Islamic Economic System – Many people do not really understand the order 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 of Allah. That way, the lives of all Muslims will be more blessed and orderly.
1. Definition of Islamic Economic System
The Islamic economic system is simply a rule, where its implementation is based on various sharia. 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, tyranny, endeavor, haram, and many more. Everything is explained and regulated in detail in the Islamic economic system.
The concept of Islam in various issues such as production, distribution, accounts payable, income, and state spending is included in the Islamic Economic System as discussed in the Islamic Economic System book below.
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1.2 Methods of Property Ownership in Islam (Al-Milkiyah)
In Islam the position of wealth is included in a very important matter. This is evidenced by the existence of various opinions, but all of them refer to one provision, that is, in the end, all assets belong to Allah ta’ala. Islam also provides protection to its owners.
1.2.1 Utilization
The Prophet Muhammad himself was very concerned about the use of wealth in Islam. Because if there is redundancy or hoarding of wealth it is the same as bringing sin and will make it difficult to reckon at the end of the day. Everything must be used properly and correctly.
For example, you have a plot of land but after three years it is still sitting idle without any utilization. This of course will cause a boss and bad consequences for the owner. For that you should not waste time when you already have property.
1.2.2. Exercise of Rights
Next is the fulfillment of rights meaning that every Muslim who has property is obliged to donate it to zakat in accordance with syara’ rules. So don’t hoard it and then leave it with the intention of keeping it and enriching yourself. This is not allowed.
In the assets of the rich there are also the rights of the poor or underprivileged. Zakat is a symbol of harmonious human relations. That there is nothing higher or lower before Allah SWT, all are the same and only the morals are the difference.
1.2.3. Not Harming Other Parties
As the owner of a lot of wealth, you should also not use it for useless things. The best assets are those that are useful to others, not to bring harm. If this happens, it’s the same as you have underestimated Allah SWT.
For that, don’t ever disappear or run away from the obligation to pay taxes for others, alms, and various other sharing activities. This is also meant so that you are not easily affected by joy sickness or are proud of these assets and become arrogant.
1.2.4. Legal Ownership
The next step is to fulfill legal ownership requirements. This is so that people do not get their wealth from loot or loot. Everything is purely due to the hard work of each. In this way, of course, the distribution is also still useful.
The Qur’an itself has prohibited all assets from being obtained by dirty or illegal methods because they can be a source of damage. Likewise if you want to get wealth from untested ways such as bribing courts, false witnesses and other dishonorable and despicable things.
1.2.5. Balanced Use
Finally, Islam always encourages its people to really use wealth in a balanced way. Don’t just be one-sided or negligent in carrying out your duties and obligations such as zakat, alms and sharing with others. Really God does not like that.
Furthermore, Islam also provides various provisions for the ownership of property in Islam. Among them are individual ownership, public property, related to the interests of many people and also need to be spent on the basis of maintaining a clean balance of assets.
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1.3 How to Manage Ownership (At-Tasharruf Fi Al Milkiyah)
The property that is owned, of course, will not be brought to death. For that you need to manage it properly so that the treasure becomes a blessing and does not become a burden during the reckoning process at the end of the day. There are at least three management matters in Islam to be made the rules of its followers
1.3.1 Individual Ownership
Individual ownership or private property is where the property is legal in the name of one person. The tendency towards pleasure is human nature itself. Allah himself made the love of 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. Each person must have different assets for that management is also different.
1.3.2 Common Ownership
In addition to individual ownership, there is also general or public property where all of its wealth has been determined to be shared property, so it’s not just for one person. There are at least three types of public ownership that have been defined by Islamic economic rules.
1. Public facilities that have been made by the government and their use is for the community. This public ownership aims to facilitate all the daily activities of the community such as irrigation, power generation and other energy sources.
2. Wealth that is forbidden for individuals to own it personally. This has been given Illegal law, which means you can’t use it for personal needs. For example seas, bays, lakes, canals, fields, and the like
3. Mining goods are also included in the next public facilities. The abundant amount may not be used without permission from 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
Property which is the property of all Muslims can be managed by the government in accordance with the enforcement authority in that country. Islamic Shari’a has correctly determined what the rights of Muslims are, while later they can be given more according to the agreement
Public property cannot actually be given to individuals just like that, but on the contrary state property can be given but there are terms and conditions that must be completed so that later it is not misused by irresponsible elements and in the end it only becomes madarat.
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1.4 Ways of Circulating Wealth in the Middle of Society (Tauzi’ul Tsarwah Tayna An-Naa)
The subject matter of this one includes issues that are very important and must be discussed seriously. In Islam itself there are also various provisions relating to the distribution mechanism of assets in syara’ law and have been fully guaranteed by each government.
That is why Islam prohibits the circulation of assets only among the rich, while they forget about the less fortunate. This is why you are also not advised to bargain ruthlessly the 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 Mechanisms of the Islamic Economic System
The Islamic mechanism itself is an activity that is productive in nature 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 person involved in it.
