿa means by which to reduce the dangers of this financial power because it is impermissible to block any potential harm to individuals in a manner that causes to the original owner of the wealth, as justice must be maintained for all parties concerned.
3. The wealthy owner has an obligation to fulfill his financial duties with his wealth,such as paying the alms of Zakat and other duties of social solidarity. If the owner refuses to pay these dues that are obligatory upon his wealth, the state has the right to secure such payments through the power vested in its authority and to secure them for the poor and needy and for any projects related to the public weal.
From these observations, it is clear that wealth under Islamic rule cannot be raised in a fast and ugly manner, given the constraints and obligations associated with it that would preclude its large expansion within a short duration. And if wealth is raised in accordance with the Sharīʿa, having fulfilled any obligations towards the larger society, such wealth is considered sacrosanct and respected under Islam. Additionally, Islam has sanctioned the concept of inheritance shares, which is the division of wealth amongst one’s inheritors, thus restricting the expansion of wealth once again, such that it may no longer add to the potential harm of society.
Seventh: The fight against poverty
Every economic system strives to fulfill certain objectives, and among the most important objectives for economic studies and financial policiesrelating to Islamic legislative thoughtis the fight against poverty, as the phenomenon of poverty is a social illness, and the dangers of its reality do not extend to those who are poor alone but rather go on to affect the society as a whole. Society cannot be established on a firm and solid foundation, while a section of its people suffers from the plights of poverty and is afflicted by its scourge. Thus, any religious, nationalist, or moral call is bound to have little impact on a people’s state as long as it is not tied to any foundational reforms that are aimed at relieving this continuous source of suffering, for poverty constitutes a dangerous illness, and it is up to the reformers, if they hope to gain any attentive ears, to establish their call on the eradication of this deadly scourge and destructive danger . . Otherwise, any such call to reform would fall on deaf ears and result in no more than empty rhetoric that has no resonance with the people.
Islam’s response to the phenomenon of poverty has always been decisive, as it has affirmed the concept of sharing a portion of one’s wealth between the rich and the poor, and this sharing of a specific portion is renewed annually and applies to all types of assets that are raised, be it money, real estate, personal effects, or crops . . This share ought to not to be associated with the desire of its contributor, nor is it to be regarded as an act of good will or benevolence, as it is not in essentially a chartable act that is deserving of praise and gratitude, but it is rather an obligatory duty that is due annually upon anyone who owns wealth, willingly or unwillingly, and it is the duty of the state to collect it and redistribute it to the needy who are deserving of it.
Islam has not sufficed itself with outlining this financial obligation but has also mentioned other obligations upon the wealthy that are by no means less significant or worthy than the Zakat, such as the duties of social integration inall their material sense, including forms of financial support, expiations, charity,blood money, endowments, and bequests.
The financial obligations that are due upon the wealthy are by no means restricted to what we have mentioned in terms of their amount, but they rather extend according to what is needed to cover all the basic social needs in cases where poverty is widespread since it would be Islamically inconceivable to tolerate a poor class that is utterly destitute and incapable of feeding itself, while an other social class lives a life of prosperity, extravagance, and ease . . For this reason, the noble Messenger affirmed the idea of sharing between the two camps of the Muhājirīn (Migrators) (al-Muhajirīn) and the Anṣār (Supporters), and he specified that the Migrators specifically as the recipients of assistance in this case, in order that the wealth does not remain hoarded amongst a minority of the wealthy, and said concerning this,”Whoever has an extra mount shall give it to the one without a mount, and whoever has any extra provisions shall give to the one with no provisions.” The narrator of this ḥadīth Abu Saʿīd, commented on it, saying, “And he continued to list the different types of wealth, until it became clear to us that we had no right to keep anything of what we had in excess.”It was also narrated that the Messenger of Allah, Allah’s peace and blessings be upon him, said, “Whoever has food for two shall fetch a third, and whoever has food for four, shall fetch a fifth or a sixth.” It was also narrated on the authority of ʿAlī b. AbīṬālib that he said, “Allah has decreed that the rich provide of their wealth to the extent that they are able to meet the needs of the poor among them, and if they are left to go hungry, bare and exhausted, then it is by the will of the wealthy, and Allah, the Most Exalted, has the right to hold them to account for this and punish them for it on the Day of Judgment.”
The Islamic Perspective on Private Property
Private property constitutes one of the pillars upon which society is founded, and it would be inconceivable for any society to deny or ignore the concept of proprietorship because the drive for ownership is something that is instinctively ingrained in the human psyche, and this drive can be quite strong amongst certain peoples and individuals, while weak amongst others. However, it would be impossible to deny it altogether without any intransigence or difficulty. And if we are to consider that some regimes have attempted to eliminate private ownership all together, we are still left with the inescapable reality that such regimes would never be able to overcome the hidden and instinctively human drive for ownership, as the human being from the beginning of his or her childhood can be seen longing and looking to possess small objects, and once this drive grows stronger and is developed further as he or she is able to understand what it means to possess or own something, this drive will eventually propel him or her to work harder and to exert an effort, and to earn and income, as it is the most immediate material incentive that affects human behavior and productivity.
Especially given that economic studies today seek a great level of sophistication in supplying the material and spiritual incentives of individuals, so as to encourage them in increasing their work and productivity, the elimination of private property would effectively serve as a defining detrimental factor in killing the sense of motivation within the human being, which would make any work appear as a loathed duty and lead to a preference for slacking off.
Given the above, it is only natural that Islam would affirm the concept of private property as something to be celebrated, except that it would also not wish for private property to constitute a burden on society and for proprietors to transgress in their exploitation of it and their investment in it. For this reason, Islam has surrounded this concept with many restrictions, duties, and conditions, such that it may be steered in an appropriate direction that contributes to the wellbeing of the individual and that serves the advancement of society.
The Nature of Private Property in Islam
The topic of subject property is considered among the most important subjects for researchers and it has been the source of much debate and disagreement amongst the scholarly community of philosophers, legal scholars, religious clerics, and politicians. Some of have viewed it from an individualist light, highlighting its necessity and the importance of affirming it and of securing full freedoms for proprietors in terms of how to dispose of their properties, while others have viewed from an opposite light, highlighting how it represents a real danger to the public weal and indicating that for this reason it ought to be eliminated and done away with as a right.
