Chapter Two: The Islamic Economic System

Chapter Two: The Islamic Economic System
Section One: The Definition of the Islamic Economic System and its Sources
Section Two: The Fundamental Beliefs Underlying the Islamic Economic System, its Objectives & Distinctive Qualities
Section Three: The Foundations of an Economy and Finance in Islam
Section Four: Usury
Section Five: Monopoly

Section One: The Definition of the Islamic Economic System and its Sources
Firstly: The linguistic definition of the term ‘economy’:
In Arabic, this word derives from the trilateral root ‘qa–sa–da, yaqsidu, qasdann’ and has several meanings, including: a straight path, justice, ease, nearness, temperance, moderation and purpose.(740)

The word ‘economy’ carries a similar meaning and signifies moderation and temperance. These meanings are indicative of the way Islam views economy and are reflected by numerous verses of the Quran.

such as the sayings of Allah –the Almighty–:
(وَالَّذِينَ إِذَآ أَنفَقُواْ لَمْ يُسْرِفُواْ وَلَمْ يَقْتُرُواْ وَكَانَ بَيْنَ ذَٰلِكَ قَوَامًا)
Sura al–Furqan; (25): 67
(Meaning: And those, who, when they spend, are neither extravagant nor niggardly, but hold a medium way between those extremes.)
(وَلَا تَجْعَلْ يَدَكَ مَغْلُولَةً إِلَىٰ عُنُقِكَ وَلَا تَبْسُطْهَا كُلَّ الْبَسْطِ فَتَقْعُدَ مَلُومًا مَّحْسُورًا)
Sura al–Isra•; (17): 29
(Meaning: And let not your hand be tied like a miser to your neck, nor stretch it forth to its utmost reach like a spendthrift, so that you become blameworthy and insolvent.)
(وَكُلُواْ وَاشْرَبُواْ وَلَا تُسْرِفُوٓاْۚ إِنَّهُۥ لَا يُحِبُّ الْمُسْرِفِينَ)
Sura al–A’raf; (7): 31
(Meaning: O children of Adam, take your adornment at every mosque, and eat and drink, but be not excessive. Indeed, He likes not those who commit excess.)

The scholars also mention moderation and temperance, which lie between profligacy and parsimony, in their definitions of economics.(741)

Secondly: The technical definition of the Islamic economic system: Perhaps the most appropriate definition for the Islamic economic system is: ‘it is the set of rulings and policies that govern wealth and how a person utilizes it’.(742)

The ‘set of rulings’ refers to Islamic rulings, i.e. that which Allah has explicitly made mention of.

‘Policies’ refer to those laws which the ruler or state decide upon in order to maintain an organized society. They must not contradict any of the rulings derived from textual evidence contained within the Quran or the Prophetic traditions.

‘Wealth’ refers to everything that is useful goods that are lawful and have market value.

‘How a person utilizes it’ refers to how a person manages wealth, and includes, among other transactions: giving, buying and selling.(743)

Thirdly: the sources of the Islamic economic system: the Islamic economic system derives its principles from the sources of the religion of Islam, which are:
1. The Noble Quran.

2. The Prophetic traditions.

3. Unanimity, i.e. the consensus of the scholars of Islam which occurs after the prophetic era regarding a religious ruling.(744)

4. Analogical inference, i.e. the extension of a ruling to a new problem provided that the precedent and the new problem share the same operative or effective cause.(745)

An example of analogical inference is modern–day currencies, such as riyals, pounds and dollars, which are similar to the money used in the time of The Prophet –peace be upon him–e, the common operative being growth.

5. The principle of blocking the means to evil, which refers to refraining from permissible means which lead to evil.(746)

6. Custom: every widespread habit that a people have grown accustomed to and are familiar with, such that it is well known in their everyday lives.(747)

Provided the customary practices of a people do not oppose any religious texts, they are to be regarded unless the contracting parties explicitly mention otherwise.

An example of the customary practices of a people being regarded in an economic context is the financial obligation a husband has towards his wife and children, wherein the exact amount is decided according to the customs of a people.

Allah –the Almighty– says:
(وَعَلَى الْمَوْلُودِ لَهُۥ رِزْقُهُنَّ وَكِسْوَتُهُنَّ بِالْمَعْرُوفِۚ)
Sura al–Baqarah; (2): 233
(Meaning: The father of the child shall bear the cost of the mother's food and clothing on a reasonable basis)(748)

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(740) See: ‘Lisan al–Arab’ (3/353–5).

