ISLAMIC

ECONOMIC
SYSTEM
Introduction

• Islamic banking and finance is being practiced in over 75

countries around the world, with about 550 Islamic financial
institutions in the field.
• In Islamic Banking selling price once agreed becomes and
remains fixed. As a result, even if the purchaser does not pay
on time, the seller (Bank) cannot ask for a higher price.
• The real and ideal instruments of financing in Shari‘ah are
musharakah and mudarabah.
Features of Islamic Economic System

• Reduces gap between the Rich and the Poor

• Encourages trade
• Discourages hoarding of Wealth.
• Wealth is taxed through Zakat.
• Profit sharing and venture capital where the
lender is exposed to risk is acceptable.
• Grabbing other peoples land is prohibited.
Characteristics of Economic system of Islam

Right of ownership:

1. In Islam ownership of resources belong to almighty Allah alone.

Both private and public property are legitimate kinds of property in
Islam.

2. Economic freedom: Islam allows economic freedom to an

individual who is at liberty to earn wealth, own it and spend his
wealth at his discretion.
3. Zakat (Alms giving) : An income redistribution mechanism, not
necessarily to provide revenue to the state but to correct
imbalances in the social structure.
Islamic Shariah and Its Objectives

Primary Objectives
The primary objectives that Shariah tends to
realize are the protection and preservation of:

• Religion.
• Life.
• Progeny (family unit).
• Property.
• Intellect.
• Honor.
Secondary Objectives

The above primary objectives of Shariah lead to a number of

secondary objectives, which are:

1. The establishment of justice and equity in society.

2. The promotion of social security, mutual help and
solidarity, particularly to help the poor and the needy in
meeting their basic needs.
3. The maintenance of peace and security.
4. The promotion of cooperation in matters of goodness
and prohibition of evil deeds and actions.
5. The promotion of supreme universal moral values and all
actions necessary for the preservation and authority of
nature.
6. Coitent to something greater than oneslef
Assets and Deposits of Islamic Banking Industry (IBI) were
recorded at Rs.1,885 billion and Rs.1,564 billion respectively by
end March, 2017.
Financing Mix (% share)
March-16 Dec-16 March-17
Murabaha 22.1 15.8 16.4
Ijarah 7.2 6.8 6.4
Musharakah 14.5 15.6 16.3
Diminishing 32.4 34.7 32.3
Musharakah
Salam 5.3 4.4 5.2
Istisna 8.0 8.4 8.9
Others 10.5 14.3 14.5
Total 100 100 100
Investments

• Investments (net) of IBI were recorded at Rs.490 billion

by end March, 2017
• Investments of overall banking industry witnessed an
increase of 6.6 percent.
• Market share of Islamic banking assets and deposits in
overall banking industry stood 13.2 percent, by end
March, 2017
Conclusion
The Islamic Economic System is a fundamental
system that is far above the other economic
fabrications. Evidence abound that it is the only
system that suites mankind and allow us to earn
barakah of Allah in this world and prepare us
for a blissful hereafter.