Timesofummah.com – Many people do not really understand about the structure of an Islamic economic system. Even though all the regulations really make it easier for his people to carry out activities based on the laws and regulations from Allah. That way, the lives of all Muslims will be more blessed and orderly.
1. Understanding the Islamic Economic System
The Islamic economic system is simply a regulation, the implementation of which is based on various Shari’a. Namely Islam and always guided by the Qur’an and Al-Hadith. This includes activities such as savings and loans, investments and various other activities.
This economic system was created so that Muslims can continue to carry out economic activities properly and correctly and avoid all bad traits such as usury, dzalim, ikhtikar, haram, and many more. Everything is explained and regulated in detail in the Islamic economic system.
Islamic concepts in various issues such as production, distribution, accounts payable, income, and state expenditures are included in the Islamic Economic System as discussed in the book Islamic Economic System below.
1.2 Ways of Possession of Assets in Islam (Al-Milkiyah)
In Islam the position of property is included in a very important thing. This is evidenced by the existence of various opinions but all of them refer to one stipulation, namely that in the end all property belongs to Allah the Exalted. Islam also provides protection to its owners.
The Prophet Muhammad himself was very concerned about the use of wealth in Islam. Because if there is a waste or hoarding of wealth, it is the same as bringing sin and will complicate the reckoning at the end of the day. Everything must be used properly and correctly.
For example, suppose you have a plot of land but after three years it is still sitting there without any use. This of course will create a boss and be bad for the owner. For that you should not waste time when you already have property.
Next is the fulfillment of rights, meaning that every Muslim who has property is obliged to donate it to zakat in accordance with the rules of syara’. So it is not hoarded and then left in silence with the intention of being stored and enriching oneself. This is not allowed.
In the wealth of the rich there are also the rights of the poor or underprivileged. Zakat is a symbol of harmony in human relations. That there is no higher or lower before Allah SWT, all the same and only the difference in character.
1.2.3. Not Harming Other Parties
As the owner of a lot of property, you should also not use it for useless things. The best wealth is that which is useful to others, not to harm. If that happens, it’s the same as you have underestimated Allah SWT.
For this reason, never lose or run away from the obligation to pay taxes for others, alms, and various other sharing activities. This is also intended so that you are not easily affected by the disease or proud of the property and become arrogant.
1.2.4. Legal Ownership
Next is to meet the legal ownership requirements. This is intended so that people do not get their wealth from booty or booty. Everything is purely because of the hard work of each. In this way of course the distribution is also still useful.
The Qur’an itself has forbidden all property to be obtained by dirty or illegal means because it can be a source of damage. Likewise if you want to get wealth from untested means such as bribing the court, false witnesses and other disgraceful and disgraceful things.
1.2.5. Balanced Use
Finally, Islam always encourages its people to actually use wealth in a balanced way. Do not be just one-sided or negligent in carrying out their duties and obligations such as zakat, alms and sharing with others. God really doesn’t like that.
Furthermore, Islam also provides various provisions on property ownership in Islam. Among them are individual ownership, public property, related to the interests of the people and also need to be spent on the basis of maintaining a balance of cleanliness of property.
1.3 Ownership Management Method (At-Tasharruf Fi Al Milkiyah)
Of course, the property owned will not be taken to death. For that you need to manage it properly so that the treasure is blessed and not a burden during the reckoning process at the end of the day. There are at least three management matters in Islam to be used as rules for its followers.
1.3.1 Individual Ownership
Individual ownership or private property is where the property is legal on behalf of one person. The tendency leads to the pleasures of human nature itself. Allah Himself created love for several things, namely wealth, women, children.
Humans are given the freedom to get wealth in a clean way as much as possible. It’s just that the Shari’a does limit it with various rules and prohibitions. Everyone must have different assets for that management is also different.
1.3.2 Common Ownership
In addition to individual ownership, there is also public or public property whose entire wealth has been determined to be common property, so it is not only for one person. There are at least three types of public ownership that have been determined by Islamic economic rules.
Public facilities that have been made by the government and their use is for the people. This public ownership aims to facilitate all people’s daily activities such as irrigation, power generation and other energy sources.
