Economic system of The Quran
by Muhammed Abdul Malek

12.1 Introduction: The Qurán prohibits interest (riba) in the strongest terms and therefore the pillar
of an economic system based on the Qurán must be based, not only on the total rejection of interest in all forms, but also away from whatever that bears any resemblance to it. The following verses give some indication of the Quránic requirements:

(2:278) O ye who believe! Observe your duty to Allah, and give up what remaineth (due to you)
from usury, if ye are (in truth) believers.

(2:279) And if ye do not, then be warned of war (against you) from Allah and His messenger. And if ye repent, then ye have your principal (without interest). Wrong not, and ye shall not be wronged.

(3:130) O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe
your duty to Allah, that ye may be successful.

(4:61) And of their taking usury when they were forbidden it, and of their devouring people's wealth by false pretences, We have prepared for those of them who disbelieve a painful doom.

(30:39) That which ye give in usury in order that it may increase on (other) people's property hath
no increase with Allah; but that which ye 'invest as Zakat', seeking Allah's Countenance, hath
increase manifold.

Note: In verse (30:39) the phrase "invest in Zakat" has been used in place of the traditional
translation "give in charity". Section 12.33 gives the reasons for this.

Today, most modern economy is based on interest to such an extent that it is difficult to imagine any
economic activity where interest is not involved directly or indirectly. Many Muslims have attempted to resolve this contradiction between what the Qurán demands and that of a modern economy, but as yet no viable system has been developed. The so called Islamic countries which shook off the yoke of colonialism have remained intellectually and economically controlled from outside, and therefore, any suggested economic system cannot be implemented and tested without the prior establishment of a true Islamic State (see chapter 16). In fact, during the early years of Islam i.e. the first few hundred years, when the Qurán was the only source of guidance for the Muslims, an economic system based on the Qurán was well established, and without doubt this would have flourished with time, if only the Muslims had not deviated from the Qur'an, and thereby lost their status as world power. The vacuum was filled in by the West which, as we see today, has an economy largely based on interest.

The basis of the ideal economic system is in the Qur'an. However, the Qurán gives the fundamental principles and leaves the details to be filled in by human beings according to the need of the society, but at no stage of their experience, the human beings must transgress the fundamental limits set up by The Creator.

12.2 The Present Day's Global Economic Control:

The following section (12.21) speaks for itself with quotations taken from an article named, "Islam:
Taking root in Europe", by Sahib Mustaqim Bleher. The next section (12.22) includes a part of an
article published in the Guardian of 9th Jan. '87. by F. Clairmonte and J. Cavanagh, on the
unprecedented debt crisis facing the Third World, preceded with my own comments.

12.21: " As every ideology has its basic under-lying philosophy (capitalism emphasising the
individual free will, communism equating the value of man with his productive capacity, modern
indifference stressing the relativity of everything), I think the basic philosophical notion of Islam is
balance. When Allah created the world, everything was in its right place. Through the interaction of
numerous entities and forces in the world, this order was continuously being disturbed, and the
balance was being lost, unless and until this imbalance was being redressed, and humanity returned
onto the right, straight and even path. This principle can be applied to all spheres of human experience. The over-rating of material advancement, has stifled spiritual advancement; as a consequence, uncontrolled pollution has disturbed ecological equilibrium; greed has produced a world of contrasts through an unfair distribution of resource; the world's leading societies' careless comfort has brought war to the doorsteps of countless nations. In all these examples the visible imbalance can be equated with the injustice of some towards others. To restore the balance inivitably means fighting injustice. Islam, therefore, can never be a mere private religion practised inhomes and monasteries. If it is not political, it is not Islam.