The mistake in my opinion is that each of the two perspectives has focused on the concept of property from a partial angle that fails to account for comprehensive vision, and for this reason, both perspectives have fallen into the error of being too quick to judge and consider. Indeed, private property has its own positive side in terms of its contribution to the building of society by providing the necessary incentives for hard work and the earning of income, but it also has a negative side in that the proprietor may seek every possible means to expand his property and wealth, even if they be at the expense of the public weal and harmful to the community.
From here, we can ascertain the distinguishing nature of private property in the Islamic perspective, which can only be grasped through the comprehensive perspective that Islam has taken vis-à-vis the concept of proprietorship. The nature of proprietorship in Islam is simultaneously constituted of a private and a communal dimension; it is neither to be viewed in an absolute individualist and private light, as is the case with the proponents of capitalism, due to the constraints and obligations that Islam has imposed upon it, and nor is it a form of unsuccessful communitarianism, as the proponents of communism, due to Islam’s affirmation in principle of the concept of proprietorship, even if it has not tolerated the idea absolute ownership with the constraints and obligations that it has associated with it in the name of the public weal. It is thus regarded in an individualist light in terms of its affirmation and in a communal light in terms of the restrictions placed upon it, and as such Islam has provided a very positive remedy for the challenges of private property.
And if we were to go back to the Noble Qurʾānic verses concerning the topic of private ownership, we would find a confirmation of these two dimensions, for the Qurʾān ascribes ownership to Allah in some instances and also ascribes it to individuals in other instances. The explanation for this combined mention is to alert the our attention to this distinct feature, in order to guarantee that the proprietor is able to direct his property to the benefit of society since it is impermissible for him to use it or invest in it in a manner that contravenes the boundaries of the Sharīʿa, which are antithetical to anything that is harmful or exploitative.
As the Most Exalted mentions in ascribing all wealth to Himself:
“And to Allah belongs the kingdom of the Heavens and the Earth and all that is in between” [al-Māʾīda: 17];
“And give them of Allah’s wealth that He has bestowed upon you” [al-Nūr: 33];
“And believe in Allah and His Messenger, and spend from what He has made you successors to” [al-Ḥadīd: 7];
And with regards to ascribing wealth to the people, He said:
“And do not devour your wealth between you unjustly” [al-Baqara: 188];
“And take from their wealth a charity” [al-Tawba: 103];
“Allah has purchased from the believers their very lives and their wealth in exchange for Paradise” [al-Tawba: 111];
“And in their wealth is a rightful portion for the beggar and the needy” [al-Dhāriyāt: 19].
The ascription of proprietorship to Allah does not in any way conflict with the ascription of proprietorship to people, as its ascription to the people is born out of a desire to grant the human being the responsibility to invest in it, tend to it, and to take care of it, while its ascription to Allah is meant to keep the proprietor from indulging in his greed, such that it brings harm to the people.
The Duties Accruing from Private Property
The duties accruing from private property consist of the active financial obligations that the proprietor must commit to; in addition to his responsibilities in ensuring that his wealth and investments are developed through means that are compliant with the Sharīʿa, he is also responsible for the following duties:
The duty of Zakāt: Zakat consists of the financial obligation that the proprietor must fulfill towards the poor and needy, and it is considered a religious obligation that is both an act of ritual worship and a financial obligation. Perhaps it has been given this characteristic of worship as means of spurring people to pay it and to fulfill its obligation, as people are more prone to failing in their financial obligations.
The duty of social solidarity:social solidarity in Islam is a general concept that stems from Islam’s desire to bring about a society that is cooperative and well integrated and that is founded upon the values of love, affection, and unity, such that it becomes a cohesive society whose building is stable and is based on a firm foundation and strong pillars . . As the Most Exalted states, “The believers are but brothers,” and the essence of brotherhood is none other than cooperation, solidarity, and affection. As the noble Messenger describes the believers, saying, “You see the believers in their compassion, affection, and sympathy with one another as the example of a single body; if a body part complains (of any pain or ailment), the rest of the body responds to it with sleeplessness and fever.” Narrated by Bukhārī and Muslim.
The Noble Qurʾān has clarified the meaning of righteousness, stating, “Righteousness does not consist of turning your faces to the East or the West, but the righteous is one who believes in Allah, the Last Day, the angels, the Book, and the Prophets, who spends of his money out of love for Him on the near of kin and the orphans and the needy and the wayfarer and those who ask and in emancipating the slaves, who observes the prayer and performs the Zakāt, and those who fulfill their promise when they make a promise and who are patient in good and bad and in war; these are the ones who are truthful and such are the ones who are God-conscious!” [al-Baqara: 177] . In this manner it becomes clear for us that the obligatory duties of private ownership are not merely restricted to Zakāt but rather extend to all that contributes to the service of the community and promotes brotherly relations between its members.
The Constraints on Private Property
Islamic legislation does not seek to bind private property with material obligations but rather has obligated the proprietor with meeting certain restrictions on the generation of wealth or its use. These restrictions consist of negative commitments that are binding on any proprietor so as to ensure that his property is of no harm to the public weal, for though Islam seeks to affirm private ownership as a means of accommodating this natural human instinct and for this property to fulfill its role in society, it also forbids that this right be used towards purely materialistic and greedy ends. Although the proprietor may derive a particular benefit from developing his property and its use in any manner that maylead to abundant gains, such a materialistic vision is disapproved in Islam for contradicting its moral foundations and legal rulings.
These negative commitments are met by two restrictions:
First:that private ownership is not developed non-Sharīʿa means that are harmful to others such as forming a monopoly, fraud, or exploitation since all such means are unlawful in Islam due to their harms against the people. Any wealth that is generated through such means is cannot be respectable or protected under Islam but rather it is the duty of the authorities to prevent these unlawful means from being used in the interest of the common weal and to preserve the objectives of the Sharīʿa.
Second: that this expansion of wealth is not contrary to the moral principles mandated by Islamsuch as the trade in harmful merchandise, alcohol, drugs and all the like of what is detrimental to the religion, morals, nation, and economy of the wider society. Among these is means is human trafficking and their shipping to nations that violate their rights, trading in contraband and legally prohibited products, which are only prohibited for their harms to society, and thus trade in such merchandise grants the merchant an opportunity to exploit this prohibition to actualize corrupt earnings.
