Characteristics of Islamic

Economic System
Lecture 02
 Summary of the Previous Lecture
• We discussed the course outlines.
• Requirements of the course.
• Importance of the subject.
 Learning Outcomes
After this lecture your will be able to understand;
the characteristics of Islamic Economic System
according to the divine instructions as mentioned in
Quran and Hadith.
 Salient Features
1. Allah is the Sustainer
2. God is Real Owner of Everything and Man is Merely a
Trustee
3. Everything Created for Service and Use of Man
4. Concept of Halal and Haram
5. System of Sadaqat and Zakat
6. Prohibition of Interest
7. Ban on Hoarding of Wealth
8. Policy of Moderation
9. Condemnation of Monasticism and Materialism
10. Equity and not Equality
 1. Allah is the Sustainer
Verses of the Qur’an:
1. And there is no creature on earth but that upon Allah is its
provision, and He knows its place of dwelling and place of
storage. All is in a clear register. (11 : 6)

2. Indeed, your Lord extends provision for whom He wills and

restricts [it]. Indeed He is ever, concerning His servants,
Acquainted and Seeing. (17 : 30)
 1. Allah is the Sustainer
3. And how many a creature carries not its [own]
provision. Allah provides for it and for you. And He
is the Hearing, the Knowing. (29 : 60)

4. Allah extends provision for whom He wills of His

servants and restricts for him. Indeed Allah is, of all
things, Knowing. (29 : 62)
 1. Allah is the Sustainer
5. O mankind, remember the favor of Allah upon you. Is
there any creator other than Allah who provides for you
from the heaven and earth? (35 : 3)

6. And have you seen that [seed] which you sow? Is it you
who makes it grow, or are We the grower? (56 : 63-64)

7. Or who is it that could provide for you if He withheld His

provision? But they have persisted in insolence and
aversion. (67 : 21)
 1. Allah is the Sustainer
Ahadith of Muhammad (PBUH) :

1. Omar-b-al-Khattab reported : I heard the Messenger of Allah say : If

you all had relied on Allah with due reliance, He would have certainly
given you provision as He supplies provisions to birds who get up
hungry in the morning and return with full belly at dusk.
(Tirmizi, Ibn Majah)
2. Abu Darda’a reported that the Messenger of Allah said: Certainly
provision seeks a servant just as his death seeks him.
(Abu Nayeem)
3. Jabir b. Abdullah reported : The Messenger of Allah (may peace be
upon him) said: “O people, Fear God and cut your ambitions of
livelihood, for a man will not court death unless he is provided full
sustenance (decreed) for him even if he restrains himself from it. So,
fear Allah and cut your ambitions in search of livelihood. Take
whatever is lawful and leave whatever is unlawful.” -----(Ibn Majah)
 1. Allah is the Sustainer
4. ‘Ali (Allah be pleased with him) said: “I heard the Messenger of
Allah (may peace be upon him) saying: ‘(on the Day of
Resurrection) when there will be no shade except that of the
Throne of Allah, the person who undertakes a journey to earn his
livelihood and then returns with it towards his dependents, will be
under the shade of Allah’s Throne’.” (Masnud Zaid bin Ali)

5. ‘Ali (Allah be pleased with him) said: “A person came to the Prophet
of Allah (May peace be upon him) and asked: ‘O Messenger of
Allah: What type of earning is best?’ The Prophet (may peace be
upon him) said: ‘A man’s work with his hand and every business
transaction which is approved, for Allah loves a believer who is a
craftsman. A person who suffers pain to feed his dependents is like
a person who fights in the cause of Allah, the Mighty and Glorious.’”
(Masnud Zaid bin Ali)
 1. Allah is the Sustainer
Concept of Entrepreneurship in Islam
The Qur’an encourages struggle when it says: “And that there is not
for man except that [good] for which he strives. And that his effort
is going to be seen ” (53 : 39-40).

O you who have believed, when [the adhan] is called for the prayer
on the day of Jumu'ah [Friday], then proceed to the remembrance
of Allah and leave trade. That is better for you, if you only knew.
And when the prayer has been concluded, disperse within the land
and seek from the bounty of Allah , and remember Allah often that
you may succeed. (62: 9-10).