Wealth that is forbidden for individuals to own it personally. It’s already illegal, which means you can’t use it for personal use. For example seas, bays, lakes, canals, fields, and the like
Mining Goods are also included in the next public facility. The abundant amount should not be used without the permission of the relevant parties. Legal goods may turn out to be illegal if they are not based on valid legal sources.
1.3.3 State Ownership
The property that is the property of all Muslims can be managed by the government according to the authority of enforcement in that country. Islamic law has determined correctly what the rights of Muslims are, while later they can be given back according to the agreement.
General assets actually cannot be given to individuals just like that, but on the contrary, state assets can be given but there are terms and conditions that must be completed so that later it will not be misused by irresponsible persons and ultimately only become a disaster.
1.4 Ways of Wealth Circulation in the Community (Tauzi’ul Tsarwah Tayna An-Naa)
The subject of this discussion is a very important issue and must be discussed seriously. In Islam itself there are also various provisions relating to the mechanism for the circulation of assets in sharia law and have been fully guaranteed by each government.
That is why Islam forbids the circulation of wealth only among the rich, while they forget the poor. This is why you are also discouraged from ruthlessly bargaining with small sellers who are just sitting on the side of the road . Learn about the Islamic economic system through the book Islamic Financial System: Principles & Operations.
1.5 Mechanism of Islamic Economic System
The Islamic mechanism itself is a productive activity and is only in the form of property development or tanmiyatul mal. In various muamalah contracts there are various ways and special provisions that must be carried out by each individual involved in it.
1.5.1 Economic Mechanism
First. Work is part of the economic system because it opens up the widest possible opportunities for the causes of individual ownership. So don’t be lazy to work just to provide space to be lazy.
Second. Investment is also part of the Islamic economic system which is sought for the development of property or tanmiyah mall. This is all a management and use properly and correctly in an economic cycle itself.
Third. Never dare to hoard treasures such as gold and silver. Even though the zakat has also been paid, if it is done it will only hinder the circulation of assets and the circulation of the economic system.
Fourth. It is not recommended to conduct business trade or business in the area-that’s all. Do equity distribution or business expansion in other areas. The goal is to develop an economic system for the better and be felt by all levels.
Fifth. There is a prohibition against conducting monopoly or other fraudulent activities. This can break the market price and hurt the hearts of people in the lower classes. So you should avoid it or you will feel the consequences later.
Sixth. Prohibition not to commit unlawful acts such as gambling, usury, giving gifts for dishonorable actions such as bribes. Wealth like this is useless and only a source of destruction.
1.5.2 Non-Economic Mechanisms
This mechanism is not carried out through productive economic activities but comes from gifts or obligations of a Muslim such as alms, zakat, inheritance and the like. So the circulation is of course different from the mechanism of ordinary economic wealth.
The activity of circulating non-economic mechanisms aims to create a balance in the life of the people, considering that currently there are not many people who have the same amount of wealth. This is intended to create harmony between Muslims and their surroundings.
- Provision of state assets to its citizens according to a predetermined nominal.
- Giving wealth or zakat paid by muzakki to mustahik.
- Giving infaq, waqf, alms, and grants to people with economic limitations.
- The distribution of inheritance to the experts that has been adjusted to the content or content.
1.6 Islamic Economy
Now people may not know much about the economy in Islam. Even though this learning is very important, especially for Muslims to avoid disgraceful acts and still be able to carry out daily activities according to Allah’s commands.
Within Islam itself there is a paradigm that aims to map all the problems that occur in the field to reach a more valid source. In this way, points are made so that all can adhere to the same rules without discriminating in order to achieve:
- Fostering an ethical market where everyone has competitive cooperation
- The desperate and luxurious needs of individuals in society
- Reward the perpetrators for the risk as well as the loss
- Dividing wealth equitably between impulsive and personal uses
- And play a clear role in its supervision
2. Advantages of Islamic Economics
Islamic economics is an alternative system to the economic system that is still used today, namely the capitalist economic system and the socialist economic system. Although it is still relatively new, starting from the middle of the twentieth century. However, indirectly, the practices and goals of Islamic economics have basically been applied since the emergence of Islam in the world. Some of the advantages of Islamic economics or Islamic economics itself are as follows:
- There are Morals and Ethics: In Islamic economics or Islamic economics, users are indirectly faced with a series of morals and ethics. This is because Islam teaches a consumption process that is not only concerned with the aspect of material satisfaction but is also used to meet daily needs. When carrying out the buying and selling process, for example, Islam teaches several norms that economic actors should obey.