Private ownership is constrained by all the relevant passages in the Qurʾān and Sunna, which ascertain the prohibition of any harm or harming, irrespective of the means, and harm in all its types is forbidden in Islam, as no rights can be guaranteed through harm, a principle which the noble Messenger has amply clarified in his saying, “there should no harming nor reciprocating harm.” This ḥadīth calls for the prevention of harm in all its manifestations, be it through using preventive means before it falls or repairing its traces after it has fallen. Islam has by no means sufficed itself with prohibiting harmful conduct, such as any conduct that stems from a motivation that is harmful to the individual or collective because even if the action itself is permissible, once it is tied to a harmful or prohibited motivation, then it is also prohibited, as it is impermissible for the human being to go about arbitrarily applying his or her rights, even if the actions are permissible, for anything that is tied to a sinful intention becomes itself prohibited by virtue of its motivation. For this reason, if a proprietor uses his wealth with the intention of harming his neighbor, partner, or any individual in society, then such a use can never be lawful for its association with a harmful intention.
The Ruling on the Confiscation of Private Property
Many people ask about the ruling concerning the legitimacy of confiscating a private property or nationalizing it in its present form and Islam’s position vis-à-vis this policy, which is normally considered a violation of the right to private ownership and a direct attack on the proprietor. In response to this question, I would not wish to provide a single for this type of situation, which can be constituted of very different circumstances where different rulings apply. I can however confirm the self-evident truths that Islam prohibits all forms of injustice, whether this injustice is from the state against the individual or from the individual against the society, for it is unlawful for the state to violate the rights of individuals and attack their freedom to own property and to earn an income. The ownership of property is an established right, and since the individual works hard with much effort to secure his property, it is only just that this right be protected against any foreign aggression. At the same time, however, we must not be unmindful of the fact that the individual cannot develop his property or wealth through exploitative means, the enforcement of a monopoly, or the harming of others, and in such cases the property is no longer protected, as it was reaped through means that are not sanctioned by the Sharīʿa.
With this discussion, the following picture emerges:
First: the confiscation of an individual’s private assets by state authorities in order to exact the vengeful desires of a tyrannical ruler or their development to the benefit of the ruler and his authority, such actions cannot be approved by Islam for their clear injustice.
Second: the confiscation of private property in response to a pressing social interest, which is an extension of the view that a property may not be confiscated if it leads to any harm to the public weal, and examples of this case are the confiscation of property for the expansion of public roads or the building of dams and railroads. Such forms of confiscation are clearly permissible and are mandatory if they bear no harm to the common good, which must always be tended to by the state. The historians have recorded that the Second Caliph ʿUmar b. al-Khaṭṭāb had wanted to expand the Holy Mosque (in Mecca) and requested to by the homes surrounding the Kaʿba to add them to the mosque. In response some homeowners accepted while others disapproved, and so ʿUmar b. al-Khaṭṭāb seized their properties by force and placed their values in the coffers of the Kʿaba to compensate them, saying to them, “You have chosen to settle by the Kaʿba, and this is its precinct, while (you cannot claim that) the Kaʿba settled on your properties.”
This being said, it must be ascertained that any confiscation of private property, irrespective of the pressing need for which it was intended, cannot result in an injustice to the original proprietor, and for this reason it is the duty of the state to offer full financial compensation for his property so as to ensure that he is not met by any injustice behind this confiscation which was necessitated by the pressing circumstances.
Third:the confiscation of corrupt assets, such as those that are acquired or developed through contravening the established principles of the Sharīʿa or that are aimed at harming public interests, which are sacrosanct. Under this fall all forms of property or assets that were gained through dealing in interest, imposing a monopoly, harming others, bribery, forms of trafficking that can be harmful to the society or state, tax evasion, failing to pay the Zakāt, trading in merchandise prohibited under the Sharīʿa or that are illegal under state law, and in addition to this wealth is any profit that is achieved through the exploitation of particular circumstances such as the corrupt profits of a merchant who exploits the circumstances of war or the hiding of certain merchandise from the market, for any profit that carries the features of exploitation is necessarily a corrupt profit that is unlawful. It is thus the prerogative of the just state to carefully examine each of these cases individually and to confiscate in whole all that is gained through bribery, interest, or a monopoly and to confiscate partially what is gained through exploitation or corrupt profits. In such cases, an authorized committee can determine the amount the amount needed to restore justice in a manner that leads to no harm to either the individual or society at large, for justice is what is sought and demanded in all occasions, and it is the objective standardupon which each new instance must rely.
The Islamic Perspective on the Economic Functions of the State
The Primary Function of the Islamic State:
Among the most important functions of the state in Islam is the protection of public interests, and these interests are not limited to guaranteeing the security of the public and protecting the borders of the state but rather extend to securing what Islam has legislated for the benefit of the individual and society at large, for Islam did not institute such laws for a frivolous purpose that is empty of meaning. Rather, these laws are there to be implemented, and it is the duty of the Islamic state to strive in applying the rulings of Sharīʿa, which have been instituted for no other reason other than to secure the interests of the public and to place Islamic society on a solid and upright footing that is firmly constituted.
The Islamic perspective is that the state has no claim to ownership nor does it have a partisan role in confronting the people, for if this were the case, it would certainly lead to some form of conflict and antagonism in the actualization of competing interests. The state, however, by virtue of its authority and power is better able to secure its interests, especially when it harnesses its potential in an immoral manner by prompting society to serve the authorities and subjugating the people to meet the interests of those in power with the threat of violence and deterrence. However, the state from the Islamic perspective is but an instrument that has been facilitated in the service of the public, and society is the source of its legitimacy. Its ultimate purpose is thus to secure the wellbeing of its citizenry, and the establishment of justice and working towards ensuring security and public order are the means to fulfilling this purpose. As such, it is unbefitting for the state to transcend the limits that have been imposed upon it in its rule just as it is unbefitting for the state to ignore its essential purpose which is to serve the people, as opposedsubjugating the people in its service, for the people come before the state, and the state is but an instrument in securing the welfare of the people.