In a famous Hadith Prophet (pbuh) said, “Alkasibu habibullah" the

laborer or worker is dear to Allah Almighty.
 2. God is Real Owner of Everything and Man is
merely a Trustee
1. Unto Allah belongs whatsoever is in the heavens and
whatsoever is in the earth; and unto Allah all things are
returned. (3 : 109)
2. Unto Allah belongs whatsoever is in the heavens and
whatsoever is in the earth. Allah ever surrounds all things.
(4 : 126)
3. And it is He who has made you viceroys upon the earth and has
raised some of you above others in degrees [of rank] that He
may try you through what He has given you. Indeed, your Lord
is swift in penalty; but indeed, He is Forgiving and Merciful.
(6 : 165)
4. Believe in Allah and His Messenger and spend out of that in
which He has made you trustee. For those who have believed
among you and spent, there will be a great reward. (56 : 7)
 3. Everything Created for Service and
Use of Man
1. It is He who created for you all of that which is on the earth.
Then He directed Himself to the heaven, [His being above all
creation], and made them seven heavens, and He is Knowing
of all things. 2:Al-Baqarah:29

2. And it is He who placed for you the stars that you may be
guided by them through the darknesses of the land and sea.
We have detailed the signs for a people who know.
6:Al-An’am:97
 3. Everything Created for Service and Use of Man
3. It is He who sends down rain from the sky; from it is drink and from
it is foliage (vegetation) in which you pasture [animals]. He causes
to grow for you thereby the crops, olives, palm trees, grapevines,
and from all the fruits. Indeed in that is a sign for a people who give
thought. And He has subjected for you the night and day and the
sun and moon, and the stars are subjected by His command. Indeed
in that are signs for a people who reason. And [He has subjected]
whatever He multiplied for you on the earth of varying colors.
Indeed in that is a sign for a people who remember. And it is He
who subjected the sea for you to eat from it tender meat and to
extract from it ornaments which you wear. And you see the ships
plowing through it, and [He subjected it] that you may seek of His
bounty; and perhaps you will be grateful. And He has cast into the
earth firmly set mountains, lest it shift with you, and [made] rivers
and roads, that you may be guided, And landmarks. And by the
stars they are [also] guided. 16:An-Nahl:10-16
 3. Everything Created for Service and
Use of Man
4. And Allah has made for you from your homes a place of rest
and made for you from the hides of the animals tents which
you find light on your day of travel and your day of
encampment; and from their wool, fur and hair is furnishing
and enjoyment for a time. And Allah has made for you, from
that which He has created, shadows and has made for you
from the mountains, shelters and has made for you garments
which protect you from the heat and garments which protect
you from your [enemy in] battle. Thus does He complete His
favor upon you that you might submit [to Him].
16:An-Nahl:80-81
 3. Everything Created for Service and
Use of Man
5. Do you not see that Allah has made subject to you
whatever is in the heavens and whatever is in the
earth and amply (sufficiently) bestowed (granted)
upon you His favors, [both] apparent and
unapparent? But of the people is he who disputes
about Allah without knowledge or guidance or an
enlightening Book [from Him].
31:Luqman:20
 4. Concept of Halal and Haram
Verses of the Quran:
1. O mankind, eat from whatever is on earth [that is] lawful and good and
do not follow the footsteps of Satan. Indeed, he is to you a clear enemy.
(2:168)

2. O you who have believed, eat from the good things which We have
provided for you and be grateful to Allah if it is [indeed] Him that you
worship. He has only forbidden to you dead animals, blood, the flesh of
swine, and that which has been dedicated to other than Allah . But
whoever is forced [by necessity], neither desiring [it] nor transgressing
[its limit], there is no sin upon him. Indeed, Allah is Forgiving and
Merciful. (2:172-173)

3. And do not consume one another's wealth unjustly or send it [in bribery]
to the rulers in order that [they might aid] you [to] consume a portion of
the wealth of the people in sin, while you know [it is unlawful]. (2:188)
 4. Concept of Halal and Haram
Ahadith of Prophet Muhammad (PBUH):
1. Abu Hurairah reported that the messenger of Allah said: Verily Allah is pure. He
does not accept but what is pure …..Then he mentioned about a man disheveled in
hair and laden with dust, making his journey long and extending his hands towards
heaven: O Lord! O Lord! while his food was unlawful, his drink unlawful, his dress
unlawful and he was nourished with unlawful things. How he can be responded for
that? (Muslim)
2. Abu Masud Al Ansari reported that the messenger of Allah forbade the price of
dogs, earnings of prostitute and foretelling of a soothsayer. (Bukhari,Muslim)
3. Jabir reported that the messenger of Allah cursed the devourer of usury, its payer,
its scribe, and its two witnesses. And he said that they are equal (in sins) (Muslim)
 4. Concept of Halal and Haram
4. Abdullah-bin-Amr reported that the messenger of Allah
cursed the bribe taker and the bribe giver.
(Abu Daud)
5. Jabir reported that the messenger of Allah…..forbade the sale
of wine, dead animals, pigs and idols…
(Bukhari,Muslim)
6. Abdullah-bin-Amr reported that the messenger of Allah
prohibited intoxicants, games of chance, card-playing and
Gobairah and he said: Every intoxicant is unlawful.
(Abu Daud)
 5. System of Sadaqat and Zakat
Verses of the Qur’an:
1. And establish prayer and give zakah and bow with those who
bow [in worship and obedience]. (2:43)
2. And spend in the way of Allah and do not throw [yourselves]
with your [own] hands into destruction [by refraining]. And do
good; indeed, Allah loves the doers of good. (2:195)
3. They ask you, [O Muhammad], what they should spend. Say,
"Whatever you spend of good is [to be] for parents and relatives
and orphans and the needy and the traveler. And whatever you
do of good - indeed, Allah is Knowing of it.“ (2:215)
4. Who is it that would loan Allah a goodly loan so He may multiply
it for him many times over? And it is Allah who withholds and
grants abundance, and to Him you will be returned. (2:245)
 5. System of Sadaqat and Zakat

