Poverty alleviation through Islamic economy
Thursday, 13 May 2010
Hafizul Islam Mia
The importance of economics, which is a social science that studies the production, distribution, business and trade, consumption of goods and services and eradication of poverty, cannot be undermined. This very importance of economics resulted in emergence of different economic systems in the world and all those economic systems claim that they will bring back economic welfare. Today it is the reality that those prominent and dominating economic systems failed to accomplish economic justice, prosperity, eradiation of oppression, inequality and poverty from the society. Hence it is necessary to introduce an alternative economic system which can successfully make a poverty and starvation free and prosperous world.
Poverty is treated as one of the main concerns of modern world, the eradication of which is still a long way to achieve. The economic systems like capitalism and communism have presented number of instruments for the alleviation of the poverty from the society. But these extreme ideologies failed to satisfy the purpose of eradicating or alleviating poverty from the world. Private ownership of property, laissez-faire policy of capitalism and class war, dialectical materialism, state ownership of property of communism failed to touch the real cause of poverty. This situation necessitates seeking the possibilities of Islamic economics in alleviating poverty.
Social scientists have developed various definitions of economics. Lionel Robinson's scarcity definition of economics is most accepted amongst them. According to Robinson, economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses. This definition is based on two points which are scarcity of resources and the never ending needs. But in reality former is a myth. The survey conducted by UNO shows that there are enough resources for 20000 million people on earth and we have only 6000 million people on earth residing now. Latter point never ending needs is also incorrect as the desire and greed of the man is unlimited but the need is limited, countable and controllable.
As a system of life Islam has not left any area of human life without guidance. Whether it is economical, social, political, spiritual or individual, Islam gives specific and clear guidelines. By considering the guidelines of Islamic sources, Islamic economists have developed plethora of definitions. Derivation of each definition of Islamic economics is based on guidance given in the basic sources of Islamic Shariah, which are Quran and hadith.
According to Yusuf Ibrahim, professor of Islamic Economics, Qatar University, "Islamic Economics is a science studying the guidance of the human behavior towards the use of resources to satisfy the needs." This definition is based upon the following reality:
1. The resources are enough for satisfying the needs;
2. These resources should be protected from the waste, and improper use;
3. The human behavior towards the resources should be controlled by divine injunctions;
4. Only legal needs, needs that build life on the earth, should be satisfied;
5. Illegal needs (desires), which destroy life on earth, should not be satisfied; they are never ending and never satisfied.
Islamic economic system, a normative economic system, has been built upon certain fundamental Islamic philosophies. According to Quranic teachings real and absolute ownership of the wealth belongs to Almighty Allah. Quran says, "Allah belongs to everything in the sky and on the earth" (2:284). Role of the man is considered as trustee who is to manage the trust, i.e. wealth according to the directives of the real owner; Allah. Quran clearly states, "Spend of that where of hath made you trustees" (57:7). So Allah has granted conditional and limited ownership to human beings.
Another Islamic philosophy is universal brotherhood and equality of men as their creator is one and parents are same. Hence distinction based on color, caste, creed, races do not suffer at any cost. This concept induces the people for cooperation and participation in their all efforts instead of cheating, exploiting and making fraud each other. Another aspect of Islamic philosophy is the faith in the Day of Judgment after death. In the life after death man is accountable for his deeds on earth. The implication of this faith is that economic choices one makes in the world are to be judged according to the norms Allah has laid down.
These are the judging points which differentiate Islamic economics from the liberal, capitalistic, imperialistic, mainstream economic system and communist, class war, state dictatorship economic system. Islam constructs a just world on the spirit of everlasting divine concepts.
The Islamic economic system is a structure as taught by The Holy Qur'an and Sunnah of the Prophet (PBUH), which is capable of solving the economic problems being faced by the world today. Benefits of this system, which combine the benefits of both communism and capitalism, are: i) Private ownership and market economy; ii) Profit motive; iii) Justice in distribution and consumption; iv) Elimination of inequities.
These benefits are related to the methods of poverty reduction. Economic growth is possible with private ownership; aid or charity can be a symbol of justice in distribution, which may eliminate inequities also.
Islamic economic system not only allows the market forces of demand and supply but also provides mechanism to keep them operative with their natural momentum without creating monopolies and concentration of wealth.
It is known that production, consumption and distribution are three basic functions of economics. Islam, which teaches justice and equality, clearly puts these functions as follows:
Production function:
i. Demand/supply of prohibited goods should fall to zero; ii. Production of luxury goods is checked; iii. Producers should not maximize profits; iv. Competition among producers should be healthy.