With this in mind, Islam has guaranteed the freedom of individuals with respect to their religion, opinion, work and earnings, while providing them with the freedom to live a dignified life, be it in relation to individual freedoms, freedom of opinion, and the freedom to work, earn and own property as one wills, except that all such freedoms function as medicine: if they are used in precise measure and with wisdom, the cure is actualized, and if they areused in a random fashion, they are a cause of death and extinction. Thus while freedom of opinionis guaranteed, it is unbefitting to use it destructively to instill doubts in the basic creed of the Muslim Ummah, in its heritage, in its ability to ward off enemies, and in its right to defend its interests. As for the rights to earn, to work, and own property, these are affirmed because they are the means to developing a strong integrated economy that bestows its benefits on the individual and society at large. But such rights must never be directed towards the exploitation of society and exposing it to harm by exploiting its needs and harming its national interests.
The state is the authority that is responsible for protecting these societal interests, and this is achieved by looking after them and affirming the rulings that protect them against any exploitation or misuse.
The State’s Supervision of Economic Affairs
Since the duty of the state is to protect society’s interests, it must have some form of commission established to provide some oversight over the civil transactions that take place within it, and this is primarily achieved through the establishment of specific regulations that are meant to preserve civil rights and that are subject to the prevailing social conditions. As such, the state must strive to legislate the necessary laws that are needed to preserve people’s rights, and any law that is intended to this effect or to protecting the interests of a certain segment of society is not only permissible in Islam but in fact required on the condition that it meets the description of the objective it aims to achieve and that it does not violate the rights of any individual from among the people. From among these laws that must be legislated by the state for the preservation of the public weal are labour laws that are meant to determine the number of working hours, fix minimum wages, establish vacation pay, establish a social security net, and provide employment insurance for unanticipated layoffs. The proof for Islam’s need of such laws is that Islam has come to protect public interests and labourers, for this the class that exerts the greatest effort, and what they produce is more worthy of protection and care. As such, it is the duty of the state to protect them against arbitrary treatment and exploitation, as it is unlawful subject their lives and the lives of their families to the whims of their employers who may derive personal benefit from cheating them and paying them minimally for their work. Thus, should the state have no interest in securing universal healthcare and education for the children of the patiently striving working class, it should at least ensure to collect the Zakat from the wealthy so as to assist in providing them with a dignified living.
If the state is able to assist in securing this general masses with its right to a dignified living, it would deter them from turning to these suspicious groups that only desire to exploit the people as instruments for the actualization of political ends. On the other hand, if this section of the masses were to turn instead to Islam, which is their religion and creed, it would find therein the financial regulations that would guarantee its dignified economic right to a generous life. Thus, the fact that Islam never was and never can be a religion of injustice and that it would be inconceivable for it to accede to any form of exploitation under any given circumstanceshould suffice such people as a source of great pride; Islam has granted them the right to share annually in a portion of what the wealthy make, and this allotted portion is sufficient enough to meet all the needs of the poor and need to guarantee them with a dignified existence.
Under its golden age, the Islamic state depended on a system that enabled it to inspect the markets, financial dealings, merchandise, and public benefits in general, and this system was developed into an official inspection regime (wilāyat al-ḥisba).
This inspection regime functions as an inspection commissionthat is tasked with overseeing and maintaining all that pertains to protecting the interests of society, so as to assist the state with its supervisory role and with combatting all forms of corruption, exploitation and harm.
Many books have been authored on the topic of inspection and the duties of the inspector, and they all affirm the duty of the state in protecting society against the dangers of those who are accustomed to exploitation and whose conscience is incapable of deterring them from committing prohibited offences that harm people.
Al-Mawardī states in his work al-Aḥkām al-Sulṭāniyya: “In the case of detested transactions such as those involving interest, corrupt sales, and the sale of what the Sharīʿa has prohibited while both the parties to the transaction agree to it and are aware of its unlawfulness, the inspection regime has the authority to and must condemn them, prevent them, and punish them depending on the gravity of the violation. Among such transactions are the cheating merchandise and manipulating costs, which must be condemned, prevented, and punished depending on the circumstance, for if this cheating is intended to deceive the buyer buy hiding from him the cost, then it is a more harshly condemned offence that is more sinful, which ought to be more strongly condemned and punished, whereas if the nothing is kept hidden from the buyer, it would be less sinful and not as serious.”
The Scope of State Intervention in Economic Affairs
It would be pointless for us to comment on the state’s intervention in economic affairs beforeunderstanding the purpose of such intervention, for if this intervention brings about some common good or is demanded by some exigent circumstances, then it becomes mandatory upon the state without doubt. This is because the very purpose of the state is to secure the public weal, and thus if such considerations call for state involvement, then it becomes a duty upon the state to intervene to protect society and its interests. However, if this intervention is with the intention of harming certain individuals or oppressing society and subjugating it to a despotic authority and by terrorizing them with threats of seizure and expropriation as a means of controlling their movement and spreading fear within them, such intervention is clearly unacceptable, as it carries with it the meanings of injustice and repression, and all the revealed religions and any just legal system have come for no other purpose than to prevent injustice and to struggle against the unjust.
It is permissible for the state to intervene, however, in the following cases:
First: in cases where there is a monopoly, exploitation, or any harm, for in such cases public interests are exposed to dangers that are harmful to society, and as such it is permissible and in fact a duty of the state to protect society since its primary function is to protect its interests. Thus, if the major merchandise that constitute the every day needs of the people happen to be monopolized by a small group of merchants, it becomes incumbent upon the state to seize such merchandise in order to resell it at its normal prices and to make it affordable to the people and to prevent this wrongful exploitation from becoming a means to prosperity that is in contravention to the Sharīʿa.
Second: the case of corrupt earnings:though the right to make an earning is well established for individuals, it is impermissible for it to be accompanied by the exploitation of times of crisis such as wars, economic depressions, political crises, or when goods are in shortsupply. Such exigent circumstances do not permit merchants to unjustly and exorbitantly raise their prices. While Islam has legally allowed for prosperous gains in profits, it has restricted this to the lawful profits that are well known by merchants and which consumers are able to accept with conviction and satisfaction. As for the base profits that are extracted from the consumer with great reluctance, such are sinful and bad, and for this reason it is incumbent upon the state under these circumstances to intervene and fix the profit margin so as to protect consumers against the dangers of unfettered greed and exploitation.