1. O you who have believed, spend from that which We have

provided for you before there comes a Day in which there is no
exchange and no friendship and no intercession. And the
disbelievers - they are the wrongdoers. (2:254)
2. Never will you attain the good [reward] until you spend [in the
way of Allah ] from that which you love. And whatever you
spend - indeed, Allah is Knowing of it. (3:92)
3. And from their properties was [given] the right of the [needy]
petitioner and the deprived. (51:19)
4. Indeed, the men who practice charity and the women who
practice charity and [they who] have loaned Allah a goodly loan -
it will be multiplied for them, and they will have a noble reward.
(57:18)
 5. System of Sadaqat and Zakat
Ahadith of the Prophet:
1. Anas reported that messenger of Allah said: verily charity
appeases wrath of the Lord and removes pangs of death.
(Tirmizi)
2. Abdullah bin Masud raising the tradition reported. There are
three whom Allah loves. A man who gets up at night to read
the Book of Allah, and a man giving alms with his right hand
which he conceals (I consider that he said) from his left
hand, and a man, being in a battalion, encounters the
enemies, although his companions are routed. (Tirmizi)
 5. System of Sadaqat and Zakat

Ahadith of the Prophet:

3. Marsad bin Abdullah reported: Some of the companions of
the Holy Prophet informed me that he heard the Prophet
say: Surely the shade of the believer on the Resurrection Day
will be his charity. (Ahmad)
4. Ibn Omar reported that the Messenger of Allah made
obligatory the charity of Fitr one Sa’a of dried dates or one
Sa’a of barley upon the slave and the free, male and female,
young and old from among the Muslims. He directed its
payment before the people go out for the (Eid) prayer.
(Bukhari , Muslim)
 5. System of Sadaqat and Zakat
5. Ibn Abbas reported that the Holy Prophet sent Mu’az to Yemen
saying: Certainly you will come across a people, the People of
the Book. Call them to bear witness that there is no God but
Allah and that Muhammad is the Messenger of Allah. If they
submit to that, teach them that Allah has made obligatory upon
them prayer for five times a day and a night. If they submit to
that, teach them that Allah has made obligatory over them
Zakat which will be taken from the rich and will be given to the
poor among them. If they then obey that, avoid taking the best
part of their property and fear the invocation of the oppressed,
because between it and Allah, there is no veil. -(Bukhari and
Muslim)
 6. Prohibition of Interest
Verses of the Qur’an :
1. Those who consume interest cannot stand [on the Day of
Resurrection] except as one stands who is being beaten by
Satan into insanity. That is because they say, "Trade is [just]
like interest." But Allah has permitted trade and has
forbidden interest. So whoever has received an admonition
(warning) from his Lord and desists (stops) may have what is
past, and his affair rests with Allah . But whoever returns to
[dealing in interest or usury] - those are the companions of
the Fire; they will abide eternally therein. Allah destroys
interest and gives increase for charities. And Allah does not
like every sinning disbeliever. (2:275-276)
 6. Prohibition of Interest

2. O you who have believed, fear Allah and give up what remains
[due to you] of interest, if you should be believers. And if you
do not, then be informed of a war [against you] from Allah and
His Messenger. But if you repent, you may have your principal -
[thus] you do no wrong, nor are you wronged. (2:278-279)

3. O you who have believed, do not consume usury, doubled and

multiplied, but fear Allah that you may be successful.(3:130)
 6. Prohibition of Interest

Ahadith of Muhammad (PBUH):

1. Jaber reported that the Messenger of Allah cursed the devourer

of usury, its payer, its scribe, and its two witnesses. And he said
that they are equal (in sin). (Muslim)