(741) See: ‘Lisan al–Arab’ (3/354); & ‘an–Nitham al–Iqtisadi fil–Islam’ of Dr. Abdul–Aziz al–Marzuqi and others (p. 12).

(742) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (p. 13).

(743) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 13–4).

(744) See: ‘Rawdat an–Nathir’ of Ibn Qudamah (1/411); & ‘Taysir al–Wusul Ila ‘Ilm al–Usul’ of Dr. Abdur–Rahim Ya’qub (p. 200).

(745) See: ‘Rawdat an–Nathir’ (2/227).

(746) See: ‘Sharh al–Kawkab al–Munir’ of Ibn Najjar (4/434); & ‘Taysir al–Wusul’ (p. 221).

(747) See: ‘Taysir al–Wusul’ (p. 212).

(748) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 18–23); & ‘an–Nitham al–Mali wal–Iqtisadi fil–Islam’ of Dr. Mahmood al–Khatib (pp. 30–1).

Section Two: The Fundamental Beliefs Underlying the Islamic Economic System, its Objectives & Distinctive Qualities
Firstly: The Fundamental beliefs Underlying the Islamic Economic System

Every economic system is based on foundations and ideological principles which define its economic policies and rules.

The capitalist and socialist systems are both based on materialism and the sanctification of wealth, whereas the Islamic economic system differs from them in this regard. It bases itself on a much more noble and important foundation: faith. In reality, economics is merely an offshoot of faith and its role is to safeguard it, to firmly enroot it, to spread its light, to provide practical examples of its application in everyday life.

It is for this reason that when Allah –the Exalted and Most High– mentions verses containing legal rulings, including those pertaining to dealings and transactions, the address is to those who believe.

For example, in the verses pertaining to usury,

Allah –the Almighty– says:

 (يَٰٓأَيُّهَا الَّذِينَ ءَامَنُواْ اتَّقُواْ اللَّهَ وَذَرُواْ مَا بَقِيَ مِنَ الرِّبَوٰٓاْ إِن كُنتُم مُّؤْمِنِينَ)

Sura al–Baqarah; (2): 278

 (Meaning: O you who believe, fear Allah and give up what remains due to you of interest, if you are believers.)

In this verse, Allah addresses His believing servants and commands them to fear Him by abandoning usury if they are truly believers.

The last of these verses reiterates the command to fear Allah and warns of His punishment in the hereafter:

 (وَاتَّقُواْ يَوْمًا تُرْجَعُونَ فِيهِ إِلَى اللَّهِۖ ثُمَّ تُوَفَّىٰ كُلُّ نَفْسٖ مَّا كَسَبَتْ وَهُمْ لَا يُظْلَمُونَ)

Sura al–Baqarah; (2): 281

 (Meaning: And fear a Day when you will be returned to Allah. Then every soul will be compensated for what it earned, and they will not be treated unjustly.)
These verses are indicative of the fact all economic obligations stem from faith and belief in origin. When a Muslim adheres to Allah’s commands and prohibitions in this regard, such as giving alms and charity and abandoning usury and fraud, they are doing so because they originate from Allah – the Mighty and Majestic. A Muslim is conscious of the fact that such rulings are better for them in this life as well as the hereafter.

The relationship between Islamic economics and belief is manifested in its direct connection to the pillars of faith, especially belief in Allah, belief in the last day and belief in predestination, both its good and evil aspects.(749) A Muslim believes that Allah sees all of their actions; that this worldly life is merely a preparation for the hereafter; that they will be rewarded in the hereafter in accordance with the deeds they have committed and that they will only receive provisions according to whatever Allah has preordained for them.

Thus, Muslims strive via lawful means to earn a livelihood and they are content with whatever Allah has allotted to them. They are not discontent, nor do they express displeasure if they experience any loss, provided they have taken the correct means.

Secondly: The Objectives of the Islamic Economic System

The Islamic economic system seeks to achieve various goals which can be summarized as follows:

1. Adequate living standards:

the Islamic economic system aims at achieving an adequate standard of living for all human beings. For this reason, there are certain obligatory measures in Islam, such as almsgiving, which ensure that a suitable standard of living is available to everyone.

