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Islamic Economy

The Prophet (s): It is not allowed to do harm, nor to be harmed.

Issue to be discussed The state of economy after 60 years The role of the government
Governments

proactive Fiscal Policy Eradication of Zulm Concept of Taxation in Islam Bait-ul-Maal Subsidy Powerhouse Inflation control Pro-employment policies Pro-development policies Monetary policies

Important Hadith

(Bukhari-vol3,book 43 Hadith # 655)

Narrated Abu Huraira : The Prophet (s) said, "When an adulterer commits illegal sexual intercourse, then he is not a believer at the time, he is doing it, and when a drinker of an alcoholic liquor drinks it, then he is not a believer at the time of drinking it, and when a thief steals, then he is not a believer at the time of stealing, and when a robber robs, and the people look

The state of economy after 60 years Islamic Republic of Pakistan

The state of economy after 60 years Islamic Republic of Pakistan

The state of economy after 60 years Islamic Republic of Pakistan

The state of economy after 60 years Islamic Republic of Pakistan

The state of economy after 60 years Islamic Republic of Pakistan

The state of economy after 60 years Islamic Republic of Pakistan

what problem ?

The state of people after 60 years

The solution ?

Progress primarily because of the technological era in which we live!

What the Quran DECLARES (4:59):

Ayah Verily! Allah commands that you must ignored render back the trusts to those, for to whom they are due; and that when you judge betweencenturies! men,
you judge with justice. Verily, how excellent is the teaching which He (Allah) gives you! Truly, Allah is Ever All-Hearer,

Establishment of Justice

Governments Role

To provide & facilitate in the peoples interest, as ordered by ALLAH Build economic environment Provide ALL kinds of safety Implement Shariah with enforcement !

Seek the Help & Guidance of ALLAAH


Responsibility must be answered for!

Leader Status!
It has been narrated on the authority of Abu Malik that Ubaidullah b. Ziyad visited Ma'qil b. Yaser in the latter's illness. Ma'qil said to him: I am narrating to you a tradition. If I were not at death's door, I would not narrate it to you. I heard the Messenger of Allah (may peace he upon him) say:

A ruler who, having obtained control over the affairs of the Muslims, does not strive for their betterment and does not serve them sincerely shall not enter Paradise with them.
(Sahih Muslim, Hadith # 4502) Abu Nasr Al-Farabi said:

Ignorance is more harmful in monarchs than it is in the common people.

Common Government Satanic Practices


All injustices in the name of ISLAM Intention: to please other than ALLAH Excessive taxes & inefficiencies

Excessive luxuries/protocols
Blatant ignorance

MUST lead with best example !

Leaders right to always rule = BEST Decision


Criticism intolerable = Punishable !

Ministerial privileges in Pakistan

Approximately 96 ministers Rps 100,000 monthly mobile balance 25 monthly air tickets only

Annual Expenditure for only 2 allowances ONLY


Rps 100,000 x 12 = 1,200,000 25 air tickets x Rps 20,000 x 12 = 6,000,000 1,200,000+ 6,000,000 = 7,200,000

What about other judges, 7,200,000 x 96 ministers = technocrats, dignitaries, 691,200,000 ambassadors, generals, ~ Rps 70 Crore governors, beaurocrats, &

Good Governance Example


Saheeh Muslim (Book 20, Number 4494):

Abd al-Rahman bin Shumasa who said: I came to A'isha to inquire something from her. She said: From which people are you?
I said: I am from the people of Egypt. She said: What was the behaviour of your governor towards you in this war of yours? I said: We did not experience anything bad from

Good Governance Example (contd)


If the camel of a man from us died, he would bestow on him a camel. If any one of us lost his slave, he would give him a slave. If anybody was in need of the basic necessities of life, he would provide them with provisions. She said: Behold! the treatment that was meted out to my brother, Muhammad bin Abu Bakr, does not prevent me from telling you what I heard from the Messenger of Allah (may peace be upon him). He said in this house of mine: O God, who (happens to) acquire some kind of control over the affairs of

Pro-active Governance

20% direct influence on economy (C+I+G+[X-M])

Maximize GDP
Pro-competition Anti-Monopoly

Compare Pakistan & Japan

Enhancing productivity & efficiency

What should the tax rate be ?