"The Quráns's account of Pharonic society tells us that human society rests on three pillars: The
social, political and military sphere (represented by Pharao); the economic sphere (represented by
Qaroon/Corah); and the ideological sphere of education, religion and media-propaganda
(represented by Haman). The three are inter-related, and the fight against oppression will remain
unsuccessful, if directed against one without the other two. This is what has happened in the past.
When various bands of nationalism within the Muslim world shook off the yoke of colonialism, the
result was the creation of countries which got rid of foreign political elite, but remained intellectually
and economically controlled from outside. The Islamic revival of various Muslim movements around
the world concentrated exclusively on the spiritual aspects of Islam, the need for the refinement of
the individual's character, and was consequently unable to free anybody from political and economic bondage. Muslim attempts at economic reforms were limited to minor issues, for they did not address the question of political and media control. It seems that most, if not all, the Muslim
movements over the last few centuries have been fooled by Western divide-and-rule-policy in that
they adopted a dialectical and analytically fragmented approach in their effort, rather than the
holistic approach that Islam demands. Modern materialistic society has such refined mechanisms
of control that its injustice can be passed off as a just cause. Its rejection of divine law and emphasis of individualism renders the individual isolated and helpless against bureaucratic human regulation.

Its media propaganda machine turns falsehood into truth by effectively filtering all available information to a permitted norm as well as twisting the perception of events through classic double-speak. Its ever growing drugs and narcotic industry sedates people to a point where they become indifferent to the suffering of others, unable to relate, unmotivated, and turn all their potential energies for change introversive against themselves. Its political institutions provide justification of the most perverse deeds of injustice by an elaborate process of "decision-making" which effectively rubber stamps any action the elite wishes to take. Its economic system clearly uses the instrument of interest for continuing re-distribution of wealth away from its producers to a small clique of monopolists who have mortgaged the life of almost every individual on earth.

"Present-day global economic control is a marvellous example of how the mind can be made to
believe things that are not real. It started with the early goldsmith's who took peoples valuables for
safe keeping in their vaults. They soon started to realise that none of the depositors ever asked for all the moneys back, but withdrew small portions of it at a time, and they could safely lend other
people's money against interest, as long as they kept enough to meet day-to-day demands. More
than that, they could often get away with lending more than they had, as the recipient of a promissory note would not normally exchange it back into coin, but be happy with a title deed to coinage he thought was kept safely in the goldsmith's vaults. Thus the goldsmiths became the first bankers and gradually, by way of deception, defrauded more and more people out of their hard earned property.

With the wide-spread use of paper money, cheques, plastic cards and electronic money transfers,this business has taken on gigantic proportions, and bankers now control all significant enterprises including governments. As historically the money-lending profession was forbidden to Christians, and still is, or should be, forbidden to Muslims, Jewish families were the first to establish themselves in this business and to date control it almost exclusively. Little surprise, therefore, that Zionism almost always gets its way with governments who find themselves in ever-increasing debt.

"In 1865 Abraham Lincoln stated his monetary policy: Money is the creature of law, and the creation of the original issue of money should be maintained as the exclusive monopoly of national
government. Money possesses no value to the State other than given to it by circulation....
Government should stand behind its currency and credit and the bank deposits of the nation. No
individual should suffer a loss of money through depreciation of inflated currency or bankruptcy.
Government possessing the power to create and issue currency and credit as money .... need not
and should not borrow capital at interest as a means of financing governmental work and public
enterprise". These words need no updating over a hundred years later. But Lincoln was
assassinated, and money-lenders stayed in power. In America this power is exercised by the Federal Reserve which issues the nation's money instead of the government. John F. Kennedy was about to take this right away from them, but then he, too got assassinated. This money-power has upset the balance more than any other means of control. Fertile, self-sufficient countries were plunged into debt and made dependent on outside aid. Yet, the West's income from interest payments is a multiple of Third World Aid dispatched by the West. Only the interest income goes on to the lenders, whereas the aid bill is footed by the people and their governments. Considering that this evil money-power is at the root of some of the worst injustice troubling our planet -- war, pollution, starvation, social disorder --, Muslims should be amongst the first to fight it. Considering that this creation of money out of nothing, this usurpation of wealth by crooked means is almost taking the shape of playing god -- a sign of the Dajjal, the false Messiah --, it should be the most important issue on the Muslim's agenda. For good reason, interest has been forbidden in Islam.