Islamic history is full of examples that prove the Islamic state used to spend upon the poor and needy, Muslim and non–Muslim alike. ‘Umar bin al–Khattab used to say to those charged with distributing alms: “When you give to the people, enrich them.”(750)

Other measures in place to ensure adequate living standards for all humans include government intervention in the labour market to create job opportunities for the unemployed, to ensure a fair minimum wage is imposed for all employees and to allocate economic resources efficiently in accordance with the actual needs of society.

These are some of the measures in place in the Islamic economic system to ensure adequate living standards for all.(751)

2. Investment of economic resources in the best possible way:

Investing economic resources in the best possible way is from the main objectives of the Islamic economic system.

There are a number of ways this can be achieved, such as:

 (i) Utilising economic resources to produce lawful and useful goods and abstaining from the production of harmful and unlawful goods.

(ii) Prioritising production of the essentials and necessities which safeguard the higher objectives of Islamic law.

(iii) Refraining from the production of goods and offering of services which require expenditure so great that it would be a squandering of wealth.(752)

3. Reduction of any large disparity between income and expenditure:

Islam rejects any great disparity between income and expenditure due to the unjust distribution of wealth that it results in. Wealth inequality, wherein a minority of people own majority of wealth, leads to the overwhelming majority of people struggling to meet their basic needs. For this reason, Islam does not allow wealth concentration or monopolization of markets, contrary to human–inspired economic systems.

Islam also forbids all forms of social injustice, such as extreme poverty, deprivation of humans from sustenance, neglection of the poor and destitute, the purposeless accumulation and the excessive hoarding of wealth.

Rather, the Islamic economic system strives to reduce wealth inequality and minimise the gap between the rich and the poor. It prohibits the aimless amassment of wealth which gives rise to immoral oppressive practices,
just as Allah says:

 (كَيْ لَا يَكُونَ دُولَةَۢ بَيْنَ الْأَغْنِيَآءِ مِنكُمْۚ)

Sura al–Hashr; (59): 7

 (Meaning: So that it does not circulate only among the rich from amongst you.)

For this reason, Islam forbids excessive hoarding, monopolies, usury, betting, bribery, fraud, exploitation and selfishness of which the poor are victims. In addition, it prescribes almsgiving and financial support and encourages wills, endowments and charity, all of which contribute to even wealth distribution in society and improve quality of life for poor people.(753)

4. Increase the material capabilities and defensive powers of the Islamic nation:

In addition to reducing poverty and providing an adequate standard of living for all citizens, the Islamic economic system also aspires to increase the material capabilities and defensive powers of the Islamic nation in order to ensure peace and security from enemies who pose a threat to its economic power.

Allah –the Almighty– says:

 (وَأَعِدُّواْ لَهُم مَّا اسْتَطَعْتُم مِّن قُوَّةٖ وَمِن رِّبَاطِ الْخَيْلِ تُرْهِبُونَ بِهِۦ عَدُوَّ اللَّهِ وَعَدُوَّكُمْ وَءَاخَرِينَ مِن دُونِهِمْ لَا تَعْلَمُونَهُمُ اللَّهُ يَعْلَمُهُمْۚ وَمَا تُنفِقُواْ مِن شَيْءٖ فِي سَبِيلِ اللَّهِ يُوَفَّ إِلَيْكُمْ وَأَنتُمْ لَا تُظْلَمُونَ)

Sura al–Anfal; (8): 60

 (Meaning: And prepare against them whatever you are able of power and of steeds of war by which you may threaten the enemy of Allah and your enemy and others besides them whom you do not know but whom Allah knows. And whatever you spend in the cause of Allah will be fully repaid to you, and you will not be wronged.)(754)

Thirdly: The Distinctive Qualities of the Islamic Economic System

The Islamic economic system has a number of qualities which distinguish it from other economic systems, such as:

1. The Islamic economic system is characterised on the recognition of both private and public property. Public property includes common property, such as shared resources, property of the state and the Islamic House of Money. The Islamic conception of wealth is another distinctive quality of the Islamic economic system.