Erradication of Zulm - Injustice

Eradication of all un-islamic practices & injustices Lawful dealings only (ban all Satanic trades) Avoidance of Gharar (uncertainties) Eliminating hoarding, shortage, monopolies Cheating & fraud totally unacceptable

Taxation in ISLAM
100% 0%

taxation ?

Zakat is not What should the tax rate be ? tax


What The

taxation ?

should tax revenue be used on ?

more the tax, the more the inefficiencies, corruption, luxuries & protocols

Hadeeth on Taxation
The Prophet (s) said: He who imposes maks [Sales Tax] will Not enter paradise.
(Ahmed & Ad-Darmi)

Uqbah ibn Amir heard the Prophet (s) say: One who wrongfully takes an extra tax (sahib maks) will not enter Paradise.
(Sahih Muslim, Hadith # 2931)

Hadeeth on Taxation
The Prophet (s) said: When someone offers an excuse to his fellow Muslim and the later does not accept it, his sin sin is like the crime of imposing taxes.
(Ibn-e-Majah)

Limitation on Dhimmi Tax


Narrated 'Amr bin Maimun (r): Umar-r (after he was stabbed), instructed (his would-besuccessor) saying:

"I urge him (i.e. the new Caliph) to take care of those non-Muslims who are under the protection of Allah and His Apostle in that he should observe the convention agreed upon with them, and fight on their behalf (to secure their safety) and he should not over-tax them beyond their capability."
(Saheeh Bukhari, Book #52, Hadith #287)

Result of taxation & high government spending

Bankrupcy (Chapter 9) filed by 3 Californian Cities (2012, in 1 month):


Stockton
Mammoth

Lakes San Bernadinio


(http://www.bbc.co.uk/news/world-us-canada19089970)

Only a few taxes in Islamic Republic of Pakistan Income tax CVT General Sales VAT Tax CST Service Tax Octori Fuel TDS Adjustment ESI Charges EoBI Petrol Levy CGT Excise Duty STT Customs Duty Dhal Property Tax Fees Stamp Duty Local Cess Aabiana Local Cess

In addition to Water Tax other Professional important Tax taxes Road Tax Education Cess Wealth Tax Tax on tax Capital Gain Tax Congestion Levy Compulsory Deduction Minimum turnover tax

Atleast we any enjoy tax joke, untaxed!

Bait-ul-Maal Subsidy Power House

Subsidy is an integral component

Strategic use of subsidies


Subsidy on core consumer items Effect of subsidy on technology

Receivers of Zakat
Poor Needy Travelers To

reconcile hearts towards islam (Dawah) To spread Islam (Jihad) Collectors of Zakat Freeing slaves Debtors

Sadaqah-Charity
A

religious obligation changing humanities attitude towards the have-nots concept of saving = Sharing ? concept of wealth

The

The

Hadeeth: Sadaqah-Charity
The best charity is to satisfy a hungry person.

No wealth (of a servant of Allah) is decreased because of charity.


(At-Tirmidhi, hadeeth # 2247)

How can a tax-free, subsidy-based economy survive ?


By

efficient management of natural resources (oil, gas, chromite, marble, precious stones, etc)
no natural resources, must be creative & innovative (Coke/Pakola, medicine, handicraft, hand made wonders, etc)

If

How can a tax-free, subsidy-based economy survive ?


