COURSE UNIT 604: ISLAMIC ECONOMIC ANALYSIS

TOPIC: WEALTH AND WEALTH DISTRIBUTION IN ISLAM TUTOR: Dr. JAMIL SERWANGA

PRESENTATION DATE: 3RD DECEMBER ,2013

GROUP TWO MEMBERS:

1. Mr. ADAM H. MAKAME 2. Mr. GODWIN OCHENG 3. Mr. MOHAMMED A. MAKAME 4. Mr. RASHID A. MUSSA 5. Ms. TATU O. ABBAS 6. Ms. NASSRA H. SALUM 7. Ms. FATMA B. JUMA 8. Mr. KHAMIS MW. PEMBE 9. Mr. ALI R. SALUM 10.Ms. MASHAVU S. SAID

Introduction The distribution of wealth is one of the most important and most controversial subjects concerning the economic life of man, which have given birth to global revolutions in the world of today, and have affected every sphere of human activity from international politics down to the private life of the individual. For many, a century now, the question has been the center not only of fervent debates, oral and written both, but even of armed conflicts. The fact, however, is that whatever has been said on the subject without seeking guidance from Divine Revelation and relying merely on human reason, has had the sole and inevitable result of making the confusion worse confounded

Wealth and wealth distribution in Conventional economic perspective

Definition of wealth. According to Investopedia: Wealth is a measure af value of all the assets of worth owned by a person, community, coy or country. wealth= total market value of all physical and intangible assets of the entity - all debts.

Wealth: according to Oxford dictionary it is a state of having abundance or profusion of something desirable i.e asset.
Wealth of different countries is measured through GDP per capita. -this is a measure of the total output of a country that takes the gross domestic product (GDP) and divides it by the number of people in the country.

Wealth distribution. -Global Finance defines wealth distribution as: how the ownership of assets in a given society is shared among its members . -The distribution of wealth is a comparison of the wealth of various members or groups in a society. -Redistribution of wealth is the transfer of income, wealth or property from some individuals to others caused by a social mechanism such as taxation, monetary policies, welfare charity, divorce, offense. The desirability and effects of redistribution are actively debated on ethical and economic grounds.

The capitalist view of the distribution of wealth. -theory states that wealth should be distributed over those who have taken part in producing it i.e factors of production. Capital- interest Labor- wages Land- rent or revenue Entrepreneurship- profit

The socialist view of distribution of wealth -This theory consider capital and land to be national property and not private. So, the question of interest or rent (or revenue) does not arise at all under the philosophy of this system. -Under socialist system the entrepreneur too is not an individual but the state itself. So, profit too is not is out of the question in this system. Now, there remains only one factor-namely labor. And labor alone is considered to have a right to wealth under the socialist system, which it gets in the shape of wages.

Conceptual and Theoretical Discourse of Wealth and Wealth Distribution Theories to develop this are: GDP - per capita income Pareto optimum Lorenz curve

Islamic Paradigm Shift The concept of wealth maximization of conventional economics in disregard to social economic justice has failed to resonate with the people. In fact its secularist approach gives it a number of inherent drawbacks such as: The Role of Moral Values Human brotherhood The Hereafter is a concept

Pareto Optimum -This concept does not fit into Islamic economics paradigm. -Pareto does not recognize any solution as optimum, if it requires a sacrifice on the part of a few (rich) to raise the well-being of the many (poor). -Such a position is in clear conflict with Islamic moral values.

Islamic foundation of the subject matter

Wealth Distributions in Islam The wealth or property is meant by Mal (singular) and Amwal (plural) in Arabic meaning. -Definition of wealth: a material that is capable of being possessed and protected and should be capable of beneficial use according to the prevailing customs. -In the Quran stated that : all wealth belongs to Allah in the form of trust or Amanah. Human beings are considered to be trustees who hold the property and are conferred with the right to own property.

The concept of Distribution of Wealth in Islam -based on divine scripture with moral and ethical values addressing humanity, sympathy, forgiveness, generosity and charity.
Objectives of the Wealth Distribution Establishment of practical system of economy. Enabling everyone to get what is rightfully due to him. Eradicating the concentration of wealth.

Basic differences between the Islamic system and the Capitalist system with regard to the distribution of wealth
-Capitalist- Allows Interest. -Islam- Forbids it.

Right to Wealth -Every rational human being requires some wealth. The honest man requires some wealth at least to have security and peace of mind. It is only the irrational man who requires some wealth in order to have more wealth.

Islamic economic theory and model calibration

Wealth Distribution Theory and Model

-Islam guarantees the equitable distribution of income and wealth by means of a realistic approach that recognizes the coexistence of the rich and the poor. -Several redistributed measures that transfer wealth from the rich to the poor are implemented to reduce the gap of those who have and those who have not.

Islam ensures distributional equality. -first, at the level of natural resources allocation. -second, at the level of functional distribution. -lastly, at the level of personal distribution.
There are two kinds of distribution of wealth in Islam 1. Primary heads- factors of productions. 2. Secondary Heads.- this is because in the society, all the people are not participates in the process of production and do not meet their needs themselves.

Concerned people orphans, widows, and children, wayfarer, poor and needy.

Secondary Heads Includes:

Zakat Inheritance Charity(Sadaqqah) Booty Endowment Poll Tax Loan without interest Borrowing etc

Prohibiting Interest -Elimination of interest from the economic system is a revolutionary step with profound effects on all spheres of economic activities. Unfortunately, the approach of many Muslim countries to eliminate interest from the system is not the way it should have been done. The strong condemnations of interest in Islam is widely documented in almost all the books related to this topic besides very clear and unambiguous verses of Quran and many Sayings of the Prophet Muhammad (Peace Be Upon Him).

Therefore, for the sake of brevity these have not been produced here. In most case, it seems, the conventional interest under an Islamic Title (e.g. Profit and Loss Accounts, Markup, Mudharibah etc.) have been introduced .As a result the desired results of eliminating interest from the system could not be achieved (and would never be achieved).

Empiricism Concerning the Subject matter (Case study Scenarios)

Conclusion -concludes that the Islamic system of redistribution of wealth tries to facilitate and assist the non-participants of economy. -All things which have been discussed here related to the distribution of wealth in Islam may be applied to fulfill the requirement of poor segment of the society. The segment neither participates . -Wealth distribution may be very useful to eliminate poverty, concentration matters and various issues of the society.

-study shows this redistribution will be executed by individual, family, society and state to make sure the deprived segment of the society may get an opportunity to fulfill its basic needs and live on the planet respectively.
-Islamic system of distribution of wealth solve all deficiencies of other economics systems which are contemporary and prevailed.

Recommendation -All Muslims countries should establish institutions on wealth distributions to cater the challenge in the Islamic economics. -Also Islamic banking and financial institutions should be involved to make policies in well-organized manner for collection and wealth distribution. -In additional to that, researchers, intellectuals and policy makers should explores these issues and awareness relating to the system.

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