Yet Muslims happily pray in mosques built with interest money, and the so called Islamic banks happily contend themselves with trying to beat the others at the game. Instead of offering a real alternative, they simply change the labels and shamelessly call it fair partnership, when they get half the profits of an entrepreneur's hard labour after lending him some money, which cost them nothing".2

12.22: Unprecedented debt crisis facing the third world: I must turn my attention to some of the
Western nations who pride themselves with their democracy and freedom, and yet their attitudes
and behaviour towards other nations often lack both of these virtues. The reason for this is that the
people who govern these countries can only stay in power by promising a constantly rising standard
of living, which in most cases is achieved by robbing the wealth of the Third World. Most of these
rich nations behave like money sharks. They corrupt the people who rule the Third World countries
by giving huge loans for imports which in most cases the country does not need but accepts under
political pressure. Thus, huge debts are built up under pressure and the political leaders can do very
little to resist, as otherwise they will be liquidated or replaced by people who will again be
subservient to the rich nations. Very often these Third World leaders are pressurised to hand out
contracts to the foreign countries by accepting huge bribes as well as by taking an undisclosed share
of the profits. This has made it impossible for any genuine third world leader, who wants to improve
the well-being of his countrymen, to succeed. If they somehow survive then they are branded as
communist or undemocratic in the press and every possible pressure is put in order to get rid of
them. I would be failing in my duty not to mention about this great exploitation and the tragic
consequences that are bound to follow. The money lending, and the huge interest that is collected,
are crippling these countries. A point has reached where the cumulative interest payments outweigh
the original loan and the debt has become so big that it would be impossible to pay back the original
debts, and so the interest payments will go on forever. The loans are designed so that the money
sharks can go on making money out of the miseries of the Third World. The church seems to have
nothing to say about this global problem. I cannot help but quote a section of an article published in
the Guardian of 9th Jan.'87. by F. Clairmonte and J. Cavanagh on the unprecedented debt crisis
facing the third world. It is almost ten years since the article was published. The condition of third
world countries since then has gone from bad to worse, and the only reason for this, is the
exploitation through the medium of interest payments, which the Qurán forbids in no uncertain
terms.

" The Third World is facing an unprecedented financial crisis, with its debts growing exponentially
whilst its export earnings are plummeting. Gigantic amounts of capital are thus flowing from the poor
to the rich countries. --- The upshot is that in 1981, for the first time in post-war history, Third
World countries have become net capital exporters. In other words their debt service payments
exceeded new borrowing and rescheduling.--- Between 1981 and 1985 net capital export for Latin
America moved from US$0.2 to US$42.4 billion or an 85 fold increase; in Africa from US$5.3
billion to US$21.5 billion, and Asia from US$1.7 billion to US$9.7 billion. These net capital flows
exclude profit repatriations by Third World based transitional companies and capital flights, as well
as Middle East exporters. If these additions were thrown into the scale the aggregate outflows would
not be far short of US$230-240 billion.---This is the sum four times larger than that of Marshall
Plan; and it must be emphasised, Marshall Plan aid was repaid with interest to the United States. In
contrast, this tribute from the poor to the rich countries will not be repaid.--- Aggravating this
terrifying configuration is the direction of the International bank lending which topped US$216 billion
in 1985. The industrial economies, as usual, absorbed almost the totality : US$194 as compared
with US$119 billion in 1984. The underdeveloped took only US$3 billion (1984): a derisory sum
amounting to around 2 per cent of their global interest payments,--- Of vital importance is the role
played by the commodity price forecasts of the World Bank, which simply have no claim to scientific
validity. The World Bank's forecasts of commodity prices were generally higher than the actual price
movements of all the commodities since 1980. The fraudulent nature of these World bank forecasts
-- designed to boost the over-supply of commodities and thus lower prices -- is being recognised by
a growing body of intelligent technocrats in the Third World -- The outcome, like a Greek tragedy, is
ineluctable: Third World countries are literally being driven to market fatter and fatter volumes of
commodities at lower and lower prices on the global market in return for higher priced goods and
service imports.-- In fact, neither can the principal nor the interest ever be repaid. Nor is it desirable
that the debt (interest and principal) should be repaid. Debt repudiation stands out as the only
ethically feasible and rational solution for the Third World".3

I must also say that similar exploitation is suffered by the ordinary people even within the rich
countries. The rules of the game are the same as are applied to the Third World. The newspapers
rarely publicise the enormous suffering that common people undergoes at the hands of money
sharks. The church too is entirely silent on these issues. No wonder, Allah has forbidden usury and
has clearly stated the need to use our surplus wealth for the benefit of humanity rather than to line the
pocket of these money sharks.