- Distribution Process Based on Justice: The Islamic economic system makes justice one of the main principles that must be obeyed. Islam provides limitations in functional distribution in order to create stability in an economic prosperity. This is clearly different from the principle of capitalism which tends to create inequality, as well as the socialist economic system which tends to enjoy poverty together
- Freedom in Decision Making: Islam gives freedom to humans to make decisions based on the values of monotheism. This freedom will then optimize their abilities and decisions related to the economy without being based on coercion by anyone.
- Safe Income System: The income system is quite different from the conventional economic system. The income is based on activities that generate profits and capital. Therefore, the goal of Islamic economics is to eliminate the interest system to a steady income from the running of an economic activity
3. Islamic Economic System and Ummah Welfare
The understanding of Islamic economics and the welfare of the people itself is the definition of various sciences that study how humans themselves will fulfill their needs in accordance with their environment and time or era. Of course also with the means and resources.
All resources are also alternative means in order to achieve good fortune in this world and the hereafter. Of course, everything is based on the values of the teachings in Islam, namely the Qur’an and Al Hadith. So if applied correctly everything will ease the way of your life.
2.1. The Concept of Welfare in Islam
Prosperity itself according to the Indonesian dictionary is an understanding of feeling safe, comfortable, prosperous, safe and in good health. It can also be given the meaning of liberating a person from the shackles of poverty, fear or ignorance so that life is more peaceful.
2.2. Giving Welfare in the World and the Hereafter
As a Muslim, of course, you believe in life after death. By following all the rules of the economic system in Islam, Allah guarantees his people with happiness and prosperity in this world and the hereafter.
You will get a better and more honorable life if you run the Islamic economy properly and correctly. For example, even though a lot of wealth, a lot of wealth, but never forget to carry out their obligations for zakat and alms to those in need.
2.3 Peace and Harmony
If you look at the content of all the regulations above, it can be seen that the aspects of Islamic teachings always involve social welfare issues. It’s not enough to have a relationship with God, you have to improve your relationship with your fellow human beings.
If practiced correctly starting from zakat, alms, sharing with others and not committing fraud or hoarding wealth, it will bring peace to all Muslims. Isn’t it easy to run Islamic economics properly and correctly?
2.4. Taqiyuddin an Nabhani’s Islamic Economic System
For some people, they may still feel unfamiliar with the term Islamic economic system from Taqiyuddin an Nabhani. He is a scholar, politician and also an influential figure from Palestine. He has accuracy in every work, including the principles of Islamic economics.
4. The Concept of Islamic Economics According to Taqiyuddin an Nabhani
In the view of Taqiyuddin an Nabhani, he prioritized wealth that should be consumed in the way of goodness and benefit others. Such as spending it on the path of alms and zakat and paying for the rights of all objects such as clothes, cars and the like.
Because Allah SWT has given all the provisions related to Islamic laws, then on behalf of the owner, use them properly, so that they do not enter the forbidden path and will eventually become a source of endless destruction.
The law of the Islamic economic system itself is the whole of the principles, rules, institutions, as well as civil and public institutions that regulate and direct economic activities or systems based on the concept of Islamic Law which is clearly described in the book on Islamic Economic System Law.
3.1. Use of Legalized Ownership
In the use of assets or malls there are mandatory ones, such as providing a living for their children and wives as well as parents and other nuclear families. And there are classifications for worship purposes such as zakat and alms to those in need.