Third:cases of pressing needs: as the problems of life have developed in complexity, and the interests of people have become ever more intertwined, while the means of production have increased, and as such, and the functions of the state have developed in an interconnected manner it has become all the more necessary for the state to supervise the various public economic organizations, which ought not to be controlled and exploited for personal interests by a minority of individuals. Here, it is the responsibility of the state to intervene in every important economic organization with the intention of supervising and taking over it if this is what is demanded for the common good. Among the most important of these organizations are those related to public resources, energy sources, weapons manufacturing, marine and air transportation, and any others that are required by the public weal and must hence be under the direct supervision of the state.
The State’s Responsibility to Public Money
The state represents the legal personality that is responsible for protecting the public weal, and as such, all the affairs of the state must connected to the interests of the public, which are the true measure of legitimacy by which all the state’s actions are held to account. As for the ruler, he is the person with whom the final decisions ultimately rest, for he is considered to be the most eligible candidate for running the state’s apparatus, and he charges from its wealth for his work what is sufficient enough to relieve him of any other duties, and it is forbidden to him to misuse the funds of the public treasury or take from it as he wills because this is the wealth of the people, meaning it can only be spent in meeting its interests.
This is the opinion of Islam on the head of state, and as such it is impermissible to for him to set for himself any special privileges, unless these are in line with what is absolutely necessitated by the public good. Indeed, Islamic society during the era of the Rightly Guided Caliphs, which is the golden age that best represented the nature of Islamic rule, was greatly affected by this objective perspective on the ruler, as the ruler used to take himself to account first, while finding no qualms with the public’s taking him to taskand encouraging and praising such vigilance, which he considered to be a healthy manifestation in society.
A man said to ʿUmar b. al-Khaṭṭāb, “O Commander of the Faithful, if you only spent more on yourself from Allah’s wealth, the Most Exalted.” So ‘Umar said to him, “Do you know what the similitude of them and I is? It is as the example of a people who are traveling, and they gathered from them some money and confided it with someone to spend on them, so is it permissible for such a man to appropriate the money to himself and keep it from them?”
The first Caliphs were not merely satisfied with taking themselves to task with regards to the state’s wealththat was entrusted to their disposal, but they also held their governors and workers to account for the wealth that they were entrusted with, and if they found that any of them had used their positions to advance some material gains or to generate wealth through unlawful means, they would either seize this wealth in whole or in part and return it to the public treasury for the benefit of the public . . The righteous CalpihʿUmar b. ʿAbd al-ʿAzīzincarcerated one of his governors, Yazīd b. al-Mahlab, because he failed to return the money in his possessionto the public treasury, and he told him concerning this, “It is the right of the Muslims.”
The responsibility of the state to providing social security: As we have seen, the primary function of the state is to protect the interests of society, and among the most important of these interests that is most urgently needed is the provision of a social security programby the state out of its responsibility for the needy, the poor, the orphans, the unemployed, and the senile.
If we were to follow the premodern legal (fiqh) manuals we would find texts confirming the Islamic perspective on the state’s obligation to provide all that relates to social security by facilitating universal health care, welfare for the poor, thesenile, the orphans and abandoned infants.
Here is a text from one of the premodern legal manuals, in which the author discusses the expenses of the public treasury: “As for the fourth kind, he must spend on the medicine of the poor and the ill and for their treatment, on theshrouds of the dead who are penniless, on abandoned infants and for the blood money of their crimes, on those who are disabled from work with no financial support, and other such examples, and it is the duty of the ruler (Imām) to spend upon those for whom these rights are due.
The Islamic state used to also grant a specified allowance for infants from the public treasury, whether they were from among the rich or poor, and ʿUmar b. al-Khaṭṭāb ordered on someone to call upon the people and reassure them not to rush in weaning their infants, for every infant in Islam was provided for. ʿUmar b. al-Khatṭṭāb also spoke with two of his workers in Iraq who had informed him of the surplus of wealth in their treasury there, and he said to them, “Perhaps you overtaxed your workers with what they cannot bear, but by God if it is saved for the widows of Iraq, it would suffice them such that they shall not need from any ruler after me.”
Islam has not sufficed itself with providing insurance for the poor among the Muslims but has ensured that this duty of the state extends to non-Muslims as well, as we see in the letter of Khalid b. al-Walīd to the people of Ḥīra when he made peace with them, where any old man who was unable to work or had received an injury had his Jizya tax waived and was provided for from the treasury of the Muslims for him and his children, as long as he lived within the abode of Islam and the Ḥijra.
This is what is to be understood by social insurance in Islam, which is an honoured and humanist vision in its general and comprehensive scope and which was by no means restricted to the residents of the Arabian peninsula from among the Quraysh or others or to those of the Muslim faith to the exclusion of others. Islam has made no distinctions between an indigenous Arab inhabitant and an Arab resident from the farthest reaches of the Levant, Iraq, or Egypt whose lands were liberated but has rather treated them equally in full accordance with Islam’s humanist vision, which is the primary reason for why many inhabitants of these liberated lands entered into Islam in waves, tasting its universal vision of justice, a sense of generous concern, and humane treatment.
Today, after more than thirteen centuries and after all that has been achieved by our modern societies of rights and freedoms, we must objectively ask ourselves: has the modern citizen in any of the far reaches of the Earth been able to secure for himself all that the Islamic state has been able to secure for its citizens, and have the colonial powers been able to secure for their colonial subjects a small portion of what by contrast Islam was able to offer its liberated lands? This is indeed the nature of Islamic civilization, and this is the secret of its greatness and endurance, and this is why the colonial powers were eventually forced to leave their colonized states in a state of rejection, while the people of the lands conquered by Islam were eventually integrated into the Islamic fold, becoming full members of its society, speaking its language and upholding its religion, looking favorably onthe generousand new thought of its civilization.
The Islamic Ruling on Interest Based Transactions
The topic of interest-based transactions is among the most controversial topics that is likely to generate much debate in our social gatherings due to the interconnectedness of our daily transactions and their relationship to the banks that play a pivotal role in our contemporary economic lives.
At this juncture, we cannot delve into this challenge in a manner that is able to address any of its ambiguities without first addressing some basic principles and key points that can clarify the details of the problem.
I do not believe that anyone can oppose the prohibition against interest (in Islam), for it is clearly prohibited by an explicit text of the Qurʾān, and as such, this topic does not require any further debate or disagreement since there is no room for any independent legal reasoning on the intended meaning of the text.