12.3 Some important economic concepts used in the Qur'an:

12.31 Charity: (Applicable until the time when Qur'anic Social Order is established).

12.32 Sadaqaat: Payments for fulfilment of certain obligation out of our income, such as out of a
wage, a dividend, a bill etc. Sometimes sadaqaat is also used as a charity.

12.33 Zakat: Payments by way of investment, for the sake of economic development which
essentially aims at making economic gains for the benefit of the society.

12.34 Business dealing and trading.

12.31 Charity: Once the Qur'anic social order is established the need for charity should disappear.
However, during the transitional period, there will always be the need for charity, but Allah likes the
affluent people to pay the charity out of their own wish, and merely by way of expressing gratitude to
The Creator. Following verses explain the concept of charity in a God fearing society:

(2:177) ... And giveth his wealth, for love of Him, to kinsfolk and to orphans and the needy and the
wayfarer and those who ask and to set slaves free.

(76:8) And feed with food the needy wretch, the orphan and the prisoner, for love of Him.

(76:9) (Saying): We feed you, for the sake of Allah only. We wish for no reward nor thanks from
you.

A selfless act to help the needy breeds two obvious elements in the society: firstly, the needy are
helped in material terms which generates a feeling of cohesion in the society, and secondly, the donor
gains a spiritual benefit in that his greed for material effects would get blunted and prevent him from
obstructing the path of the society. Indeed it causes a reversal in the direction of peoples greed when
they come forward to give in charity as a matter of free will, and as an expression of their
gratefulness to The Creator.

12.32 Sadaqaat: Please see the following verses to understand this concept.

(9:60) The Sadaqaat are only for the poor and the needy, and those who collect them, and those
whose hearts are to be reconciled, and to free the captives and the debtors, and for the cause of
Allah, and (for) the wayfarer; a duty imposed by Allah. Allah is Knower, Wise.

(9:103) Take alms of their wealth (Sadaqaat), wherewith thou mayest purify them and mayst make
them grow, and pray for them. Lo thy prayer is an assuagement for them. Allah is Hearer, Knower.

The scheme is simple to understand provided human beings believe that it is on account of the
resources made available by The Creator that the material gains are forthcoming, and a share out of
such gains belong to Allah, and this share is to be spent for the general welfare of the society. As
such the payment as Sadaqaat in verses (9:60) and (9:103) have been termed as "for the cause of
Allah". In simple terms Sadaqaat means the tax paid by the people and businesses of the state
which must then be used for welfare spending. It must be noted that, like many Arabic words having
multiple meanings, Sadaqaat can also mean 'charity', and the meaning applicable in a particular case
depends on the context in which it is used.

(57:18) Lo! those who give Sadaqaat, both men and women, and lend unto Allah a goodly loan, it
will be doubled for them, and theirs will be a rich reward.

Verse (6:141) below explains when this Divine-share is supposed to be paid: on the day of
harvesting. In todays terms, it would mean the taxes that one must pay when one receives the pay.

(6:141) He it is Who produceth gardens trellised and untrellised, and the date-palm, and crops of
divers flavour, and the olive and the pomegranate, like and unlike. Eat ye of the fruit thereof when it
fruiteth, and pay the due thereof upon the harvest day, and be not prodigal. Lo! Allah loveth not the
prodigals.

This Payment for Allah is a payment to the Islamic State for the common welfare. By the same token
payments to the messenger in verses (58:12,13) means payments to the State for the general
welfare, as the messenger is the collector on behalf of the State.

(58:12) O ye who believe! When ye hold conference with the messenger, offer Sadaqaat before
your conference. That is better and purer for you. But if ye cannot find (the wherewithal) then lo!
Allah is Forgiving, Merciful.

(58:13) Fear ye to offer Sadaqaat before your conference? Then when ye do it not and Allah hath
forgiven you, establish worship and invest in Zakat and obey Allah and His messenger. And Allah is
Aware of what ye do.

It is important to note that Allah enjoins on Muslim men to consider marriage payment to their wives
as a duty (4:24), and this payment has been named as 'Sadaqaat': (4:4). In this case Sadaqaat is
not a charity but an obligation which must be paid.