By

efficient management of natural resources Creative & innovative Zakat & Sadaqah Jizyia Ushr & Kharaj Anfal & Fai Mudarbah & Musharikah When all the above are available, is

Pro-employment & Pro-investment

Problem of unemployment, over-employment, & national inefficiency Converting population into skilled-labour

Nurturing & retaining human capital


Investment in infrastructure -> Nation building Real investment in evolving military assets

Man will have nothing but what he strives for;


(Sourah An-Najm, verse 39)

U$ Gun Law!

Learning a lesson from Qaroon


Surely Qaroon was of the people of Musa, But he oppressed them; And we gave him so much treasure that his hoards of wealth would certainly weigh down a company of men possessed of great strength. When his people said to him: Do not rejoice exultantly, surely Allah does not love the exultant.
(Sourah ?, verse ?)

Land development
Hadhrat Aisha (r) reported that the Prophet (s) said: Whoever colonizes a land which does not belong to another, has the better right to keep it. Urwa Bin Zubair (r) states tha Hadhrat Umar (r) acted upon the same rule during his reign.
(Bukhari, Muslim & Nisai)

Public interest
Abdullah bin Abbas (r) reported that the Prophet (s) said: All Muslims are partners in 3 things: 1. In water, 2. Herbage and 3. Fire
(Abu Dawoud & Ibn Majah)

Abu Hurairah (r) reported that the Prophet (s) said: Dont withhold excess water so as to prevent therwith (the growth of) additional herbage.

Reserved Public interest abolished!


Abdullah bin Abbas (r) reported that Saad bin Jassamah heard the Prophet (s) say: There is no HIMA, except for Allah and His Prophet.:
(Bukhari)

Hima is a grass land with water which preIslamic Arabs used to reserve for their own cattle 7 animals.

Monetary policy ANTI-inflation

Biggest

note ? Interest rate ? Restrict money supply Investment in real industry

DEFLATION ??
Which is more powerful Fiscal or Monetary?

The Nominal Interest Rate and the Inflation Rate


Percent (per year) 15 12

Nominal interest rate

Inflation 3

1960

1965

1970

1975

1980

1985

1990

1995

2000

Copyright 2004 South-Western

Nominal GDP, the Quantity of Money, and the Velocity of Money


Indexes (1960 = 100) 2,000 Nominal GDP 1,500

1,000

M2

500

Velocity
0

1960

1965

1970

1975

1980

1985

1990

1995

2000

Copyright 2004 South-Western

Recent episodes of hyperinflation


10000

1000
percent growth

100

10

Israel 1983-85

Poland 1989-90

Brazil Argentina Peru Nicaragua Bolivia 1987-94 1988-90 1988-90 1987-91 1984-85

inflation

growth of money supply

Money Supply, Money Demand, and the Equilibrium Price Level


Value of Money, 1 /P (High) 1 Money supply Price Level, P 1 (Low)

/4

1.33

12

Equilibrium value of money

Equilibrium price level


14

4 Money demand

(Low)

Quantity fixed by the Fed

Quantity of Money

(High)

The Effects of Monetary Injection


Value of Money, 1 /P (High) 1 1. An increase in the money supply . . . A Price Level, P

MS1

MS2

(Low)

2. . . . decreases the value of money . . .

/4

1.33 3. . . . and increases the price level.

12

14

B Money demand

(Low) 0
M1 M2

(High)

Quantity of Money

How did U$ get out of the Great Depression?

Isnt this market crash situation Severe drought High unemployment (30%) similar to the High Inflation current Social unrest Pakistani Increase in organized crime economic Fear of spreading communism disaster ? Dwindling economy Capital flight Banking system failed
Stock

Pro-Active Fiscal & Monetary Policy


Maximizing GDP (Investment, Production, Export), Minimize government spending on luxuries Tax rate ~ ZERO Real use of Bait-ul-Maal (Zakah Fund, Sadaqah Funds, resource harvesting/mining) Subsidization of all core consumer items (wheat, rice, sugar, petrol, gas, electricity, cement, plastic, metal, wood, etc) Education 100% FARD Transforming population into labor force Widely dispersed vocational training institutes, avoid non-sense industries Nurturing & retain human capital Promote permanent residency (only temporary travel) Curb capital flight, pro-investment Strategic employment Pro-competition, anti-monopoly Build infrastructure (roads, electricity, gas, water, education, health, etc)