Thus the point of contention is not over the prohibition of interest but is rather related to what is intended by the word ribā (interest). So what is the prohibited ‘ribā’? If we are able to define thisribāwith a comprehensive all encompassing definition we would be able to achieved the desired result, however defining this term and knowing what is intended by it is by no means easy, and scholars and jurists have persevered since the origins of Islam till the present day in studying the topic of interest, and their disagreements historically were no different than what we see today. Accordingly, we are in no need today of clarifying the ruling concerning interest, due to the clarity of the ruling presented in the Qurʾānic text, where in God, the Most Exalted, states, “While Allah has made trade lawful but has forbidden financial interest.” What we need instead need to understand is the nature of banking transactions and which of these would fall under ribā, and is hence prohibited, and which would fall under the default of permissibility.
I admit from the start that no researcher in this topic is able to ascertain in an absolutely definitive sense his conclusions given the vagueness of the relevant sources and proofs, for though these proofs are definitive in terms of clarifying the ruling onribā, they are by no means definitive when it comes to clarifying what is intended byribā; for had there been sufficient clarity in its definition, there would have been no need for debate amongst the jurists since no one would consciously dare to defy a definitive proof. For this reason, there ought to be a specialized Islamic legal academy where scholars specialized in this topic are able to conduct an objectivestudy that can reach the most accurate position possible, and it is only natural that there would be no unanimous consensus (ijmāʿ) or agreement, given that consensus is impossible on matters that are subject to legitimate differences of legal opinion. However, providing a scholarly survey on this topic taking into consideration the nature of financial transactions today is more likely to narrow the gap of disagreements amongst the specialists by clarifying the majority position among them, in order that people may reach an agreed upon ruling with regards to their daily financial transactions.
The proofs concerning the prohibition of interest: As we mentioned above, interest is forbidden by a clear Qurʾānic text, and here we shall provide the relevant Qurʾānic proofs concerning its prohibition in order to clarify the gradualism with which the Noble Qurʾānhas sought to enforce its prohibitions, which is the same process with which the Qurʾān has prohibited the consumption of intoxicants.
Interest is mentioned in four verses, once as a Meccan revelation and the other three in Medina, which highlights Qurʾān’s concern with stamping out this detested transaction, which is defined as an ugly form of exploitation that is rejected by the humanist spiritand from which human nature flees. Thus, the first verse seeks to alienate interest and to clarify that is something undesirable, while encouraging the payment of Zakat,which is rewarded many fold with Allah, without the mention of an explicit prohibition. As the Most Exalted states, “Whatever you give out with interest that it may grow in people’s money, does not grow with Allah. As for what you give of Zakat, desiring with it the Countenance of Allah, suchare the ones whose wealth is multiplied” [al-Rūm: 39].
The next verse then came to rebuke the Jews who are described as taking interest, while they were forbidden from it, and as eating the wealth of the people unjustly. Even though it still did not explicitly prohibit interest up to this point, the general flow of the verse strongly hints at the undesirability of engaging in interest, while preparing the human conscience for its eventual prohibition. As the Most Exalted states, “For the transgression from the Jews, We prohibited upon them some of the good things that had been previously lawful and for their deterring of many people from the path of Allah and for their taking of interest, when they were prohibited from it, and for their consumption of people’s wealth unjustly. And we have prepared for the disbelievers amongst them a most painful punishment” [al-Nisāʾ: 160-161].
The third verse then came to prohibit compounded interest. As Allah, the Most Exalted, states, “Oyou who believe! Do not eat of interest, compounded over and over, and fear Allah, perchance you may succeed” [Āl-ʿImrān]. Had Islam sufficed itself with this verse, which only prohibits compounded interest, some would be justified in arguing that what is prohibited is compounded interest and not the simple interest rates, however, the fourth verse has decisively precluded any room for disagreement by staunchly declaring its prohibition in His statement, the Most Exalted, “Those who devour interest do not stand up except as the one has been roughed up by the Satan with his touch. That is because they said trade is similar to the charging of interest, but Allah has made trade lawful but forbidden interest. Whoever receives this admonition from His Lord and desists shall keep what has already come to pass and his affair is with Allah, and as for he who returns, then such are the People of the Fire, wherein they shall abide” [al-Baqara: 275]. As He states after this, “O you who believe! Remain conscious of Allah and cease whatever remains of interest if you are truly believers. And if you fail to do so, then beware of war from Allah and His Messenger, but if you repent, then you shall have back your principal; thus you shall not wrong nor shall you be wronged” [al-Baqara: 278-279].
With this definitive text that is categorical and decisive, the ruling concerning interest is a clear prohibition that is not subject to further doubts or confusion, given the clarity and categorical nature of the proof.
There are many ḥadīth reports narrated from the Messenger, Allah’s peace and blessings be upon him, all of which confirm the prohibition of interest in all its forms. Among these is what the noble Messenger has said in his farewell sermon: “Hence all interest obligations from the days of ignorance shall henceforth be waived. Your capital is however yours to keep. You shall not wrong nor shall you be wronged.” Among them also is his saying, may Allah’s peace and blessings be upon him: “Allah has cursed the consumer of interest, its giver, the one who witnesses it and the scribe who transcribes the transaction.”Furthermore, he said, “None shall devour interest except that that his final outcome is scarcity.”
It is said concerning the reason for revealing its prohibition is that some of the Arab tribes during the Age of Ignorance (al-jāhiliyya) used to deal in interest, and when Islam came and they entered its fold, they disputed amongst themselves concerning the charging of interest. This occasioned the revelation prohibiting all forms of interest, be it at a low or high rate.
Islam has thus rebuked the use of interest very strongly, and it has not merely sufficed itself with its prohibition but has rather sought to warn those who engage in it with a severe punishment, in a manner that strikes fear into the hearts and souls, threatening them with destruction, war, and a horrible fate, addressing them with the words, “Be ware of war from Allah and His Messenger” and “Allah wipes out interest.”
The Meaning Intended by the Prohibited Ribā
The word ribā is used to designate the excess or increase of something in general; thus, it is mentioned concerning something that increases,or when a man enters in ribā, it means he has gone into excess, and it may also be used to designate an additional amount, as in one who added (arbā) to the fifty, i.e. he gave a little extra. Al-rabwa al-rabiya in Arabic is the elevated region.