According to Taqiyuddin an Nabhani, the expenditure of assets can also be carried out by the Islamic State. Namely a condition that requires a country to perform mandatory tasks when many of its people are suffering from hunger. For example, during a natural disaster, facing an attack or in the middle of a war
3.3. Prohibited Use of Possessions
There is a recommendation for this benefit in Islam because it does not use wealth properly and correctly. Just spree, or miserly to others. There is no development because it is only used for acts of injustice.
It is better to use assets properly by investing or to other more profitable fields. That way you can run all economic systems according to the provisions of Islam. Hopefully life will always be safe and prosperous world / hereafter.
That was, some reviews related to the Islamic economic system. Hopefully useful and can give an easy overview.
5. Recommendations for Islamic Economics Books
Here are some recommended books related to Islamic economics:
Introduction to Islamic Economics
The development of Islamic economics is something that cannot be separated from the development of Islamic history itself. And this book discusses Islamic Economics, as the study of modern science only emerged in the 1970s, but thoughts on Islamic economics have emerged since Islam was revealed through the Prophet Muhammad SAW, because the reference to Islam is the Qur’an and hadith. The emergence of Islamic economics in the current era has yielded results with many re-discussions in the realm of modern business, such as Islamic financial institutions/Islamic banking, and so on.
“This book was compiled by a team of writers from the Center for the Study and Development of Islamic Economics (P3EI) at the Islamic University of Indonesia, Yogyakarta, within the framework of cooperation in writing financing assistance from Bank Indonesia. Hopefully this support can be read as a concrete form of Bank Indonesia’s discretion towards improving the quality of human resources as the main capital for the development of the Islamic banking industry in particular and the Islamic financial system in general.” “Islamic economics reference books for academic community strata: S1, S2, and S3 are indispensable; Alhamdulillah, this book can be used as a reference in the education process for pious human resources, God willing. Amen.” Prof. Dr. Suroso Imam Jazuli (Dean of the Faculty of Economics, Airlangga University Surabaya) “The discussion does not only touch on economic mechanisms but also moral values in the economy, making this economics textbook has advantages over similar books.” Dr. M. Syafii Antonio (Chairman of the Tazkia High School of Islamic Economics, Bogor)
Islamic Economics Revised Edition
The development of the Islamic banking and finance system, which is currently reaching its peak of growth and is increasingly being widely known by the public, cannot be separated from the author’s observations. Explanations in terms of existing policies and regulations strengthen the existence of the development of an Islamic economic system at a practical level. Likewise, in terms of supervision of institutional expansion and developed Islamic financial products are also discussed in this book. This 4th edition of the Islamic Economics book shows that this book has truly earned a place among academics and practitioners of Islamic economics, so it is not an exaggeration if I also recommend to the Chancellor and Dean who manages the Islamic Economics Study Program at UIN, IAIN, STAIN and PTKIS to be able to use this book as a reference and reference.
Islamic Economics Theory Its Application
This Islamic Economics book is a textbook intended to provide a guide for teaching Islamic Economics in universities. All themes were discussed in succession, starting from microeconomics to economic policies carried out by monetary authorities. All of this discussion is presented comprehensively by stating the reasons naqli from the Qur’an and hadith. Economic theories born by classical Islamic economists such as Abu Yusuf, al-Ghazali, Ibn Taimiyah, and Ibn Khaldun. Supported by existing contemporary theories.
Islamic Economic System
The book in hand is one of the reference books on Islamic economics that has become a reference for world academics. The range of main themes that are structured with the systematics of modern economics makes it easier for those who are interested in knowing what and how the Islamic concept is in terms of production, distribution, accounts payable, income, and state spending. The main theme is also complemented by various supporting topics such as interest, property rights, land, labor, and comparative analysis between the current dominant economic system and Islam.
6. Principles of Islamic Economics
The principles of Islamic economics include dualism of ownership, economic freedom, and social responsibility because in Islamic economics economic activities are based on Sharia, morals and faith to balance the economy.
