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MME 4272

Islamic Economy
Al-Falah Maximization
Islamic Economy Philosophy
The Objectives of Islamic Economics
Basic principles of Islamic Economics
Islamic Economics Structure
Special characteristics of Islamic Economics
Islamic Economics as a science on how
to consume and manage resources for
self interest, society in order to get the
bessing of Allah - Hailani Muji Tahir
Importance characteristics
Self interest could become priority as long as it
do not affect the interest of the society
The objectives of Islamic economics is to get
the blessing of Allah
Al-Falah Maximization
Al Falah maximization is to get the blessing of
Allah as compared to Conventional
economics which is to maximize profits.
Just profit instead of max profit
The inclusion of reward and sin

Al-falah also means the success in this world
as well as in the hereafter.
Islamic Economy Phylosophy
The concept of Tauhid (Oneness)
The Concept of Rububiyah (Allah is the
Greatest Creator)
The concept of Tazkiyyah (Purification)
Judgment day
Man as the Khalifah (Trustee)
Equality and Brotherhood
Ownership Concept Man as the trustee
Normative and positive economy
The Objectives of Islamic
Economics stability for individual, society and
Optimum Resource Usage
Fair distribution of wealth
Uphold individual freedom
Equal rights and opportunities
Justice and cooperation

Basic principles of Islamic
Individual liberty
Right to property
Economic inequality with natural limits
Social equality
Social security
Wider circulation of wealth
Prohibition of accumulation of wealth to
certain group
Prohibition of anti-social institutions
Social and individual welfare
Islamic Economics Structure
Politics/Public (Siasi)
Business/ Private (Tijari)
Social/ Voluntary (Ijtimai)
Special characteristics of Islamic
Resources Trustee
Islam approved personal property ownership
but public interest exceeds individual interest
Al-Taawun (Cooperation)
Property as a productive resource and not
selfish end
Public ownership for certain industry
Taqwa (fear of Allah) to avoid oppression,
fraud, unlawful profit, discrimination

The area of ultimate principles that highlight
the spirit of the shari rules.

These objectives serve as values that regulate
and govern discretionary justice in Islamic law.
The Shariah aims at:

a. Safeguarding people's interest
b. Preventing harm from them in this world and the hereafter
If the injunctions of al-Quran is not aimed at bringing
benefit, than it will be a disastrous for all mankind and there
is no benefit for the revelation
Therefore fiqh, with all different parts of it (Ibadah,
Muamalah, jinayah etc) were revealed to benefit human
beings and prevent harm from them, and it is also part of
the mercy from Allah to mankind.
The matters on which the religion and worldly affairs of the
people depend on them, their neglect will lead to total
disruption and disorder and it could lead to bad ending.
The protection of religion
The protection of property
The protection of life 2
The protection of dignity
The protection of intellect
The session aims to introduce the student
to the basic premises of the Islamic
perspective of Management, its
development, attempts to contribute
toward the discipline, and suggestions to
enthusiasts to continually learn about
and develop Islamic perspective of
The Islamic approach to management
is an emerging discipline, often referred to
as Islamic management, looks at the
management of organizations from the
perspective of the knowledge from the
revealed sources and other Islamic
sources of knowledge and results in
applications compatible with the Islamic
beliefs and practices.
Islamic management system refers to a systematic
arrangement of human activities and in utilizing
resources as trusted by almighty ALLAH. It has to be
rabbani-based rules and values and ensure its
implementation as an act of ibadah towards ALLAL

Sistem-Sistem Islam: Satu Analisis by Abu Urwah (2001), page 196
The primary revealed knowledge source is
the Holy Quran.
This basic source is elaborated through
the Ahadith - the traditions and the
Sunnah, the actions of the Prophet (SAW).
There are Islamic scholars who treat Fiqh,
the science of Islamic jurisprudence, as a
source of revealed knowledge too.
Other sources are the reported sayings
and actions of the first four Caliphs (RAA);
instances from Islamic history, studies in
public administration and Islamic
management, studies in Islamic social
sciences, studies in Islamic culture,
writings of leading Muslim scholars, and
the writings of leading but authentic non-
Muslim scholars.

Islamic management
No demarcation between the secular and the religious; human life
is an organic whole; All human activity can be Ibadah provided they
are guided by Allahs commandments. ( Islamic Belief System)
Conventional management
Clear demarcation between the secular and the religious; human
activities are separated; spiritual or religious aspect is a private
matter of individuals while work is in public domain. ( Non-Islamic
in approach)
Islamic management
Thus purpose of human existence is to obey and fulfill Allahs
commandments and act as the vice-regent of Allah on earth. ( Ad-
Conventional management
Purpose of human existence is to utilize natural resources to satisfy
ones needs, wants and desires and to remain happy. ( Al-Dunya )