From this literal sense, we see thatribā in the Arabic language consists of something in excess, however, not everything in excess constitutes ribā because trade has some form of surplus as well, which in this case is permissible. Thus, we must return to the meaning of ribā in the technical sense of the Sharīʿa, and if we turn to the Qurʾān to understand this legal sense, we would find that the Qurʾān’s passages point to the prohibition ofribā without clarifying its meaning, suggesting that what is prohibited is the ribā as it was understood by the people of the Age of Ignorance and what was known to the people at that time. This is why the Companions never asked the Prophet, may Allah’s peace and blessings be upon him, to clarify its meaning, for they were content with how it was understood in their context as it was conventionally understood by the people.
As for the financial transactions of today, are they considered similar to the ones that were dealt with during the Age of Ignorance? And if the transactions of the people of that age are characterized by the ugliness of their exploitation, can we say that bank deposits may be characterized similarly in our day? There is certainly no doubt that any transaction today that may considered as exploitative is to be regarded as prohibited, whether it meets the conditions of interest or not. Thus Ribā according to Islam relates to conduct that contains the meaning of exploitation, be it a debt or a sale, for the seller who exploits the need of the consumer by selling something at a price that is exorbitantly above its original value is engaging in ribā(a murābī), and the employer who makes use of his employ and rewards him with only half of his salary is also a murābī. Thus ribā,in my opinion, is not simply restricted to the conventional understanding of interest that pertains to financial loans but is rather more inclusive to incorporate anything that carries the meaning of exploitation, even if it may appear as a permissible exchange at first place.
There are some people who attempt to circumvent the rulings of the Sharīʿa and who deal in interest based transactions, while cloaking the form of their transactions to appear as pure and honorable. All such transactions may be counted as ribā because they signify ugly exploitation and harm to he individuals and to society, whereas Islam never for once looks to the external form and appearance of transaction, for what must be considered are the objectives, motivations, and intentions behind them.
Financial investments are indispensible to our contemporary age, and the need for them is ever more urgent given the rapid population explosion that is reason for concern and that continues to threaten humanity with famine, poverty and extinction due to the lack of sufficient natural resources in meeting the needs of humanity, from one angle, and due to the detrimental ways in which they are invested, from another. If only these natural resources that are at the disposal of humanity were invested in accordance with the most advanced scientific standards, they would surely be sufficient in meeting all the needs of all modern societies. Thus, it is imperative that the standard of living is raised in our Arab societies in order that their natural and human resourcesare enlisted together in accordance with the most advanced scientific developments and raise the income levels in our countries and strengthen our economies such that they are able to meet the aspirations of our people and nation.
Investment is therefore crucial to the wellbeing of all individuals and because it is the only means for advancement in our contemporary context, and Islam has indeed encouraged investment and hard work, granting workers a lofty and honorable station in society, favoring them to the idle worshippers, as work in itself is an act of worship, one which reaps profits and benefits.
If we return to the texts of the Noble Qurʾān and the pure Sunna, we would find that they consistently affirm the importance of work, which constitutes the most important element of productivity, even though Islam’s encouragement of labour came at a time when work consisted primarily of menial crafts amongst the ancient nations, such as Romans and the Greeks. With its emphasis on the importance of hard work and of the contribution of laborours, Islam was hence able to alter the previous image of menial labour and to grant it the lofty station that it deserved by making it praiseworthy, respectable and honorable.
As the Most Exalted states, “And who is better in speech than the one who calls to Allah and follows it with good works?” He also states, “And others who travel through the land seeking the favours of Allah, and others who struggle in the cause of Allah.”
Many ḥadīths have been narrated from the noble Messenger that also affirm the value of work, elevating the income that one makes with his own sweat and labour to the most honorable of ranks, and he said concerning a man whose hand began to peel from his hard work, “This is a hand that shall not be touched by the Fire . . .”
It is narrated that some of the Companions saw a man hastening to his work and said, “If he were only so in the path of Allah.” The noble Messenger responded to them, “Do not say this, for if he is seeking work (to provide) for his young child, then it is in the path of Allah, and if he is seeking work to provide for himself, it is in the path of Allah, but if he is seeking work out of ostentation and pride, then it is in the path of Satan” . .
The Prohibition Against Hoarding and Exploitation
From these texts, the Islamic position toward productive labour and toward investment, which is very much needed in our day and age, becomes clear, and we are thus able to mention certain points relating to the Islamic position on investment and wor. These points are as follows:
1. Islam’s very clear encouragement of labour because its benefits return to the individual and to society, and the texts we have mentioned readily affirm this . .
2. Islam’s prohibition against hoarding wealth, which entails withholding money from playing its positive role in society, and Islam has prohibited this because it is a source of harm to the individual and society and because it reflects a greedy spirit, where money is viewed purely from the perspective of self interest. However, wealth in Islam is but an instrument to securing the wellbeing of all through its investment, spending on others, and through charity. . As the Most Exalted states, “. .As for those who hoard gold and silver and do not spend of it in the path of Allah, then inform them of a painful punishment; on the Day when they will be seared in the fire of Gehenna, and their foreheads, sides and backs shall be branded therewith: ‘This is what you hoarded for yourselves, so taste what you have hoarded.’”[al-Tawba: 34-35].
3. The prohibition against exploitative investments: here we see the morality of Islamic legislation in terms of its of its ability to relate legal rulings to the moral principles that are connected to the public weal. It is prohibited for the investor to invest his wealth in anything that contravenes the Sharīʿa or what is orthodox and customary. Thus, if one were to invest their wealth in exploitative ways so as to actualize quick and generous profits, then such profits would be unacceptable under Islam, and this is why Islam has prohibited that the investor engage in any form of monopolization, becomes monopolies are an ugly form of investment, as it generates harm to society. Similarly, Islam has prohibitedinterest because it carries an exploitative meaning, as the one who loans the poor person who is penniless some money for some interest is considered a sinner due to his exploitation of others’ needs
The Lawful Means of Investment:Islam has called for investing money in all the productive means that are able to generate profits and develop the economy. However, it has permitted some forms of investment and prohibited others. Thus, prohibited investments consist of any investment that leads to any exploitation and harm, and if anyone chooses to invest his wealth then he must supervise the means he has chosen for his investment and abide by the condition that it not be associated with any harm to the other. Accordingly, the investment of money through relying on interest, monopolies, or any form of harm to individuals, the society at large, or the state is prohibited, as it is an exploitative form of investment that contravenes the most basic of moral principles, which Islam has only come to secure and encourage.