So that in running the economy will always be adjusted to the teachings of Islam. The purpose of the sharia economy itself is not only to get physical benefits, but also to get inner peace in life. Islamic Economics is here to help the customer’s economy to make a profit but still within the rules and teachings of Islam. Here are the principles of Islamic economics that you need to know:
1. Giving Space to the State and Government
Cooperation as a prime mover in the Islamic economy. This economy resists the accumulation of wealth for the few. Community ownership and its planned use for the benefit of the people are guaranteed in the Sharia economy. The Islamic economy also provides space for the state as an intermediary if a problem occurs.
2. Prohibiting the Practice of Riba
The Islamic economy prohibits the practice of usury, for example, adding payments to people who borrow their assets because of the delay in the payment deadline from the specified.
As is the case with an Islamic insurance system based on principles that combine efforts to seek lawful profits and the intention to be together through donations with a tabarru’ system to help insurance participants which is discussed in full in the Sharia Insurance book.
3. Not Doing Hoarding Or Effort
Effort is an act of buying merchandise with the aim of storing goods for a long time so that the goods are declared rare or have an expensive price.
4. Have Social Responsibility
Every economic actor should have responsibility. Because, by implementing social responsibility, he has directly given alms to others and those in need, this is in accordance with the values taught by Islam.
5. Implementing a Profit Sharing System
Islamic economics itself implements a profit-sharing system that prioritizes justice as one of the principles of Islamic economics. Every profit from every economic activity will be shared fairly, for example in Islamic banking there is a profit share for banks and customers.
6. Orderly Economic Freedom
Islamic economics is actually not too binding, because Allah SWT guarantees the freedom and space for human economic movement to the widest possible extent. This means that Allah guarantees freedom as long as economic activities remain in accordance with the Shari’a and Islamic values.
7. Dualism of Ownership
Islamic Economics adheres to Dualism of Ownership, namely private ownership and public ownership simultaneously. This is not found in the two largest economic systems in the world, namely the Liberal or Traditional Economic System, so that indirectly Islamic economics is a solution to the problems of the two economic systems. Furthermore, private property rights then do not necessarily free the users. Buying and selling activities must still be carried out fairly and not excessively.
8. Giving Freedom according to Islamic Teachings
Islamic economics frees economic actors to act according to their rights and obligations in running the economy according to applicable teachings by taking responsibility for what has been done.
9. No Monopoly
Monopoly is the act of holding back the existence of goods from being sold in the market so that the price becomes higher. Besides that, it also avoids buying and selling which is forbidden. Trading activities that are in accordance with Islamic principles, are fair, lawful and do not harm the buyer, are buying and selling which is blessed by Allah SWT.
7. Form of Sharia Economic Cooperation
Broadly speaking, Islamic economics has advantages over the other two economic systems (the Liberal economic system and the Traditional Economic System), namely providing social security based on two basic Islamic economic doctrines, namely providing reciprocity to the community as well as providing human rights to resources which include wealth controlled by the state.
Islamic economics itself has the main goal of eradicating poverty and meeting the basic needs of each individual, providing and creating opportunities for everyone in economic activities to ultimately improve the economic welfare of a country. In the Islamic economic system, the state is responsible for allocating natural resources to improve the welfare of its people in general. The forms of cooperation in Islamic economics themselves include the following:
Mudharabah is a collaboration between two parties where 100% of the business capital comes from the owner of the capital, the other party acts as the business manager. If the business then makes a profit, it must be divided equally according to what was agreed before the collaboration is carried out.
Musyarakah is a partnership in which business capital is obtained from each party. This form itself is easier to practice because the profits and losses that occur are then faced together with the terms or agreements that have been agreed previously (usually at the beginning of the agreement).
3. Al Muza’arah
Al Muza’arah is a collaboration between two or more parties that focuses on processing agricultural land between land owners and workers who work on the agricultural land. The land owner then prepares the land and seeds to be planted and cared for. Later the harvest will then be divided between the two with a pre-agreed percentage.
4. Al Muzaqah
Al Muzaqah is a collaboration where land workers are only responsible for maintaining the plants that have been planted. Al-musaqah itself comes from the word as saqa. Which means the trees of the Hijaz people that need watering from wells. Therefore, it was then given the name musaqah or it could also mean irrigation. Musaqah as a simpler form of muzara’ah in which the cultivator is only responsible for maintaining the field, in exchange for the cultivator being entitled to a certain ratio of the harvest.