2. Economic activity in Islam is based on the principle of regulated freedom.

3. The Islamic economy places emphasis on mutual aid between members of the Islamic community.

4. The Islamic economy constitutes part of Islamic law and is part of the religion of Islam.

5. Economic activity in Islam is considered to be part of worship.

6. Economic activity in Islam unites between the goodness of this life and the goodness of the hereafter.

7. Economic activity in Islam is predominantly self–regulated.

8. The Islamic economic system lies between the philosophies of scarcity and abundance.

9. The Islamic economic system reconciles between individual interest and public interest.(755)

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(749) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 28–9).
(750) See: ‘Kitab al–Amwal’ of Abu ‘Ubayd (p. 502).
(751) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 74–5).

(752) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (p. 76).
(753) See: ‘Iqtisadiyat al–Ghina fil–Islam’ of Dr. ‘Umar al–Marzuqi (p. 60); & ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 76–7).

(754) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 77–88).

(755) See: ‘an–Nitham al–Mali wal–Iqtisadi fil–Islam’ (p. 58).

Section Three: The Foundations of an Economy and Finance in Islam
The Islamic economy is built on the following pillars and fundamental principles:
1. Wealth and economic ownership:
Wealth and ownership are fundamental aspects of all economic systems and form the heart of economic activity in every society. It is possible to distinguish between different economic systems based on their outlook on these concepts. Islam recognises all forms of individual ownership and does not place any limits on how a person utilizes, invests or benefits from their own wealth. Rather, it takes into account humans innate desire for personal ownership and possession of property.

Allah –the Mighty and Majestic– says:
(وَأَعِدُّواْ لَهُم مَّا اسْتَطَعْتُم مِّن قُوَّةٖ وَمِن رِّبَاطِ الْخَيْلِ تُرْهِبُونَ بِهِ عَدُوَّ اللَّهِ وَعَدُوَّكُمْ وَءَاخَرِينَ مِن دُونِهِمْ لَا تَعْلَمُونَهُمُ اللَّهُ يَعْلَمُهُمْۚ وَمَا تُنفِقُواْ مِن شَيْء فِي سَبِيلِ اللَّهِ يُوَفَّ إِلَيْكُمْ وَأَنتُمْ لَا تُظْلَمُونَ)
Sura aali–‘Imran; (3): 14
(Meaning: Beautified for men is the love of things they covet; women, children, much of gold and silver wealth, branded beautiful horses, cattle and well–tilled land. This is the pleasure of the present world's life; That is the enjoyment of worldly life, but Allah has with Him the best return.)

The Prophet –peace be upon him–e said:
“The son of Adam grows old, but two desires in him remain young: desire for wealth and desire for life.”(756)

The Islamic legislation recognises this inclination in humans and as a result, it established individual property rights and granted people with the right to dispose of their wealth as they please, provided all transactions remain within the limits of Islamic legislation.

The Islamic economic system differs from capitalist systems wherein private ownership is central while other types of ownership are exceptions, and it differs from socialist systems wherein social ownership is central and private ownership is severely restricted.(757)

2. Regulated economic freedom:
Within the Islamic economic system, an individual is granted the freedom to acquire wealth and enjoy its profits, as well as to practice all forms of economic activity, provided it remains within the boundaries Islamic law and values.

Islam regulates this economic freedom by placing certain restrictions on it, the positive effects of which are experienced by both individual members of society and society as a whole.

For example:
(i) Economic activity in Islam must be beneficial to those engaging in it as well as to society in general.
 (ii) It is forbidden to produce or utilize products or services which are malignant or harmful in nature, due to the saying of Allah –the Almighty–:
 (وَيُحِلُّ لَهُمُ الطَّيِّبَٰتِ وَيُحَرِّمُ عَلَيْهِمُ الْخَبَٰٓئِثَ)
Sura al–A’raf; (7): 157
(Meaning: And he makes lawful for them the good things and prohibits for them the evil.)

Thus, the freedom to produce and consume goods is regulated by lawfulness; harmful goods and services, such as alcohol and narcotics, are strictly forbidden.

(iii) The ways of acquiring wealth which are unrecognised by Islamic law are all impermissible, such as through usury, fraud, bribery and forgery.(758)

3. Social support:
This means that a society supports both the individuals and groups it consists of, such that individual interests do not override the common good, as is the case in capitalism, nor are individual interests neglected, as is the case in socialism.

