Need of Islamic Economic

Islamic Worldview
Need of Islamic Economics

 Different natures-need separate discipline

of knowledge
1. Modern economics-Western societies i.e spiritual,
social, politics and cultural
2. Western economics assumes maximization of
utility and maximization of profit as a rational
behavior-selfish & indifferent attitudes towards
others.
3. Economic rationality vs. Islamic Rationality
4. Personal satisfaction vs. “al-Falah”
5. Positive vs Normative Science
Finance and Economic Activity

 Money to the economy is like oil to the

engine.

 3 markets in the economy

◦ product market
◦ factor market
◦ financial market
 Product markets

Financial markets

Producing units Flow of funds (savings) Consuming units

(mainly business
Producing units firms Flow
Flowofoffinancial services,
funds (savings) (mainly households)
Consuming units
and governments)
(mainly business firms income,
Flow ofand financial
financial claims
services, (mainly households)
and governments) income, and financial claims
Factor markets
Financial system

 Collection of markets, institutions, laws,

regulations and techniques through which
various forms of financial instruments /
assets are traded and financial service
offered by financial intermediaries
Islamic views on
 functions organization, and goals of
financial intermediaries
 creation and development of financial
instruments/assets
 methods and procedures of creating
acquiring developing and allocating
assets
 debt and equity
 rules and regulations of financial markets
 supporting environment (tax and legal)
 Financial System exists in an
economic system. Islamic view on
 philosophical foundations
 goal of the economy
 institutions in the economy
 operational principle in the economy
 no human endeavor is value-free
·Schumpeter (1954)
Analytic effort is of necessity preceded by a pre-
analytic cognitive act … called Vision.

·Acikgenc (1994)
The nature of the human mind cannot but perceive a
problem within a scheme of constructive unity…
human reason is by nature architectonic
(Kant,1965)… for the human faculty of knowledge is
such that it can operate only within a categorical
scheme (Whitehead , 1929).
· J.S. Mill (1836)
Political economy, therefore, reasons from assumed premises
which might be totally without foundation in fact, and which
are not pretended to be universally in accordance with it.

· J. S. Mill (1836)
Now in whatever science there are systematic differences of
opinion … the cause will be found to be, a difference in their
conceptions of the philosophic method of the science, the
parties who differ are guided, knowingly or unconsciously, by
different views concerning the nature of the evidence
appropriate to the subject. They differ not solely in what they
believe themselves to see, but in the quarter whence they
obtained the light by which they think they see it (emphasis
added)
 Since alternative worldviews/ideologies
exist, different economics are not only
possible but, one can argue, natural and
legitimate as well. In fact according to
Heilbroner, without a vision or a “belief
system” (ideology) there can be no economic
analysis because there will be nothing to
analyze.
• ECONOMICS and hence FINANCE are
value-loaded.

· At the most abstract level, our values are

derived from our worldview.
Religion

Culture

Education WORLDVIEW

History

Geography

Technology
•Since factors affecting world views differ, different world
views exist, leading to different “systems” for different
peoples.

•Theories explaining human behaviour also differ.

•Islamic world view based on ‘Islam’ and its sources of

knowledge.

•This world view complete at the time of revelation of the

Qur’an implying that fundamental concepts in the Qur’an
not open for changes in meaning.

•All worldviews must at least include views on God, nature,

man, religion, knowledge, aim in life.
Islam
 Literally means peace and submission

 Muslim - one who submits

Religion
 Religion as understood in the west related to their own
experience and to events occurring in Europe, especially over
last 500 years