1.5.1 Economic Mechanism
First. Work is part of the economic system because it can open up the widest possible opportunities for the emergence of causes of individual ownership. So don’t be lazy to work just to give space to be lazy.
Second. Investment is also part of the Islamic economic system which seeks to develop assets or tanmiyah mal. All of this is a good and correct management and utilization 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 hamper the circulation of assets and the circulation of the economic system.
Fourth. It is not recommended to do business or business trade in that area-that’s all. Do equity equity or business expansion in other areas. The aim is to develop a better economic system that will be felt by all layers.
Fifth. There is a prohibition against monopolistic activities or other fraud. This can break the market price and hurt the hearts of people at the bottom. So it’s best to avoid it or you will feel the consequences yourself later.
Sixth. The prohibition against committing unlawful acts such as gambling, usury, giving gifts for dishonorable acts such as bribery. Treasures like this are useless and only a source of destruction.
1.5.2 Non-Economic Mechanisms
This mechanism is carried out not through productive economic activities but originates from gifts or obligations of a Muslim community such as alms, zakat, inheritance and the like. So the circulation is of course different from the mechanism of ordinary economic wealth.
The circulation of non-economic mechanisms aims to create balance in the midst of people’s lives, bearing in mind 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 citizens according to a predetermined nominal.
- Giving wealth or zakat paid by muzakki to mustahik.
- Providing infaq, waqf, alms, and grants to people with economic limitations.
- Distribution of inheritance to the experts who have been adjusted to the contents or content.
1.6 Islamic Economy
Now people may not know much about economics 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 the orders of Allah SWT.
In Islam itself there is a paradigm that aims to map all the problems that occur in the field to reach more valid sources. That way points are made so that all can adhere to the same rules without discriminating to achieve:
- Fostering ethical marketplaces where everything has cooperative competition
- The basic and luxurious needs of individuals in society
- Give rewards to the perpetrators for risks as well as losses
- Distribute wealth fairly between the use of impulsive and personal
- As well as play a clear role of supervision
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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 mid-twentieth century. However, indirectly the practice and objectives of Islamic economics have basically been applied since the advent of Islam in the world. Some of the advantages of Islamic economics or sharia economics themselves are as follows:
- There are Morals and Ethics: In Islamic economics or sharia economics, users are indirectly confronted with a series of morals and ethics. This is because Islam teaches a consumption process that is not only concerned with aspects 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 adhere to.
- 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 welfare. 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 anyone’s coercion.
- Safe Entry System: An income system that is quite different from conventional economic systems. The income is based on activities that generate profits and capital. Therefore the goal of Islamic economics is to eliminate the interest system so that a steady income from running an economic activity
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3. Islamic Economic System and People’s Welfare
The notion of Islamic economics and the welfare of the people themselves are definitions of various sciences that study how humans themselves will fulfill their life needs according to their environment and time or era. Of course also with the means as well as resources.
All resources as well as means are alternative in order to achieve good luck in the world and the hereafter. Of course, everything is based on the values of teachings in Islam, namely the Qur’an and Al Hadith. So if implemented correctly everything will ease your way of life.
2.1. Concept of Welfare in Islam
Welfare itself according to the Indonesian dictionary is the meaning of a sense of security, peace, prosperity, safety and health. It can also be given the meaning of releasing a person from the bondage of poverty, fear or stupidity so that life is more peaceful.
2.2. Providing World and Hereafter Prosperity
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 respectable life if you run the Islamic economy properly and correctly. For example, even though there is a lot of wealth, a lot of wealth, they never forget to carry out their obligations to give 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 aspects of Islamic teachings always involve social welfare issues. Relationship with God alone is not enough, you must also improve the relationship with fellow human beings.
If practiced correctly starting from zakat, alms, sharing with others and not committing fraud or hoarding wealth, it will create peace for all Muslims. Isn’t it very easy to run Islamic economics properly and correctly
2.4. Islamic Economic System Taqiyuddin an Nabhani
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 is meticulous in each of his works, including the principles of Islamic economics.
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4. The Concept of Islamic Economics According to Taqiyuddin an Nabhani
In the view of Taqiyuddin an Nabhani, he prioritized wealth to be consumed in the way of goodness and benefiting others. Like spending it on alms and zakat and paying the rights of all objects such as clothes, cars and the like.
Because Allah SWT has provided all the provisions related to Islamic laws, on behalf of the owner, use it properly, don’t let it enter the unlawful path and in the end it will become a source of endless destruction.
The law of the Islamic economic system itself is the whole of the principles, rules, institutions, and institutions that are civil and public in nature that regulate and direct economic activity or order based on the concept of Islamic law which is clearly described in the book Islamic Economic System Law.
3.1. Use of Legal Ownership
In the utilization of assets or malls, there are those that are mandatory, such as providing a living for children and wives as well as parents and other nuclear families. And there is a classification for the purposes of worship such as zakat and alms to those in need.