Instead, the Islamic economic system marries the distinctiveness and creativity of individuals with structure and control of direction of groups. In this way, individuals live within a supportive social network which cares for them and has their best interests at heart.

This is clearly stated in the Quran wherein Allah –the Almighty– says:
 (وَإِنَّ هَٰذِهِ أُمَّتُكُمْ أُمَّةً وَٰحِدَةً وَأَنَا۠ رَبُّكُمْ فَاتَّقُونِ)
Sura al–Mu•minun; (23): 52
(Meaning: And surely, this nation of yours is one nation, and I am your Lord, so fear Me.)

The meaning of this verse can also be found in many Prophetic traditions, such as the saying of The Prophet –peace be upon him–e:
“The believers to one another are like a building whose parts support each other.” The Prophet –peace be upon him–e interlocked his fingers whilst making this statement.(759) Likewise he e said: “None of you will truly believe until you love for his brother that which you love for yourself.”(760)

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(756) Reported by Muslim (nos. 1736, 1739).

(757) See: ‘an–Nitham al–Mali wal–Iqtisadi fil–Islam’ (pp. 46–8); & ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 81–2).

(758) See: ‘an–Nitham al–Mali wal–Iqtisadi fil–Islam’ (p.51).

(759) Reported by al–Bukhari (no. 467) and Muslim (2585).

(760) Reported by al–Bukhari (no. 13) and Muslim (no. 45).

Section Four: Usury
Firstly: The Definition of Usury
(i) The linguistic definition: the term ‘usury’ in Arabic derives from the trilateral root ‘ra–b–aa, yarbu’ whose verbal noun is both ‘rabwann and ribann’ which means increase, growth and elevation.(761)
 (ii) The technical definition: It is the unlawful demand for excess in a transaction.(762)

Secondly: Types of Usury
There are two main types of usury:
1. Usury due to postponement which may take various forms, including:
(i) A deferment of the repayment of a loan in exchange for a sum additional to the principal loan amount.

For example, when a debtor unable to repay their debt upon maturity requests a delay from their creditor who stipulates a premium in return. This type of usury was prominent in the period of pre–Islamic ignorance and characterised majority of their transactions.

(ii) Loans with a fixed interest rate.
This occurs when a creditor specifies the maturity date of a loan and stipulates a fixed interest rate in case of late repayment as part of the initial loan agreement.

2. Usury due to surplus which is definable as:
the unequal exchange of usurious commodities of the same type. Some of these commodities are mentioned in the narration of ‘Ubadah bin as–Samit –may Allah be pleased with him– wherein he says: The Prophet –peace be upon him–e said: “Gold is to be exchanged with gold, silver with silver, wheat with wheat, barley with barley, dates with dates and salt with salt, like for like, equal for equal and hand by hand. Anyone who gives something additional or asks for surplus has fallen into usury.  However, if the types of commodity are different to each other, then sell as you wish as long as payment is immediate.”(763)

Through the process of analogical inference, the same ruling can be extended to include commodities which share the same operative cause. For example: the exchange of fifty grams of gold for seventy grams of gold in a spot trade, or the exchange of fifty dollars for seventy dollars in a spot trade.(764)

Thirdly: The Operative Cause of Usury
Although The Prophet –peace be upon him–e mentioned six types of commodity in the foregoing narration of ‘Ubadah, the operative cause for the occurrence of usury in these items can likewise be found in other items, meaning the ruling can be extended to include everything that shares the same operative cause.

The operative cause for the occurrence of usury in gold and silver is that they constitute currencies. Therefore, the ruling can be extended to everything with the same effective cause, i.e. everything that is used as currency, such as banknotes.

As for the other four commodities mentioned, their operative cause –according to what is correct– is the fact they are weighable or measurable foodstuffs. Thus, all weighable or measurable foodstuffs are encompassed by the same ruling as the four commodities mentioned in the narration of ‘Ubadah; namely wheat, barley, dates and salt.

Fourthly: Regulations related to Transactions involving Usurious Commodities
Transactions involving usurious commodities are of two types:
1. The exchange of usurious commodities of the same type, such as the exchange of gold for gold.

This type of transaction is permissible provided the following two conditions are met:
(i) The quantities exchanged must be the same.
 (ii) The exchange must be immediate, without delay, due to the saying of The Prophet –peace be upon him–e: “like for like, equal for equal and hand by hand.”