(4:24)... And those of whom ye seek consent (by marrying them), give unto them their portions as
duty. And there is no sin for you in what ye do by mutual agreement after the duty (hath been done).
Lo! Allah is ever Knowing, Wise.

(4:4) And give unto the women (whom ye marry) free gift of their marriage portions (Sadaqaat); but
if they of their own accord remit unto you a part thereof, then ye are welcome to absorb it (in your
wealth).

Mankind must understand the cardinal principle that a peaceful and a solid society would only come
into being when there would prevail a just socio-economic system. In such a system, wealth is like
blood for a human body: blood must continuously circulate throughout the body, and must reach
each and every cell of the body. Only then will the body continue to stay healthy. Hoarding of wealth
is like a thrombosis: an economic system will collapse if hoarding is allowed to permeate in society.
This is why Allah forbids hoarding of wealth as the following verses show.

(9:34)...... Those who hoard up gold and silver and spend it not in the way of Allah, unto them give
tidings (O Muhammad) of a painful doom.

(104:1-4) Woe unto every greedy, arrogant, Who hath gathered wealth (of this world) and arranged
it. He thinketh that his wealth will render him immortal. Nay, but verily he will be flung into the
Consuming one.

In a truly Islamic state there will be security for everybody, and hence any surplus wealth will be
invested, thus avoiding the effect of hoarding. Also Allah lays great stress upon the distribution of
wealth of a deceased person, and the Qurán contains extremely explicit detailed laws of inheritance.
This is a vital scheme whereby the wealth of the nation stays well distributed, and the formations of
cartels are not possible. Unfortunately, muslims devised ways and means to circumvent these vital
economic measures by defining Sadaqaat as voluntary charity and limiting Zakat to 2.5% of
savings and accumulated assets so that the rich could hold on to their wealth. In contrast, the
womens' dowry (i.e the marriage payment from their husbands) in most cases remain as an
unclaimed contract, whereas it should be invested for the women, as the maintenance of a family is
the responsibility of the men. Further, women are often deprived of their inheritance from their
parent's side, inspite of the Qur'ans clear injunction on this.

12.33 Zakat: Literally, Zakat means growth, purification and righteousness. AL-SHAUKANI gives
the following definition: "Linguistically, Zakah means growth: One says Zakahhaz-Zar meaning the
plant grew. It can also mean purification. In Shariah (Islamic law) it implies both meanings. The first
meaning is construed as to cause growth in wealth, or as to cause more reward or as to pertain to
increasing wealth, such as the case in commerce and agriculture".4

(30:39) The usury that is practised to increase some people's wealth, does not gain anything with
Allah. But if you invest in Zakat, seeking Allah's countenance, these are the ones who receive their
reward manifold.

Both Zakat and usury involve the investment of capital in order to seek material gains. But while
Zakat is the method of investment acclaimed by Allah, usury is the method to His total
disliking. The above verse indicates the cardinal principle that the material gains resulting from the
practice of usury are no gains with Allah, whereas the gains, resulting from the practice of Zakat,
receives "Allah's blessing". Instead of following the straight interpretation, the Traditionalists went into
the direction of linking Zakat with verses (9:60) and (9:103) which are related to Sadaqaat, and
extracted the meanings of charity collections to be introduced by the State. They went so far as to fix
the yardsticks for such charity collections, and to attribute the emergence of this practice to the
Messenger of Allah. It is unimaginable that the Messenger of Allah would have introduced an
economic system, whereby extracting 2.5% of the otherwise ill grown wealth would render it 'pure'!
After having examined that Zakat is something different from what had been ordained in verses
(9:60) and (9:103), we come to verse (2:177) which indicates that even after spending in charity, out
of own volition, there is something called 'Zakat' which will still be outstanding. Verse (22:41)
ordains that the true believers are those who, when allowed power and influence, establish a system
of 'Zakat' in their way of life.

(22:41) Those who, if We give them power in the land, establish worship and invest in Zakat and
enjoin kindness and forbid iniquity. And Allah's is the sequel of events.

Verse (22:78) further confirms this Ordainment.

(22:78)..... So establish worship, invest in Zakat, and hold fast to Allah. He is your protecting
Friend. A blessed Patron and a blessed Helper !