8. Differences in Islamic and Conventional Economics
Broadly speaking, Islamic economics has significant differences compared to conventional economics. The Islamic economic system prioritizes the production, distribution and consumption of resources based on Islamic principles. Its principles and operations in Indonesia are discussed in the book The Islamic Financial System by Muhammad.
These principles are derived from the teachings of the Quran, sunnah or traditions of the Prophet while the conventional economic system, is not guided by religious principles or divinely inspired. It was developed by Originals such as Joseph Schumpeter, Max Weber, and Adam Smith. This is a fundamental difference between the two systems which then affects the way individuals or groups operate and the economic goals they aim at. Check out a more complete explanation of the differences between conventional and Sharia economic systems, below:
1. Basic Philosophy
Islam as a religion that teaches a way of life as well as a guide on how Muslims carry out their daily activities, including transactions and other economic activities. By setting standards of how an economic system should be organized, which is based on justice and equality.
Justice cannot be achieved without considering the effects of certain actions on society. Therefore Islam guides and encourages people to be selfless where the goal of life is of course not just personal gain. This is certainly very contrary to the conventional economic system which prioritizes personal interests over the interests of others. The Islamic economic system is oriented towards human falah (victory) by applying Islamic values in practice.
This will then create social welfare that leads to justice. Whereas in conventional economic theory, social development is secondary or coincidental.
2. Funding Principles
Islamic economics is based on Allah’s revelation. While conventional economics does not have a reference in solving economic problems. The difference between this reference and conventional economics affects its objectives.
Al-Quran as the main reference in all aspects of Muslim life, including in transactional or economic life. In the Islamic economic system there is also a financial system that facilitates the allocation of resources such as financial resources and physical goods.
In allocating these resources, the Islamic system emphasizes the underlying activities while in the conventional financial system the price of financial resources or interest rates is the focus of each financing activity. In an Islamic economic system, income growth must also be accompanied by an increase in productive economic activities.
These two aspects then become the basic principles of the difference between conventional and Islamic economics. From this difference, further provisions developed, including the matter of transaction contracts and many other aspects. Its application later became the form of many Islamic financial products today.
9. Development of Islamic Economy in Indonesia
The development of sharia economics in Indonesia started from the muamalah fiqh thought developed by the scholars, and has been adapted in such a way in the form of a fatwa. The fatwas issued by the National Sharia Council (DSN) itself have now become a ‘practical guide’ for the public in bermuamalah according to sharia.
More and more books are now discussing the relationship between modern economics and Islamic economics. Islamic economics itself is not only synonymous with Islamic banks, but also includes macroeconomics, microeconomics, monetary policy, fiscal policy, public financing to economic development. Meanwhile, at the practical level, the development of Islamic public financial institutions has developed quite rapidly.
- In the banking sector as of October 2018, the number of Islamic Commercial Banks has reached 14 with total assets of 304,292 billion rupiah.
- According to data from the Financial Services Authority (OJK), as of November 2018, the number of sharia mutual funds was 220 or around 10.61% of the total mutual funds. This number is quite high when compared to the percentage in 2010 which was only 7.84%, so this number is quite high.
- The development of Sharia Securities is also very encouraging, as of November 2018, there were 407 Sharia Securities from various sectors.
- The number of sharia sukuk has also increased, until November 2018 it has reached 108 sharia sukuk.
- The development of Islamic financial institutions is also shown by the high number of BMTs (Baitul Maal Wat Tamwil) which are currently estimated at 4500 units. BMT (Baitul Maal Wat Tamwil) itself is a sharia financial institution that provides sharia financing services for micro-enterprises for its members. The existence of BMT (Baitul Maal Wat Tamwil) is strategic, especially in its efforts to reach rural areas (agricultural sector and informal sector).
- The development of the sharia economy is also evident with the establishment of the Micro Waqf Bank, which functions to provide services for providing access to financing for people who are not yet connected to formal financial institutions, especially in Islamic boarding schools.