Watt (1979)
… means a way of spending an hour or so on Sundays in
practices which give him some support and strength in
dealing with the problems of daily life, and which
encourages him to be friendly towards other persons and to
maintain the standards of sexual propriety; it has little or
nothing to do with commerce or economics or politics or
industrial relationships … or may even look on religion as
an opiate developed by exploiters of the common people in
order to keep them in subjection.
 In the west
 religion reduced to a private matter between and
individual and his/her God(s)
 no role to play in determining public affairs
 science replaced religion as authority
 religion for infantile man; science for
modern/nature man
 Nietzsche proclaims “God is Dead”
 This understanding of religion is not necessarily
applicable to all societies and civilizations.
·Elliade in Encyclopedia of Religions
(1987)
… this dichotomy between the religious
and the remainder of human life is a
western product and concern … This
distinction between the sacred and the
profane, between religion and other
aspects of human endeavour is a result of
the process of secularization that has
been the experience of Christian/Western
civilization especially since the 17th
century.
Secular
•From the latin word saeculum, denoting
space and time, i.e. here and now
•Secular activities are activities that deal with
the here and now. Usually this is taken to
mean activities for this world and in our life
•Islamic view of religion is not ‘anti this
world’. In fact, Islam has very clear guidelines
on how to undertake life in this world,
including economics
Secularism
•Ideology that says only this world is relevant
•When combined with materialism, it also
denotes that only this world is real. Hence,
any reference to the ‘hereafter’ is irrelevant
•Economics should be conducted purely on
‘costs and benefits’ that are of this world
•Islam would not be able to accept this
ideology
Secularization
For this course, secularization is seen as a
process that saw the gradual decline of
religion and its authority over life, as
occurred in western civilization in the age of
enlightenment as elaborated by Cox (1965)
and elaborated by Al-Attas (1978) as having
three components
1.Disenchantment of nature
2.Desacralization of politics
3.Deconsecration of values
While Islam has no problem with
involvement of man in secular pursuits,
secularism the ideology and secularization
as a philosophical programme/ process, is
incompatible with Islam and its worldview.
· Watt (1979)
… whole way of life … covers both the private
and public/societal lives of man, it
permeates the whole fabric of society, and
includes theological dogma, forms of
worship, political theory and a detailed code
of conduct, including even matters which
the European would classify as hygiene or
etiquette …
· no shunning this world
· din is for this world
· use this dunya to achieve akhirah

· Al-Qasas : 77
“But seek with the (wealth) which Allah has
bestowed on thee, the home of the Hereafter,
And do not forget thy portion in this world.
But do good as Allah has been good to thee
and seek not mischief in the land, for Allah
loves not those who do mischief
The term Din comes from root word DANA and is
mentioned 92 times in the Qur’an and has 4
connotations
 debt
 obedience
 judgement
 way/custom

The religion of Islam is the willing and conscious

submission to God to ‘pay back our debt’ for our
existence. Economics and its related activities are
potentially ibadah or acts of worship if intention,
knowledge and action according to Shari’ah
 In modern economics, there is no reference to God,
especially since the second half of the 19th century

 In Islamic worldview, we have Tawhid or Unity of

God, represented by kalimah shahadah

 Beautiful Names of God - implications for

economics
 Al-Razzaq (theProvider), Malikal-Mulk (the eternal
ownerof Sovereignty), Al-Muqsit (the equitable)
 In modern economics we deal with Rational Economic man
as a ‘self-interested/selfish maximiser’

 In Islamic worldview
 insan
 created good
 body and spirit
 Al-Hijr : 28-29
Behold! Thy Lord said to the Angels : I am about to
create man, from sounding clay from mud moulded into
shape. When I have fashioned and breathed into him of
my spirit, fall ye down in obeisance to him
 given Caql and knowledge

Al-Baqarah : 31
And He taught Adam the names of all things
…best of creations

Al-Tin : 4
We have indeed created man in the best of
moulds
 roles of abd and khalifah

Al-Dhariyat : 56
I have only created Jinn and Man that they may
serve me

Al-Baqarah : 30

Behold! Thy Lord said to the angels : I will

create a vicegerent on earth …

 cannot be khalifah unless you are first and

foremost an abd
Nasr (1990)

There is no more dangerous creature

on earth than a khalifah Allah who no
longer considers himself to be an abd
Allah.
 In modern economics, nature (resources) are mere
objects; no spiritual significance
 In Islamic worldview, nature/universe is seen as
creation of God for man

Al-An’am : 95 - 103
 Talks of vegetation and fruits, night and day,
heavens and earth, human beings, rain material
world and world of ghayb
 man as trustee to manage nature

 nature as a sign of God

 In modern economics, aim of economic man is to
maximize material good (satisfaction, profit etc)

 In Islamic worldview, aim of man’s existence is to achieve

falah (ultimate success) via ‘submission’
 In economics, this includes ‘develop earth to achieve
God’s pleasure’
 requires means (fadilah)
 al-nafsiyyah - iman, character
 al-jismiyyah - health, strength, long life
 al-kharijiyyah - wealth, influence, family
 al-tawfiqiyyah - divine grace

 To attain falah we must have knowledge and action

 ilm and derivatives appear 750 times in
the Qur’an
 fundamental requirement for all Muslims
life-long
 Obligation (fard)
 sources of knowledge
revelation - primary source
reason - secondary source
universe - secondary source
 good action is Cibadah
 good economic action is ibadah
 good action requires correct intention,
correct knowledge and observance of all
shari’ah requirements.
 WORLDVIEW

 Worldview explain how man perceives this

world.

