3. Definition of Islamic
Economics
• Islamic economics is “a social science which studies
the economic problems of a people imbued
(inspired) with the values of Islam” (Mannan)
• Islamic economics is a science that studies the
allocations of resources to create and distribute
wealth for mankind and universe for the purpose of
returning (worshipping) to Allah (j.j).
4. Basic principles of Islamic Economics
• Individual liberty
• Right to property
• Economic inequality with natural limits
• Social equality
• Social security
• Prohibition of accumulation of wealth to certain
group Prohibition of anti-social institutions
• Social and individual welfare
5. 5
Two Concepts of life
1 Materialistic concept of life
2 Moral concept of life
6. 1 Materialistic concept of life
• The materialistic concept of life views Man as an animal
whose sole subject is to satisfy physical needs.
• This concept of life naturally and logically leads to an
individuals approach to life.
• The feudal system of the middle ages in Europe,
Modern Capitalism and Communism are all products of
materialistic approach.
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7. 2 Moral concept of life
• According to this view the universe has been
created by Almighty Allah.
• Man is not an animal rather he is a vicegerent (خليفه )
of the Lord of the universe.
• Man should subordinate all his actions in every phase
of life to Almighty Allah
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8. • He should fully utilize all resources of universe.
• Goal of life is to obtain welfare in this life and eternal
(ابدي ) life in the hereafter.
• He is answerable for all his deeds to his Lord.
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9. • Man-God relationship is defined by Tawhid
• Man is accountable to Allah ,as life on the earth is
a test
• Tawhid is a coin with two faces: one imply that
Allah is the creator and The other that men are
equal partners.
• Private ownership is temporary and real owner of
everything is God.
• Under Islam wealth is a trust from God, and its
proper use is a test from God.
10. The Objectives of Islamic Economics
• Economics stability for individual, society and country
• Optimum Resource Usage
• Fair distribution of wealth
• Uphold individual freedom
• Equal rights and opportunities
• Justice and cooperation
11. Difference between Islamic Economic and
Western Economics
1 Difference in Basic Assumptions
a) View of the Universe
b) Concept of Man
c) The supposition of the Economic Man
2 Difference in operation of Moral values
3 Difference in aims
4 Difference in Scope
5 Difference in the Mode of research
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12. Sources of Islamic Economics
1 The book of Allah (Holy Quran)
2 The Sunnah of Prophet Muhammad (sws)
3 Ijma
4 Ijtehad
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13. 1 The Holy Quran
• The first and the most authentic source of
knowledge about Allah`s commands is Allah`s Book
i.e. the Holy Quran.
• It covers the general guidelines of all aspects of
human life.
• The basic guiding principles for ordering economic
life of man are preserved in this book in the light of
which detailed policies and program may be
designed to resolve economics issues arising in the
every age.
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14. 2 The Sunnah
• Next to the Holy Quran, the Sunnah i.e. the example
set by the Allah`s Messenger (sws) is an authentic
source of knowledge.
• It is in fact the interpretation and explanation of
Allah`s revealed message.
– “ Take whatever the Messenger gives you and avoid doing
from whatever he forbids you” [Al-Hasher]
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15. • The record of Sunnah contains theoretical
and practical guideline of almost all aspects
of economics life.
• It’s a very important source to which Islamic
economist must turn for research and analysis.
16. 3 IJMA
• The third source of Islamic law is consensus
of experts of religion.
• ideally to the consensus of the scholars of
Islam.
• Ijma emerged as a result of exercising reasons
and logic in a rapidly expanding society, such
as in the times of early Islam.
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17. 4 IJTEHAD
• Literal meaning of Ijtehad is “ to strive to the
utmost”.
• In the Shariah it denotes the greatest effort which is
made to discover the law from the implications of
Allah`s Book or Sunnah of Prophet Muhammad
(sws).
• The need for Ijtehad arises in those matters in
which direct guidance is not available in the
Quran and Sunnah.
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18. • Consumption and Savings:
• There should be moderation is personal
consumption.
• Savings for one’s future personal needs and
security are encouraged.
Wealth is the form of accumulated savings
may be used to meet religious levy resulting in
a transfer of recourses from the rich to poor.
• Zakat prevents concentration of wealth and
Income in a few hands.
19. 1. Role of the state:
The state plays a positive role in the economic life of
people.
It helps the market to work smooth.
It modifies the allocation of resources and distribution
of income effected by market system.
2. Money and saving:
The state has role to issue money and control its supply
on without interest.
3. The Islamic development Bank:
he Islamic development bank has been established to
foster economic development
20. • and social progress of member countries , in
accordance with the principle of Shariah.
• It will participate in equity capital of
productive projects and enterprises in
member countries.