Without quoting any more verses let me give the reference numbers of verses which deal with Zakat
directly. They are: (2:43, 83,110,177, 277), (4:162), (5:12), (7:156), (9:5,11,18,71), (21:73),
(22:41,78), (24:37,56), (27:3), (31:4), (33:33), (41:7).

Zakat prevents hoarding of money and causes the wealth to grow so that people can earn
their living instead of depending on charity. Another way of looking at Zakat is that if the spare
cash is simply given away in charity then in the long run the person may not be able to give in charity
but may himself become dependant on charity, due to his circumstances changing. However, if
Zakat is used as an investment for growth then one can still live a modest life, and help the society in
creating employment, so that the people do not need to depend on charity. At the same time the
question of hoarding is removed. Zakat as an investment therefore fulfils many of the Qur'anic
requirements.

Note: There are verses in the Qur'an in which the word 'Sabeelillah' appears. For example:

(2:261) The likeness of those who spend their wealth in Allah's way (Sabeelillah) is as the likeness
of a grain which groweth seven ears, in every ear a hundred grains. Allah giveth manifold to whom
He will. Allah is All-Embracing, All-Knowing.

The literal meaning of Sabeelillah is 'Allah's Path'. Traditionalists considers this synonymous with
charity, even though in the whole of the Qurán this word has never been used in that meaning.
Effectively it means spending freely: money, time, wealth or anything, in the path of Allah.

12.34 Business dealings (Baiy) and Trading (Tejarat)

Business dealings and trading are two different practices as indicated in the following verses:

(24:37) Such people as remember Allah while Trading or making Baiy....

The nearest concept of 'Baiy' in this verse is business dealing when it pertains to the dealings with
money where the exchange of commodity is not involved. Outwardly, it would look similar to the
practice of usury but with a subtle and vital difference, and only then the wording of following verse
makes sense.

(2:275).... They say 'Baiy' is just like usury: whereas Allah permitteth 'Baiy' and forbiddeth usury. ....

As an example a model of money lending based on 'Baiy' would be that profits and losses would be
shared equitably. Alternatively to repay the loan in such a way that it retained its original purchasing
power. There could be no question of repaying in devalued money. In contrast money lending based
on 'Usury', where money is put on an agreed rate of interest, would be independent of whether the
borrower makes a profit or loss out of the lent money.

Verse (2:282) below clarifies that 'Baiy' is essentially a practice of mutual agreement designed to last
over a period of time, and therefore must be signed and witnessed. Trading on the other hand may
be for long term or across the table, where a commodity is exchanged for money. It excludes the
practice of money dealing, without involvement of commodities.

(2:282) O ye who believe! When ye contract a debt for a fixed term, record it in writing.....And call
to witness, from among your men, two witnesses....

12.4 Quránic Scheme of Economics summerised:5

1. Free enterprise and right to personal holdings but in a rightful way (as the above sections
explained).

2. Lending or borrowing of money on fixed interest is forbidden. Usury in any form is not allowed.

3. Usury to be replaced by Zakat. Money to be invested freely, either directly or through the
intermediaries known as 'Bait-ul-Mals' (banks); and to share profits and losses of the institution
where money is lent. Other clerical services like transfers, letter of credits, licensing should be
performed on the tariff to be approved by the Government.

4. Individuals pay in charity in the manner as ordained in the Qurán (see12.31). and must maintain
the institution of free-will and a free sum of money: Qurán has a depth of reasons not to fix a
percentage. It is different from person to person and from time to time: What is needed is the
process of reversal of greed.

5. State would take by way of taxes from the society with the primary intention to remove excess
and to redistribute wealth for general welfare (see 12.32)

6. No one should be able to sell something he hadn't already bought or paid for. It would not be
possible to speculate in 'futures' as men do in the West, without ever owning the goods. Men make
fortunes in the city of London by financial transactions which would be strictly forbidden by Islamic
Law.

7. Fresh money will only come into circulation when goods and services of the corresponding value
shall have been inducted into the society. This will effectively check price spirals, inflation, collapse of
currencies etc. Distribution of fresh money coming into circulation will be on mutually agreed basis
between the society members.

9. An air of confidence would emerge so that people will come forward willingly, and make
investments. (see 12.33)

An economic system based on the Qur'anic Principles of an equitable society and
productive investment can remove many of the economic illnesses suffered by modern
society.