Consumption function:
i. Prohibited goods cannot be consumed; ii. Consumption can not be extravagant; iii. Consumption should lead to an efficient and pure life;
iv. Every individual should consume enough goods to lead a reasonable life.
Distribution function:
i. Prices should be reasonable, neither too high nor low; ii. Interest must not be paid; iii. Wealth concentration should be avoided.
These basic functions also provide a welfare approach of Islamic economy, which help in alleviating poverty. This system gives an opportunity to persons with lesser income to live a reasonably dignified life.
Poverty is an economic condition of lacking basic necessities needed to live on a reasonable standard of life. These include need for money, food, water, education, clothing, health care, shelter, etc.
Poverty is evil in any society. The presence of begging hands in a society pulls that society and economy into decades back. Poverty amidst plenty is the challenge faced in the modern world. Impact of the poverty cannot confine into starvation only, but poor people, apart from starvation, suffering limited income which leads to inaccessibility of basic necessities of life. For example, absence of good education disables them for challenging careers which requires a good number of years education. Deprivation from health care drags poor people towards further distressness and poverty. Absence of nutritious food results in more child morality among deprived sections.
Poverty and Islamic Economy
Starvation and inaccessibility of food, shelter, cloths and education could not suffer in an Islamic economy, which aims at ensuring human falah, i.e. human welfare. It does not support any economic instrument that leads to the deprivation of the man. Since poverty emerges in an economy as a result of various causes, so wiping out of these causes is the primary responsibility of the Islamic government.
Limited income, unequal distribution of income and wealth, misdistribution of resources, regional disparities, unemployment, social injustice, and decreased investments, etc, are some of the obstacles in the way of attainment of self-sufficiency and welfare and alleviation of poverty. Islam considers the fulfillment of basic needs of every member of society is economic, moral as well as religious obligation of the ruler. List of the basic goods extends from resources like money, traditional food, education, health, clothing and shelter to seasonal clothing, personal attendant to disabled person, and expenditure on marriage of poor and expenditure on entire family of poor. Islamic economic system introduces a set of divinely guided instruments which bring an end to poverty and build a starvation-free world.
Islamic Economic
instruments to
alleviate poverty
It is advised to Muslim citizens in an Islamic county, as the part of belief to practice certain things in their life, some of them are compulsory nature and the rest are voluntary nature. The practice of these will have vast economic implications apart from the reward of Allah. In addition to these functions there are other things the Islamic state has to carry out similar to any nation does for the welfare of citizens. Both positive and prohibitive/negative measures have been recommended by Islam for wiping out the reason of poverty.
The Islamic economics' positive instruments to alleviate poverty are zakat, sadaqa/ donations, qard-al-hasan, goodly loan to Allah, Corporate social responsibility (CSR), wakf, ganima and fay, kharaj, state ownership on uncultivated land and natural resources, mudaraba, musharaka, etc. On the other hand, the negative instruments are prohibition of interest, hoarding, speculation, abolition of extravaganza, and many other things. Influence of Islamic economic instruments on marginal propensity to consume, multiplier, price, investment and production are also important in alleviating poverty.
Positive Measures/ Instruments
There are numerous Islamic orders and injunction to perform certain things which have immense influence on economies justice, prosperity and growth. Important divine injunctions amongst them and their influence upon the economy are briefed below:
Zakat: Zakat is the yearly obligation of wealthy Muslims to poor and it is the share of poor in the property and wealth of the rich. Quran commends establish worship and pay the poor his due (zakat) and obey the messenger. Scientifically we can call it as spiritual tax. It is imposed on those forms of wealth which have the capacity to grow in value or otherwise produce further, is having the custody of whole year and have exceeded a certain minimum value called nisab.
Quran has stated the eight specific heads for the distribution of zakat. Due to the divine spirit for the performance of zakat, chances for evasion are less. The imposition of zakat on idle wealth urges the owners for the productive and profitable employment of idle wealth, which increases the wealth of economy and again the share of zakat.
Zakat plays very important role in the socio-economic life of not only the Muslim Ummah, but also other poor people. It is the corner-stone of the financial structure of the Islamic state. Zakat not only provides the required funds to Islamic state for its welfare activities in sectors like education, health and social services but also enables it to discharge its obligations regarding its poor and deprived citizens. It prevents the concentration of economic power in the hands of few and ensures fair and equitable distribution of wealth. It checks growing income disparities and bridges the gap between the rich and the poor. Thus its distribution aspect brings about social justice in the society and protects the community from bloody revolutions and political upheavals which are generally the result of ever growing disparities between the rich and poor and distressed.