It make loans to private and public sector
project.
It also establish funds to support Muslim in
non-Muslim countries.
It provide technical assistance , in promotion
of foreign aid.
4.Labour and industrial relations:
21. • Islam emphasize as the dignity of labour. Honest
work and wages to maintain a decent standard of
living.
5. Population Policy:
Population control through family planning has
been controversial.
Majority of writers oppose the family planning.
6. Economic Development:
Increase in production, distributive justice,
environmental balance and improvement in
quantity of life may be considered as the four
dimensions of development in Islamic economics.
22. 7. Exchange price and profit:
Money is confined to its basic role of
mediating between production and
consumption.
Monopoly, hoarding and speculation are all
considered as un-Islamic practice.
All prices ,whether of factors of productions
or of products will be then just or fair.
23. • There is disagreement among writers in
Islamic economics on the nature of profit.
Some writer do not consider profits as reward
for risk taking. Profits are shared between
the supplier or capital and the entrepreneur.
24. EMERGENCE OF ISLAMIC
ECONOMICS
• The contributions of Muslim thinkers and philosophers
have usually been neglected in the history of
Economics.
• Western scholars regard Adam Smith as Father of
Economics and his famous book Wealth of Nations
(1776 A.D) as the first book of economics
25. • BUT Five centuries before Adam Smith we find
elaborated discussion on economics under the topic
“Tadbir-i- Manzil ( planning of house),
• “Siyasat-i-madan (politics of city) and
• “ AL Muash (Livelihood) in the works of Muslim
scholars e
• specially Muhammad bin Hassan Tusi (1274 AD) and
Ibn e Khaldun (1332-1406 AD)
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26. Some Renowned Muslim
Economist
• Many scholars trace the history of economic thought
through the Muslim world, which was in a Golden age
from the 8th to 13th century
• Abu Yusuf (731-798) wrote the Book of Taxation
(Kitab al-Kharaj).
• This book outlined Abu Yusuf's ideas on taxation,
public finance, and agricultural production.
27. • Tahir ibn al Hsssain (755 – 822)
• Al-Ghazali (1058–1111)
• Al-mawardi (1075–1158),
• Nasir al-Din al-Tusi (1201–1274)
• Ibn Taimiyah (1263–1328),
• The discussions included division of labor
within households, societies, factories, and
among nations.
28. Contribution of other Muslim
Economists
• Ibn e Tammiya illustrates the concept of
Demand and supply.
• The concept of benefits of division of Labor
was also dicsussed by Al Farabi (873–950), Ibn
e Sina (980–1037), Nasir Al Din al Tusi (1201–
1274), Ibn Khaldun (1332–1406).
29. • The most well known Islamic scholar who
wrote about economics was Ibn Khaldun of
Tunis, who is considered a forerunner of
modern economics.
• Lets have a bird eye view on his remarkable
work.
30. Ibn Khaldun (1332-1406 AD)
Father of Economics
• Abdal-Rahman Ibn Mohammad Ibn Khaldun was
born in Tunis.
• He worked as Judge & Head of Al-Azhar University
Cairo, Egypt (world’s oldest university - founded 971 AD)
31. His major areas of work
• Labor Theory of Value,
– Labor Economics ; Labor as the Source of Growth
and Capital Accumulation.
• Demand, Supply, Prices & Profits
– Modern price theory states that cost is the backbone
of supply theory, it was IBN-KHALDUN who first
examined analytically the role of cost of production
on supply and prices.
32. – And it was Ibn khaldun NOT Frank Knight, who
originally advanced the theory of profit.
– He also concluded that both excessively low
prices and excessively high prices are disruptive
to markets.
– In fact he discovered what is now known as cost
push and demand pull inflation.
33. • Macro Economics, Growth, taxes, role of
government, and Money
– “Expenditure of one citizen are income to others”
this equality was first introduced by Ibn-e-Khaldun.
– He was the pioneer in introducing the “ theory of
Growth” based on capital accumulation
– Ibn-e-Khaldun was the first major contributor to
“theory of Taxation” in the history.
34. • Foreign Trade
– He also contributed a lot in the field of International
Economics.
– Ibe khaldun was of the view the people`s satisfaction,
merchant`s profit and countries wealth, all these
will increase through foreign trade.
– He also introduced the concept of “opportunity cost”
35. • His analysis on theory of capital accumulation, value
and its relationship to labor, dynamics of demand,
supply, prices & profits; his treatment of the subjects of
money and role of government; his remarkable theory of
taxation, and other economics subjects; his all this
unprecedented contribution to the overall field of
economics make
IBN KHALDUN , THE FATHER OF
ECONOMICS