2. The exchange of usurious commodities of different types, such as the exchange of wheat for dates. In this case, for the transaction to be permissible, the exchange must occur immediately before the two parties depart from the place of contract. Furthermore, in this case it is permissible that the quantities of the two commodities differ, due to the saying of The Prophet –peace be upon him–e: “However, if the types of commodity are different to each other, then sell as you wish as long as payment is immediate.”

Fifthly: Evidence for the Prohibition of Usury
Usury is prohibited and it is considered to be from the major sins, as is indicated by the Quran, Prophetic traditions and consensus of the Muslim community.

Evidence from the Quran: Allah –the Almighty– says:
(الَّذِينَ يَأْكُلُونَ الرِّبَوٰاْ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَٰنُ مِنَ الْمَسِّۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓاْ إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَوٰاْۗ وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَوٰاْۚ فَمَن جَآءَهُۥ مَوْعِظَةٞ مِّن رَّبِّهِ فَانتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى اللَّهِ وَمَنْ عَادَ فَأُوْلَٰٓئِكَ أَصْحَٰبُ النَّارِۖ هُمْ فِيهَا خَٰلِدُونَ ٢٧٥ يَمْحَقُ اللَّهُ الرِّبَوٰاْ وَيُرْبِي الصَّدَقَٰتِ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ)
Sura al–Baqarah; (2): 275–6
(Meaning: Those who consume interest will not stand on the Day of Resurrection except as a person who is being beaten by Satan into insanity stands. That is because they say: “Trade is just like usury.” But Allah has permitted trade and has forbidden interest. So whoever receives an admonition from his Lord and desists shall not be punished for what has passed, and his affair rests with Allah. But whoever returns to dealing in usury – those are the companions of the Fire; they will abide eternally therein. Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.)

In another verse, Allah –the Exalted and Most High– says:
(يَٰٓأَيُّهَا الَّذِينَ ءَامَنُواْ اتَّقُواْ اللَّهَ وَذَرُواْ مَا بَقِيَ مِنَ الرِّبَوٰٓاْ إِن كُنتُم مُّؤْمِنِينَ)
Sura al–Baqarah; (2): 278
(Meaning: O you who have believed, fear Allah and give up what remains (due to you) of interest, if you are truly believers.)

Evidence from the Prophetic traditions:
On the authority of Jabir –may Allah be pleased with him– who said: “The Messenger of Allah –peace be upon him– cursed the one who consumes usury, the one who pays it, the one who witnesses it and the one who records it. He said: ‘They are all equal.’”(765)

In another narration, Abu Hurayrah –may Allah be pleased with him– said: I heard The Prophet –peace be upon him–e saying: “Avoid the seven destructive sins.” Those present asked: “And what are they, O Messenger of Allah?” He replied: “Associating anything with Allah in worship, sorcery, the unjustified killing of a soul which Allah has made sacred, the devouring of an orphan’s property, the eating of usury, fleeing from the battlefield and the slandering of innocent, chaste believing women.”(766)

Evidence from the consensus:
The Muslim community is in unanimous agreement regarding the forbiddance of usury.(767)

Sixthly: Reasons for the Prohibition of Usury in Islam
Among the reasons for the prohibition of usury in Islam is:
1. That which it contains of oppression and the unlawful consumption of the wealth of people.

Allah –the Almighty– says:
(فَإِن لَّمْ تَفْعَلُواْ فَأْذَنُواْ بِحَرْبٖ مِّنَ اللَّهِ وَرَسُولِهِۦۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَٰلِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ)
Sura al–Baqarah; (2): 279
(Meaning: And if you do not, then be informed of a war against you from Allah and His Messenger. But if you repent, you shall have your capital sums. Deal not unjustly, and you shall not be dealt with unjustly.)

2. Usury encourages laziness and unemployment and is one of the greatest contributing factors to laziness and unemployment, due to the human tendency to desire maximum income for minimum effort. This is something disapproved of by the Islamic legislation which encourages people to work and earn a living. All of the prophets –peace be upon them– loved work and would urge the believers to do so; Prophet Muhammad –peace be upon him– himself worked as a shepherd and as a trader and ate from that which had earned with his own hands.

3. Usury encourages selfishness and greed and destroys rapport between people as creditors engage in predatory lending rather than loaning out of kindness and goodwill.