The writer is a director, Islami Bank Bangladesh Limited
The importance of economics, which is a social science that studies the production, distribution, business and trade, consumption of goods and services and eradication of poverty, cannot be undermined. This very importance of economics resulted in emergence of different economic systems in the world and all those economic systems claim that they will bring back economic welfare. Today it is the reality that those prominent and dominating economic systems failed to accomplish economic justice, prosperity, eradiation of oppression, inequality and poverty from the society. Hence it is necessary to introduce an alternative economic system which can successfully make a poverty and starvation free and prosperous world.
Poverty is treated as one of the main concerns of modern world, the eradication of which is still a long way to achieve. The economic systems like capitalism and communism have presented number of instruments for the alleviation of the poverty from the society. But these extreme ideologies failed to satisfy the purpose of eradicating or alleviating poverty from the world. Private ownership of property, laissez-faire policy of capitalism and class war, dialectical materialism, state ownership of property of communism failed to touch the real cause of poverty. This situation necessitates seeking the possibilities of Islamic economics in alleviating poverty.
Social scientists have developed various definitions of economics. Lionel Robinson's scarcity definition of economics is most accepted amongst them. According to Robinson, economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses. This definition is based on two points which are scarcity of resources and the never ending needs. But in reality former is a myth. The survey conducted by UNO shows that there are enough resources for 20000 million people on earth and we have only 6000 million people on earth residing now. Latter point never ending needs is also incorrect as the desire and greed of the man is unlimited but the need is limited, countable and controllable.
As a system of life Islam has not left any area of human life without guidance. Whether it is economical, social, political, spiritual or individual, Islam gives specific and clear guidelines. By considering the guidelines of Islamic sources, Islamic economists have developed plethora of definitions. Derivation of each definition of Islamic economics is based on guidance given in the basic sources of Islamic Shariah, which are Quran and hadith.
According to Yusuf Ibrahim, professor of Islamic Economics, Qatar University, "Islamic Economics is a science studying the guidance of the human behavior towards the use of resources to satisfy the needs." This definition is based upon the following reality:
1. The resources are enough for satisfying the needs;
2. These resources should be protected from the waste, and improper use;
3. The human behavior towards the resources should be controlled by divine injunctions;
4. Only legal needs, needs that build life on the earth, should be satisfied;
5. Illegal needs (desires), which destroy life on earth, should not be satisfied; they are never ending and never satisfied.
Islamic economic system, a normative economic system, has been built upon certain fundamental Islamic philosophies. According to Quranic teachings real and absolute ownership of the wealth belongs to Almighty Allah. Quran says, "Allah belongs to everything in the sky and on the earth" (2:284). Role of the man is considered as trustee who is to manage the trust, i.e. wealth according to the directives of the real owner; Allah. Quran clearly states, "Spend of that where of hath made you trustees" (57:7). So Allah has granted conditional and limited ownership to human beings.
Another Islamic philosophy is universal brotherhood and equality of men as their creator is one and parents are same. Hence distinction based on color, caste, creed, races do not suffer at any cost. This concept induces the people for cooperation and participation in their all efforts instead of cheating, exploiting and making fraud each other. Another aspect of Islamic philosophy is the faith in the Day of Judgment after death. In the life after death man is accountable for his deeds on earth. The implication of this faith is that economic choices one makes in the world are to be judged according to the norms Allah has laid down.
These are the judging points which differentiate Islamic economics from the liberal, capitalistic, imperialistic, mainstream economic system and communist, class war, state dictatorship economic system. Islam constructs a just world on the spirit of everlasting divine concepts.
The Islamic economic system is a structure as taught by The Holy Qur'an and Sunnah of the Prophet (PBUH), which is capable of solving the economic problems being faced by the world today. Benefits of this system, which combine the benefits of both communism and capitalism, are: i) Private ownership and market economy; ii) Profit motive; iii) Justice in distribution and consumption; iv) Elimination of inequities.
These benefits are related to the methods of poverty reduction. Economic growth is possible with private ownership; aid or charity can be a symbol of justice in distribution, which may eliminate inequities also.
Islamic economic system not only allows the market forces of demand and supply but also provides mechanism to keep them operative with their natural momentum without creating monopolies and concentration of wealth.
It is known that production, consumption and distribution are three basic functions of economics. Islam, which teaches justice and equality, clearly puts these functions as follows:
Production function:
i. Demand/supply of prohibited goods should fall to zero; ii. Production of luxury goods is checked; iii. Producers should not maximize profits; iv. Competition among producers should be healthy.