2. Abdullah-bin-Hanzalah reported that the Messenger of Allah

said: A Dirham of usury a man devours with knowledge is
greater than thirty-six fornications. (Ahmad, Darqutni)
 7. Ban on Hoarding of Wealth
Verses of the Qur’an :

1. And let not those who [greedily] withhold what Allah has given
them of His bounty ever think that it is better for them. Rather,
it is worse for them. Their necks will be encircled by what they
withheld on the Day of Resurrection. And to Allah belongs the
heritage of the heavens and the earth. And Allah, with what
you do, is [fully] Acquainted. (Al-Imran 3:180)

2. O you who have believed, indeed many of the scholars and the
monks devour the wealth of people unjustly and avert [them]
from the way of Allah . And those who hoard gold and silver
and spend it not in the way of Allah - give them tidings
(notification) of a painful punishment. (9:At-Taubah:34)
 7. Ban on Hoarding of Wealth

3. The Day when it will be heated in the fire of Hell and seared
(burned) therewith will be their foreheads, their flanks, and
their backs, [it will be said], "This is what you hoarded for
yourselves, so taste what you used to hoard.“ (9:At-Taubah:35)

4. And what Allah restored to His Messenger from the people of

the towns - it is for Allah and for the Messenger and for [his]
near relatives and orphans and the [stranded] traveler - so that
it will not be a perpetual distribution among the rich from
among you. And whatever the Messenger has given you - take;
and what he has forbidden you - refrain from. And fear Allah ;
indeed, Allah is severe in penalty. (Al Hashr 59:7)
 8. Policy of Moderation
The verses of the Qur’an :
O you who have believed, do not prohibit the good things which Allah
has made lawful to you and do not transgress. Indeed, Allah does not
like transgressors. (5 : 87)

And do not make your hand [as] chained to your neck or extend it
completely and [thereby] become blamed and insolvent. (17 : 29)

Say, "Call upon Allah or call upon the Most Merciful. Whichever [name]
you call - to Him belong the best names." And do not recite [too]
loudly in your prayer or [too] quietly but seek between that an
[intermediate] way. (17 : 110)

And be moderate in your pace and lower your voice; indeed, the most
disagreeable of sounds is the voice of donkeys.“ (31 : 19)
 8. Policy of Moderation

Ahadith of the Prophet :

1. Good manners, delay and moderation form a part out of

twenty-four parts of Prophethood. (Mishkat-ul-Masabih)

2. Abu Hurairah reported that the Messenger of Allah said:

Moderation in expenditure is half of livelihood, and love for
people is half of wisdom, and good questioning is half of
learning. (Bukhari)
 9. Condemnation of Monasticism and Materialism

Allah says in Quran

1. O you who have believed, do not prohibit the good things
which Allah has made lawful to you and do not transgress.
Indeed, Allah does not like transgressors. (5 : 87)

2. …….and monasticism, which they innovated; We did not

prescribe it for them except [that they did so] seeking the
approval of Allah . But they did not observe it with due
observance. So We gave the ones who believed among them
their reward, but many of them are defiantly disobedient.
(57 : 27)
 10. Equity and not Equality
Qur’an highlights these inequalities in its following verses:

1. And do not wish for that by which Allah has made some
of you exceed others. For men is a share of what they
have earned, and for women is a share of what they
have earned. And ask Allah of his bounty. Indeed Allah is
ever, of all things, Knowing. (4 : 32)

2. He it is Who has placed you as viceroys of the earth and

has exalted some of you in rank above others. That He
may try you by (the test of) that which He has given
you………(6 : 165)

3. And Allah has favored some of you above others in

provision……(16 : 71)
 10. Equity and not Equality

4. Indeed, your Lord extends provision for whom He

wills and restricts [it]. Indeed He is ever, concerning
His servants, Acquainted and Seeing. (17 : 30)

5. Do they distribute the mercy of your Lord? It is We

who have apportioned among them their livelihood
in the life of this world and have raised some of
them above others in degrees [of rank] that they
may make use of one another for service. But the
mercy of your Lord is better than whatever they
accumulate. (43 : 32)
 Summary of the Lecture
We discussed the basics of Islamic Economic System according the
Quran and Hadith.
1. Allah is the Sustainer
2. God is Real Owner of Everything and Man is Merely a Trustee
3. Everything Created for Service and Use of Man
4. Concept of Halal and Haram
5. System of Sadaqat and Zakat
6. Prohibition of Interest
7. Ban on Hoarding of Wealth
8. Policy of Moderation
9. Condemnation of Monasticism and Materialism
10. Equity and not Equality