4. Usury can lead to crime and bad investments as pressure is placed on debtors to meet burdensome loan repayments. This can tempt desperate debtors to resort to crimes such as theft and drug trafficking which impact negatively on society.

5. Usury causes creditors to become enslaved to wealth, which leads to them seeking to obtain by any means possible, even if they are unlawful. An opinion held by some doctors is that many of the diseases of the heart, such as high blood pressure, angina, the formation of blood clots, brain haemorrhages and even cardiac arrest, are caused by economic troubles which render people unable to satisfy their greed.

This is observable when companies or stocks experience losses on a large scale.

The former dean of internal medicine at Cairo University, ‘Abdul–Aziz Isma’il, in his book ‘Islam and Medicine’, mentions that usury is the cause of many illnesses of the heart.

Lastly, usury destroys social cohesion, brotherhood and mutual aid between people and has detrimental effects on individuals and society as a whole.(768)

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(761) See: ‘Lisan al–Arab’ (14/304).

(762) See: ‘al–Iqna’’ of al–Hajjawi (2/245).

(763) Reported by Muslim (no. 2971).

(764) See: ‘an–Nitham al–Iqtisadi fil–Islam’ (pp. 106–7).

(765) Reported by Muslim (no. 2971).

(766) Reported by al–Bukhari (no. 2615) and Muslim (no. 2995).

(767) See: ‘al–Mughni’ of Ibn Qudamah (6/52).

(768) See: ‘ar–Riba wa Atharuhu ‘Ala al–Mujtama’ al–Insani’ of Dr. ‘Umar al–Ashqar (pp. 101–33).

Section Five: Monopoly
Firstly: the technical definition of the word ‘monopoly’:
Stockpiling food or other commodities needed by people, in anticipation of a price increase.

In human–inspired economic systems, it is defined as the unethical practice of dominating the supply and demand of goods in order to manipulate prices and maximise profits.(769)

Secondly: the adverse effects of a monopoly include:
1. Increase in the cost of goods and services for consumers.

2. Control over the price of raw materials and manufactured goods.

3. Lack of technological advancement and low quality of goods and services due to the lack of competition and lack of incentive to work.

4. Production is limited and may be insufficient in many cases.

5. The needs of many people are not met adequately.

6. Manipulation and exploitation of consumers, which can result in the occurrence of practices such as commodity destruction, wherein excess goods are stored or even destroyed in order to maintain prices despite the costs involved in such processes. This is carried out with the intention of having control over the basic needs of people in an era characterized by globalization.

Another way in which companies monopolise markets is through group boycott, wherein monopolists abandon trade with countries, particularly those in the developing world, in order to lower prices of raw materials.(770)

Thirdly: the ruling on monopolization:
numerous Prophetic traditions mention the forbiddance of monopolies in Islam, such as the saying of The Prophet –peace be upon him–e: “No one monopolises except a wrongdoer”, and in a variant narration it mentions: “Whoever monopolises is a wrongdoer.”(771)

Ash–Shawkani comments on the foregoing narrations, saying: “There is no doubt these narrations are indicative of the prohibition of monopolisation. The fact monopolisers are described as sinners is sufficient proof for its prohibition, because the word ‘wrongdoer’ means: a sinful, disobedient person.”(772)

Fourthly: cases wherein stockpiling is permitted:
1. Provisions stored by a person for themselves and their family, provided it is not a time of crisis wherein people go to extreme measures in hoarding essentials such that it is considered a monopoly.

2. Products and commodities that are stored for later consumption, as is the case with seasonal products which are needed throughout the year, such as grains or dates.

3. The strategic reserves of a country which are stored in case of emergency. These reserves aim at protecting producers and consumers and include fuel and grain reserves.(773)

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(769) See: ‘an–Nitham al–Mali al–Iqtisadi fil–Islam’ (p. 103).

(770) See: ‘an–Nitham al–Mali al–Iqtisadi fil–Islam’ (pp. 103–4).

(771) Reported by Muslim (no. 1605).

(772) See: ‘Nayl al–Awtar’ of ash–Shawkani (5/221).

(773) See: ‘Fiqh as–Sunnah’ of Sayyid Sabiq (3/267); & ‘an–Nitham al–Mali wal–Iqtisadi fil–Islam’ (p. 105).