Consumption function:
i. Prohibited goods cannot be consumed; ii. Consumption can not be extravagant; iii. Consumption should lead to an efficient and pure life;
iv. Every individual should consume enough goods to lead a reasonable life.
Distribution function:
i. Prices should be reasonable, neither too high nor low; ii. Interest must not be paid; iii. Wealth concentration should be avoided.
These basic functions also provide a welfare approach of Islamic economy, which help in alleviating poverty. This system gives an opportunity to persons with lesser income to live a reasonably dignified life.
Poverty is an economic condition of lacking basic necessities needed to live on a reasonable standard of life. These include need for money, food, water, education, clothing, health care, shelter, etc.
Poverty is evil in any society. The presence of begging hands in a society pulls that society and economy into decades back. Poverty amidst plenty is the challenge faced in the modern world. Impact of the poverty cannot confine into starvation only, but poor people, apart from starvation, suffering limited income which leads to inaccessibility of basic necessities of life. For example, absence of good education disables them for challenging careers which requires a good number of years education. Deprivation from health care drags poor people towards further distressness and poverty. Absence of nutritious food results in more child morality among deprived sections.
Poverty and Islamic Economy
Starvation and inaccessibility of food, shelter, cloths and education could not suffer in an Islamic economy, which aims at ensuring human falah, i.e. human welfare. It does not support any economic instrument that leads to the deprivation of the man. Since poverty emerges in an economy as a result of various causes, so wiping out of these causes is the primary responsibility of the Islamic government.
Limited income, unequal distribution of income and wealth, misdistribution of resources, regional disparities, unemployment, social injustice, and decreased investments, etc, are some of the obstacles in the way of attainment of self-sufficiency and welfare and alleviation of poverty. Islam considers the fulfillment of basic needs of every member of society is economic, moral as well as religious obligation of the ruler. List of the basic goods extends from resources like money, traditional food, education, health, clothing and shelter to seasonal clothing, personal attendant to disabled person, and expenditure on marriage of poor and expenditure on entire family of poor. Islamic economic system introduces a set of divinely guided instruments which bring an end to poverty and build a starvation-free world.
Islamic Economic
instruments to
alleviate poverty
It is advised to Muslim citizens in an Islamic county, as the part of belief to practice certain things in their life, some of them are compulsory nature and the rest are voluntary nature. The practice of these will have vast economic implications apart from the reward of Allah. In addition to these functions there are other things the Islamic state has to carry out similar to any nation does for the welfare of citizens. Both positive and prohibitive/negative measures have been recommended by Islam for wiping out the reason of poverty.
The Islamic economics' positive instruments to alleviate poverty are zakat, sadaqa/ donations, qard-al-hasan, goodly loan to Allah, Corporate social responsibility (CSR), wakf, ganima and fay, kharaj, state ownership on uncultivated land and natural resources, mudaraba, musharaka, etc. On the other hand, the negative instruments are prohibition of interest, hoarding, speculation, abolition of extravaganza, and many other things. Influence of Islamic economic instruments on marginal propensity to consume, multiplier, price, investment and production are also important in alleviating poverty.
Positive Measures/ Instruments
There are numerous Islamic orders and injunction to perform certain things which have immense influence on economies justice, prosperity and growth. Important divine injunctions amongst them and their influence upon the economy are briefed below:
Zakat: Zakat is the yearly obligation of wealthy Muslims to poor and it is the share of poor in the property and wealth of the rich. Quran commends establish worship and pay the poor his due (zakat) and obey the messenger. Scientifically we can call it as spiritual tax. It is imposed on those forms of wealth which have the capacity to grow in value or otherwise produce further, is having the custody of whole year and have exceeded a certain minimum value called nisab.
Quran has stated the eight specific heads for the distribution of zakat. Due to the divine spirit for the performance of zakat, chances for evasion are less. The imposition of zakat on idle wealth urges the owners for the productive and profitable employment of idle wealth, which increases the wealth of economy and again the share of zakat.
Zakat plays very important role in the socio-economic life of not only the Muslim Ummah, but also other poor people. It is the corner-stone of the financial structure of the Islamic state. Zakat not only provides the required funds to Islamic state for its welfare activities in sectors like education, health and social services but also enables it to discharge its obligations regarding its poor and deprived citizens. It prevents the concentration of economic power in the hands of few and ensures fair and equitable distribution of wealth. It checks growing income disparities and bridges the gap between the rich and the poor. Thus its distribution aspect brings about social justice in the society and protects the community from bloody revolutions and political upheavals which are generally the result of ever growing disparities between the rich and poor and distressed.
The writer is a director, Islami Bank Bangladesh Limited