Paradigm guiding management of
Islamic management
Organizational objectives are both economic and non-economic
and are subservient to larger purpose of human existence.
(Maqasid As-Shariah)
Conventional management
Organizational objectives are both economic and non-economic in
nature and are subservient to organizational interests. (loyalty to
Islamic management
Organizations are meant to be groups of people coming together
for attaining the purpose of human existence. (Human welfare as
motivational drive)
Conventional management
Organizations are meant to be groups of people coming together to
attain the organizational goals. ( Profit Maximization as sources
of motivation)
Islamic management
The revealed knowledge and the traditions of the Prophet
(SAW) constitute the ultimate source of business ethics and personal
values. (Prophet : The Source of Hidayah)
Conventional management
Ethics is relative and values are derived from multiple sources such
as upbringing, society, and experiences. Ethics could be relative as
in utilitarian theory.(End justifies the means)
Islamic management
Human being has choice, free will and freedom of action therefore
is responsible and accountable for all actions. (Accountability in
Conventional management
Responsibility and accountability vested in the chief executive who
delegates it. Employees controlled through organizational systems
to ensure responsibility and accountability.( Accountability to
Paradigm guiding management of
Islamic management
Organizational control has to operate in a way designed to make the
human being subservient to the will of Allah. (comprehensiveness
of Islam and Syariah)
Conventional management
Organizational control has to operate in a way designed to align
human objectives with the organizational objectives. (Cascading
the objectives)
Islamic management
The locus of control is internal. Each person is responsible and
accountable for his actions. (Syariah Compliance)
Conventional management
The locus of control is external and lies in the realm of the
organization. (Market Driven)
Paradigm guiding management of
General Principles of Ethics in
Abdallah A Hanafy and Hamid Salam
classified some major ethical principles
in Islam into six (6) categories:
Science and Knowledge

Specific Principles of Business
Ethics in Islam
1. Hoarding and profiteering
Prophet (PBUH) reminded: The one who brings to
the market, Allah will help him, provide well for his
family; and the one who hoards is cursed by Allah.
[ Ibnu Majah, Kitab Al-Baya]
2. Accuracy in measurement and weight
Defrauding in weights is a very old type of
exploitation. The Holy Quran has emphasized the
ethical responsibility of business regarding weight and
Give full measure when ye measure and weight with
balance that is straight ( Al Isra, 17:35)
Specific Principles of Business Ethics in Islam
3. Adherence to contracts

The Holy Quran reminds: O ye believers! Fulfill your
contract. (Al Maidah, 5:1)
Whosoever is making such contracts let it be in a well
defined measure and well defined price and well
defined time table. (Muslim: Kitab al-Bayan)
It is clear from the above quotations that a Muslim
businessman has to fulfill his promises and
commitments to his employees, customers, suppliers,
governments, and general public in all respects. He
should not indulge in cheating, violation of promises
or arbitrary actions.
Specific Principles of Business Ethics in Islam
4. False Advertising and Misrepresentation
And do not withhold from people the things that are
their due and commit not evil in land with intent to
spread disorder... (Hud, 11:85)
It is not lawful for a Muslim to sell such a commodity
that has a defect, except that the defect is shown to
buyer. (Bukhari)
Specific Principles of Business Ethics in Islam
5. Destruction of Surplus Produce
and when he turns, his back, his aim
everywhere is to spread mischief through the
earth and destroys crops and cattle. But Allah
loveth-not disorder on earth. (Al-Baqara,
Prophet PBUH said, I dislike three things for
you: useless argumentation, wasting goods,
and excessive questioning. (Bukhari, Kitab al-

Specific Principles of Business Ethics in Islam
6. Interest (Riba) and Unlawful Trade
Islam declares that interest (riba) is the root
cause of all economic evils. Instead of interest-
based trade, Islam offers an interest-free trade
based on the Islamic principles of mudharabah
and shirkah.
Those who devour interest will not stand,
except as one has been driven mad by the
touch of the evil one. This is because they say:
Trade is like usury. But Allah has permitted
trade and forbidden interest. (Al-Baqara,
Specific Principles of Business Ethics in
7. Fair Recruitment Practices
According to Islam, an office or a post is a divine
trust, and therefore, it should be offered to the
deserving persons and responsibility should be
given only to that person who is able to shoulder it
and who has the capability to do justice to the trust
placed in him.
Allah commands you to render back your trust to
those to whom they are due and when ye judge
between man and man, that ye judge with justice.
(Al-Nisa, 4:58)
Specific Principles of Business Ethics in
8. Fair Treatment to Workers
It is the moral responsibility of business
organizations to take care of the overall welfare
and betterment of their employees. They should
not treat workers as machines or tools, but as
human beings. Fair wages, good working
conditions, suitable work, and excellent brotherly
treatment should be provided to the workers.
Give the laborer wages before his perspiration be
dry. (Ibne Maja)
Whosoever engages a worker on work should
mention the wages in advance. (Bukhari)
Specific Principles of Business Ethics in
9. Protection of Environment
According to Islam, no individual or organization has the right to
utilize its resources in such a way that damage or inconvenience
is caused to his people or the society in general. The Prophet
PBUH has said:
There is no scope for causing damage in Islam neither in the
case of an independent action nor as a reaction. (Kitab al
The utilization of natural resources for business purposes should
be socially responsible. Islam urges upon its followers to use.
It is Allah who made your homes as places of rest and quiet,
and made for you out of skin of animals (tents for )
dwellings.And out of their wool and their soft fiber and their
hair, rich stuff and articles of convenienceout of the things He
created, some things to give you shade, and of the hills He made
some for your shelter. He made your garments to protect you
from heat, and coats of mail to protect you from (your) mutual
violence. Thus, does He complete His favours on you, that ye
may bow to His will (Al Nahl, 16:80-81)
The Nature of Conflict

Organizational conflict can be functional or
dysfunctional, and occasional or chronic.

Conflict is functional when it improves the group's performance
by forcing examination of basic issues and identifying new
Conflict is dysfunctional when it hinders and prevents the
group's goals from being achieved.
Conflict is occasional when it is the exception, not the rule in
the individual's or the group's behavior.
Conflict is chronic when individuals or groups routinely differ in
their approaches.


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