It denotes “a set of implicit or explicit

assumptions about the origin of the
universe and the nature of human life”.
 A set of attitudes on a wide range of
fundamental matters.

 A comprehensive set of propositions about

various aspects of the world.

 A unified and comprehensive view of the

world around us and man’s place within it.

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 Basic assumptions and images that provide
a more or less coherent, though not
necessarily accurate, way of thinking about
the world.

 A worldview is a profile of the way the

people within a specified culture live, act,
think, work and relate. It is a “map” or
culture’s social, religious, economic and
political views and relationships

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1. Helps to know peoples and cultures
comprehensively

2. Helps us to interact with nature, individuals,

peoples, nations, cultures and civilizations

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3. Helps us to correct our own values,
perspectives, attitudes and behaviours

4. Helps us to formulate theories of politics,

sociology, culture, etc.

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 Worldview influences all aspects of life
 Some worldviews such as Islam cover all
aspects of life including the personal, social,
economic, political, cultural, civilization
besides dealing with spiritual, moral, and
Aqidah issues.
 But there are other worldviews which focus
only on spiritual, material, social, or
economic aspects of human life.
 Any worldview should be able to answer the
ultimate questions not necessary correct
answers but at least consistent

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“ a metaphysical survey of the
visible as well as the invisible
worlds including the perspective
of life as a whole”. Al-Attas in “Islam
and the Challenge of Modernity, p. 27.

 Islamic worldview encompasses the issues of

universe, creator, prophethood, society, man,
and hereafter.

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 The worldview of Islam encompasses both al-
dunia ( ‫ ) الدنيا‬and al-akhirah ( ‫ ) اآلخرة‬in which
the dunia aspect must be inextricably linked
to the akhirah aspect, and in which the
akhirah aspect has ultimate and final
significance.

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 To provide the Muslims with the true
knowledge and explanation about the world
seen and unseen as they are explained in the
Qura'n.

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 To teach people the way and method how to
achieve the main values of Islam in human
life.
 To establish the fundamental ethical precepts,
such as justice, freedom, trust, and dignity of
human life and existence.

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 ISLAMIC WORLDVIEW

 4 core elements in Islamic worldviews:

1. Tawheed (unity of God) - Oneness
of God, total worship to God
2. Man - the best creation, vicegerent
& servant
3. Nature/ universe – “heaven & earth,
and all in between”
4. Religion/ ad-Deen -
comprehensive include worldly
activities
 To believe in the Oneness of God
 Tawheed has 3 basic aspects:
1. Tawhid al Rububiyah : only one lord for the entire
universe
2. Tawhid al Uluhiyah : none has the right to be
worshipped but Allah
3. Tawhid al Asma was Sifat : none can be named or
qualified with the Names of Allah
 God is the ultimate cause and end of
everything
 Derived from nasiya means ‘he forgot’
 Man is at once the khalifah on earth and ‘abd
of God
 Man is the best creations endowed with
physical, intellectual and spiritual
potentialities
 Man is commanded to do justice or ‘Adalah
on earth.
 Man is only given a limited but sufficient
capacity to know God
 “heavens and earth and all in between”
 Visible/material world & world of ghayb
(invisible)
 Nature is in natural submission to God in
ways known only to God, and is meant for
man to utilize as to submit himself to God
 A bounty from God that must be utilized in
the “best way possible” for all, in accordance
with God’s will
 A very comprehensive one and includes
worldly activities
 Deen is meant for this world because in this
world that man is tested and asked by God to
follow the “straight path”
 The arena where man’s actions will determine
his place in the next life.
 Deen only meaningful only in this world
 As an aim in life to be achieved
 Ultimate success and pleasure of Allah
 Al Ghazali defines 4 types of means:
1. Al fadail nafsiyah : goods of the soul - faith (iman)
& good character (achieveable through amal
2. Al fadail jismiyah : bodily goods – health,
strength, long life and beauty
3. Al fadail kharijiyyah : external goods – wealth,
influence, family & noble birth
4. Al fadail tawfiqiyyah : goods of divine – hidayah,
direction, leadership & strengthening
 A very different view of the
elements contained in
Islamic worldview creates an
undeniable need for an
alternative economic system.
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