According to Taqiyuddin an Nabhani, the disbursement of assets can also be carried out by Daulah Islamiyah. That is a condition where a country is obligated to carry out mandatory tasks when many of its people suffer from hunger. For example during a natural disaster, facing an attack or in the middle of a war
3.3. Prohibited Use of Property
This beneficiary is recommended for prohibition in Islam because they do not use assets properly and correctly. Just spree, or miserly to others. There is no development because it is only used for acts of tyranny.
It is better for assets to be used properly by investing or in other more profitable fields. That way you can run all economic systems based on the provisions of Islam. Hopefully life will always be safe and prosperous in this world / hereafter.
Those were some reviews regarding the Islamic economic system. Hopefully useful and can give an easy picture.
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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 creed to balance the economy. Islamic economics also believes that wealth in the economy truly belongs only to Allah.
So that in running the economy will always be adjusted to the teachings of Islam. The purpose of the Islamic economy itself is not just to get physical benefits, but also to get inner peace in life. Islamic economics is here to help the customer’s economy to get profits but still in accordance with Islamic rules and teachings. 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 rejects the accumulation of wealth of a few people. Community ownership and planned use for the benefit of the people are guaranteed in the Sharia economy. The sharia economy also provides space for the state to act as an intermediary when a problem occurs.
2. Prohibiting Riba Practices
The Islamic economy prohibits the practice of usury, for example, adding payments to people who borrow their assets due to delays in payment deadlines from those specified.
As is the case with the Islamic insurance system which is based on the principle of combining business seeking lawful profits and the intention to be together through donations with the tabarru’ system to help insurance participants which is discussed in full in the Sharia Insurance book.
3. Not Doing Hoarding Or Endeavor
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 high prices.
4. Have Social Responsibility
Responsibility should be owned by every economic actor. Because, by implementing social responsibility, he directly also gives 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 promotes 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 the bank and the customer.
6. Orderly Economic Freedom
Islamic economics is actually not too binding, because Allah SWT guarantees freedom and the widest possible space for human economic movement. This means that Allah guarantees freedom as long as economic activities remain in accordance with the Shari’a and Islamic religious values.
7. Possession Dualism
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 Systems, so that indirectly Islamic economics is a solution to the problems of these two economic systems. Furthermore, private property rights then do not necessarily free the user. 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 also being accountable for what they have done.
9. No Monopoly
Monopoly is the act of holding back the existence of goods from being sold on the market so that the price will be higher. In addition, it also avoids buying and selling which is forbidden. Buying and selling activities that are in accordance with Islamic principles, fair, lawful and not detrimental to the buyer are buying and selling that are blessed by Allah SWT.
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7. Forms of Sharia Economic Cooperation
Broadly speaking, the Islamic economy has advantages over the other two economic systems (the Liberal Economic System and the Traditional Economic System), namely providing social security based on the two basic Islamic economic doctrines, namely providing reciprocity to society as well as providing human rights to resources which include the wealth controlled by the state.
Islamic economics itself has the main goal of eradicating poverty and meeting the basic needs of every individual, providing and creating opportunities for everyone in economic activities to ultimately increase 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. Forms of cooperation in the Islamic economy itself include the following:
1. Mudharabah
Mudharabah is a collaboration between two parties in which 100% of the business capital comes from the capital owner, the other party acts as business manager. If the business then generates profit, it must be divided equally according to what was agreed before the collaboration was carried out. But if there is a loss, the owner of the capital is responsible.
2. Musyarakah
Musyarakah is a partnership in which venture capital is obtained from each party. This form itself is easier to practice because the profits and losses that occur later are faced together with the provisions or agreements that have been agreed before (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 for planting and caring 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 the land workers are only responsible for caring for the plants that have been planted. Al-musaqah itself comes from the word as saqa. Which means the trees of the inhabitants of the Hijaz need watering from wells. Because of that it was then given the name musaqah or it can also mean watering. Musaqah as a simpler form of muzara’ah where 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 between Sharia 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 Islamic Financial System by Muhammad.
These principles derive from the teachings of the Koran, sunnah or traditions of the Prophet while conventional economic systems, are not guided by religious principles or are divinely inspired. It was developed by Originals such as Joseph Schumpeter, Max Weber, and Adam Smith. This is the fundamental difference between the two systems which then influences how individuals or groups operate and the economic goals they aim for. Check out a more complete explanation of the differences between conventional and Islamic economic systems, as follows:
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 for how an economic system should be organized, based on justice and equality.
Justice cannot be achieved without considering the effects of certain actions on society. Therefore Islam guides and encourages humans to be selfless where the purpose of life is of course not only for 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 accidental.
2. Funding Principles
Islamic economics is based on God’s revelation. Whereas conventional economics does not have a reference in solving economic problems. This reference difference with conventional economics affects its purpose.
Al-Quran as the main reference in all walks of life of Muslims, including in transactional or economic life. Within 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 be accompanied by an increase in productive economic activity.
These two aspects then become the basic principles of the differences between conventional and sharia economics. From this difference, further provisions developed, including matters of contract transactions and many other aspects. Its application later became the form of many current Islamic financial products.