Economic Roadma

Household budget-Rps8000 for a family of 4 adults & 3 children

Meat (6kg x 125) 800 Chicken (6kg x 80) 480 Beef (6kg x 80) Fish (6kg x 40) Pulses (7kg x 30) 210 Vegetables (40kg x 9) Fruits (18kg x 10) 180 Rice (30kg x 30) 900 Wheat (30kg x 20) 600 Sugar (7kg x 18) 126 Spices (3.5Kg x 40) 140 Milk (30ltrs x 10)

480 240

360

Rent 1,000 Transportation 150 Water 20 Electricity 170 Gas 80 A balanced budget, Phone 40 in an economy School fees 240 accommodating the Medicine 10 poorest! Books 40 This is only 1 fruit of Clothing 100 adopting the Shariah! Cleaning 80 Entertainment 50 This would cost more than Toys 25 Rps 60,000 in todays manDurable goods 200 made, interest-based, taxEmergency 100 based, pro-democratic, corrupt economy! Saving 100 Miscellaneous 100 More than 60% of Other 86 Pakistani today dont earn Total 8,000 more than Rps 178/day!

How ?is it possible ?


Elimination of taxes Introduction of subsidies on core consumer items Elimination of interest Promoting competition, eliminating monopolies Elimination of profiteering Bigger question Eliminating luxuries & protocol ofit happen? will government officials Abu Nasr Al-Farabi said: Exporting of excess production Obedience is Extraction of natural resources freedom, Boost investment While coercion is Strategic use of Baitul-Maal (zakat, slavery

Will lead to:


Economic stability Controlled inflation, even deflation in some cases Elimination of poverty Economic growth Self sufficiency A super power house

Case study: Libya Under Ghadafi Rule (only a partial Islamic System)
Banks state owned, giving 0% interest Free electricity Newly wed given $50,000 (60,000 dinar) to start Mother get $ 5,000 for new born Free Education (otherwise $ 2,300/monthly for abroad) Free Health (otherwise $ 2,300/monthly for abroad) 83% literacy (25% university graduates) Farmers given all for free: land, house, fertilizer, seeds, equipment Pertrol price $0.14/liter (Rps 12.5/liter) 0 national debt Foreign exchange researve : $ 150 billion Percentage of oil sale given to all Libyans in their accounts

Islamic Economic may have similarities, but is different from:


Keynesian Chicago Mercantile

As a whole it is: Divine Unique Comprehensive Flexible Well balanced

20th Century Economists define Islamic Economics (Hasan-uz-Zaman)

Islamic Economics: is the knowledge, application of injunctions & rules of the Islamic Jurisprudence that prevent injustice in the gaining & disposal of material resources in order to provide satisfaction to human beings & enable them to perform their obligations to Allah & the society.

Muslim contribution for Economics

Ibn Khaldun is accepted as the father of Economics of all times, even by Adam Smith; Ibn Khalduns economics is based on these 4 fundamental Islamic principles: All wealth belongs to Almighty Allah. Man is the trustee of wealth. Hoarding of wealth is prohibited. Wealth must be in circulation at all

Islamic Economy Objective

Islamic economics aims at the study of human recovery achieved by organizing the resources of the earth on the basis of cooperation & participation.

Islamic Economy Salient Nature


The

pure divine is a world apart for the man made, error prone, plagued with interest group maneuvering Combine law with the spiritual (& moral obligation) This translates into be will obedience & compliance

Pakistans vital role in the global polito-economic quagmire

Trade creates surplus Unlike

RIBA, trade creates surplus (money) Compare with RIBA example:


Riba-free loan Raw->supply Sajid 1,000 Fishes Earning profit to pay Navid 1,000 Farms interest-free loan Farid 1,000 Fruit Jam

Convention Economics & Politicians

Lessons from history

Establishment of shariah Fardh!