As for permissible investments, these are any investments that are not connected to any form of exploitation or harm, and Islam has encouraged such lawful investment, urging people to partake in it because it is the means to securing the wellbeing of the individual and the state and it is the path that leads to building a strong state that that is firmly established.
Islam has also mandated that all investments be shared fairly by all partners in terms of their wealth and losses, their profits, financial choices, and effort, and any agreement that do not stipulate this equal sense of responsibility is an unjust agreement according to Islam, and as such it is prohibited, as for those agreements where both parties to the agreement bear equal responsibility for any potential losses, these are considered legally acceptable and lawful.
With this we can see why Islam has prohibited any investment where one party is fully guaranteed the principal amount and any interest that is charged, while the other party bears full responsibility for any potential losses, giving the first party a clear sense of security concerning his or her principal and profit, while the latter’s fate remains tied to the vagaries of the market, which may result in either loss or profit; such a scenariodoes away with the idea of shared risk, which remains an essential feature of any investment.
Though Islam has prohibited has prohibited any investment that does away with the equal share of responsibility between both parties to the agreement, it has paved the path for those with the capital and those with the requisite competencies to establish investment agreements to invest their capital and investment skills; those with the capital contribute with their money, while those who have the requisite competencies contribute with their skills and effort, and the profits are then shared in accordance with what both parties have agreed upon.
This type of agreement is called “al-muḍārabawalqarāḍ” (lsilent partnership and loaning) in Islamic law, and it means that the parties to an investment agreement are to share in the material, physical, and mental contribution on the understanding that the profits are split in accordance with agreed upon percentages for each. Such an agreement without a doubt would actualize fairness in its most refined sense, while providing the worker with the necessary material incentive to work hard, as it motivates him to contribute more knowing that he has a share in the profits and that a portion of this profit shall be his.
The Muslim jurists have the defined a “mudāraba” agreement as follows: it is an agreement where one party contributes with his money and the other with his work.” Others have defined it as, “An agreement consisting of an authorization by a capital owner to a partner to invest his money with the understanding that the profits are shared between the two.”
The word mudārabais taken from al-ḍarbfilarḍ, which meansto travel the land, which is understood to mean traveling for the purpose of trade, as can be seen in the statement of the Most Exalted, “And others who travel the land (yaḍribūnafilarḍ).” The Ḥanafī jurists have thus taken the term “mudāraba,” which was in common use in Iraq, whereas the jurists of the Shafiʿī school used the term “qarāḍ” (loaning), which comes from qarḍ and literally means to sever, as if to say that the one with the capital has severed a portion of his wealth to give to his partner. Also, qarāḍis derived from equivalence (musāwāh) and balancing (muwāzanah), as if to say each of the two parties aims to share his contribution either through the financing or through the work.
There used to be a number of Companions who used to deal in mudārabaagreements, because this type of partnership actualizes true benefits to those with the capital and those with the skills; it may be that those with the capital may not have the requisite skills or entrepreneurial abilities, whereas those who are skilled may not have the required capital to work with. Thus, affirming this type of agreement and partnership is bound to actualize its benefits for both parties in a manner that guaranteed and that is free from exploitation or inequity.
The wisdom in Islam’s affirmation of this type of investment lies in the fact that irrespective of the guarantees that may be give, investments will always remain by their nature risky endeavors that are subject to losses. It would thus be inequitable to expect the party exerting most of the effort to also bear full responsibility for any losses that may be incurred, while the party owning the capital that barely exerts any of the effort is guaranteed his full principal and its associated profits . . For this reasons, it is only right that both partners share in the risk by bearing brunt of any losses that may accrue, with the understanding that any profits are also shared.
The Importance of Establishing an Economy that is in Harmony with the Islamic Creed
Some people may be of the opinion that establishing an Islamic system with regards to the economy and finances means to permanently seal the banks closed and to do without them all together, as they are held to go against the Islamic teachings that prohibit interest. But since these institutions play a tremendous role in our economic lives, then partaking in such an Islamic system could only lead to the total collapse of commerce and of our political, economic, and financial orders as we know them.
We are able to respond to this concern with the following:
First:Islam never sought to prohibit the establishment of financial and economic institutions that provide the development role that is provided by the banks, for these institutions are vital, and they play a crucial role that we cannot do without
Second:Why must we assume that these types of institutions are the best types of institutions that can never be improved upon in the manner that is likely to secure a greater good for our Ummah? And must we assume that it is impossible for humanity to conceive of any other option from the current one that is more secure and that is more likely to guarantee greater economic independence for our nations?
Third:Why don't we consider the possibility for argument’s sake that the current economic and financial order today has been setup in a particular manner that is dedicated to ensuring the continued prosperity of developed nations and the continued underdevelopment of developing nations? Is it notthe right of the developing nations of Africa, Asia and Latin America to ask themselves, at least during the times of ease, about the reasons that continue to hinder their development despite the tremendous abundance of their resources, while the developed nations that are endowed with fewer resources continue to leap forward in their progress and grow much richer?
There is no doubt that the current global economic order, which we continue to treat as beyond criticism and which is not necessarily the final and brightest possibility and the most beneficial system, may be in fact what is best for other nations, however, it is not what is best for our societies, which cannot perceive its latent dangers due to the brilliance of its appearance.
Fourth: Our Arab societies today have changed significantly from their past, and they now possess enough oil reserves and other natural resources that allow them the opportunity to rebel against the global economic order, while the greedy motives of advanced nations means that they would never hesitate to deliberately deprive our Ummah of the true value of its abundant resources in the international banks by means of decreasing the value of major currencies or by means of inflation.
And with this we conclude by saying that our Arab societies today are in dire need to re-evaluate their position vis-à-vis the global economic order that without a doubt is directly opposed to the interests of our Ummah, and the problem is by no means restricted to the gloomy image that has been associated with the use of interest but rather extends to the very nature of the economic order, which is at its base a monopolistic, exploitative and greedy system that serves to perpetuate our backward reality and that plunders our national resources through the manufacture of successive financial crises, while we continually pant in desperation as werush to treat their detrimental consequences that are harmful to our most vital interests.