O you who believe! Stand-up firmly by the Commands of Allah, Bearing witness with justice and let not the enmity of any people incite you that you should not do justice.

Do justice, that is nearer to piety, and fear Allah; Undoubtedly , Allah is aware of your doings. (Sourah Al-Maidah, ayah # 8)

Future of Islamic Economy


All

other economies have failed!

No

economy has performed as stated theoretically made economies have evolved, adapted and failed economy has always succeeded when applied

Human

Islamic

Future of Islamic Economy

Allah has promised those among you who believe, and do righteous good deeds, that He will certainly grant them succession to (the present rulers) in the earth, as He granted it to those before them, and that He will grant them the authority to practise that which He has chosen for them (i.e. Islam). And He will surely give them in exchange a safe sec after their fear (provided) they (believers) worship Me and do not associate anything (in worsh But whoever disbelieved after this, they are the Fasiqun (rebellious, disobedient to Alla (Sourah Nour, ayah # 55)

Future of Islamic Economy

Abd-Allaah bin Masud (r) reported the Prophet (s) as

If only one day of this world remained, Allaah would lengthen that day (according to the version of Za'idah), till He raised up in it a man who belongs to me or to my family whose father's name is the same as my

who will fill the earth with equity and just as it has been filled with oppression and
(according to the version of Fitr).
Musnad Ahmed:(1/448) & (1/376/377). Also authenticated by Dr Bastawi in Al-Mahdi Al-Muntadhar, page Abu Dawoud: Kitab Al-Mahdi, volume 3, page 1191, hadeeth # 4269.

Tirmidhi: Authenticated (judged Sahih) in Sahih At-Tirmithee (4/505), hadeeth # 1819.

Future of Islamic Economy


Mattar narrates:
We have been told that Mahdi will make something that Omar bin Abdul-Aziz did not do. We asked: What is it ? He said: A man will come to him and ask him (to give him), then he will say: Go inside (cashier) and take. He will go inside and take. Then he will go out and see people not hungry (satisfied) then he will become sorry (feel guilty) and come back to him and say: Take what you gave me.

He will reject and say: We give and dont take. Mattar is a follower of the followers (Tabi Al-Tabiyeen).
Al-Fitan (99), and Al Waredah fi Al-Fitan (5/1064), # 585. Authenticated by Dr Bastawi in Al-Mahdi Al-Muntadhar, page 226, # 18. Conclusion: Isnad are saheeh.

Future of Islamic Economy


Dr Muhammad Al-Tijani Al-Samawi:

Al-Imam Muhammad ibn Al-Hasan Al-Mahdi, who will fill the earth with justice and equality as it has been filled with injustice and despotism, behind whom Maryams son (Jesus will pray, and by whom Allaah will perfect His light and the believers w

Quoted from Al-Samawi, Dr Muhammad Al-Tijani. Translator Hasan Muhammad Najafi. The Shia:The Real Followers of the Sunnah (Ash-Shia Hum Ahlul-Sunnait. Ansariyan Publications, Iran

Future of Islamic Economy


Abu Hurairah (r) reported the Prophet (s) as saying: There is no prophet between me and him, that is, Esa. He will descend (to the earth).When you see him, recognize him: a man of medium height, reddish (fair), wearing two yellow garments, looking as if drops were falling down from his head though it will not be [1] [2] [3] [4] [5] He will fight the people for the cause of Islam. He will break the cross, kill swine, and abolish Jizyah. Allaah will perish all religions except Islam.

He will destroy the Antichrist and will live on the earth for forty ye The Muslims will pray over him.

Abu Dawoud: Kitab Al-Malahim, volume 3, page 1202, hadeeth # 4310.

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