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Islamic Economics and Secularism

Paper Type: Free Essay Subject: Philosophy
Wordcount: 5468 words Published: 29th Jun 2017

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Secularism is the assertion that governmental practices or institutions should exist separately from religion and/or religious beliefs. In other words, secular system is based on the materialistic and individualistic views with less socio economic justice and only concern to the worldly matters. Meanwhile, Islamic economics is a system that identifies and promotes an economic order that conforms to Islamic scripture and traditions.

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Thus, the above statement of differentiation between Islamic economics and secularism by only certain characteristics is untrue as both of them are mutually exclusive. The Islamic economics differs from secular system not by prohibition of interest, gambling and other unjust transaction only, but it is more than that. Islam is a way of life, and since economy is also a part of man’s life, thus, the Islamic principles is absorbed and fully utilized into the economic transaction and practices. Therefore, the statement of ‘Islamic economics as a discipline is nothing more than the secular system without interest, gambling and other unjust transactions where value creation is of the halal kind’ is not valid; and the justification will be discussed here.

The justification

To emphasize the difference, the following points underline the key difference between Islam and this secular system, in particular, and other social and political systems, in general are highlighted.

The first point is, Islam differs from secularism’s theories and perspectives in its ideological and doctrinal bases. Islam is a Divine Message with a special conception of the universe, life and man. It basically disagrees with secular views, which have their roots in their materialistic vision that has no religious base, nor any belief in Allah. Capitalism is merely concepts on devoid of spiritual and moral values. The difference between it and Islam is obviously great. Islam has an all-embracing ideological and legislative make-up. In it, no barriers are to be found between morals, laws, worships, concepts and existence.

There are significant differences among them in terms of emphasis they place on material or spiritual goals and the role of moral values and government intention in ordering human affairs. While material goals concentrate primarily on goods and services that contribute to physical comfort and well-being, spiritual goals include nearness to God, peace of mind, inner happiness, honesty, justice, mutual care and cooperation, family and social harmony, and the absence of crime and anomie. These may not be quantifiable, but are, nevertheless, crucial for realizing human well-being may lead to a neglect of spiritual ingredients. The greater the difference in emphasis, the greater may be the difference in the economic disciplines of these societies.

Besides, in its aims and objectives, Islam is distinguished from secularism on the basis of contents and the legal organization of life. It treats related subjects in separate ways with specific points. The ultimate goal of Islam is to worship and seek the pleasure of Allah. In implementing the divine law and adhering to the divine order, a Muslim demonstrates he is a worshipper. His objective is to seek the reward and pleasure of Allah, the Exalted. Even in the context of economy activity, men should obey the guideline of ethical behavior so called Akhlaq which emphasizes on the real spirit of Islam over and above legal limits. Contrarily, the human objective in capitalist society is purely a materialistic one, expressed in terms of materialistic gain regardless of the cost and fall out on society.

Even though there is a sort of analogy between Islam and other systems in certain respects, Islam has its own way and method of implementing its economic concepts and objectives. For example, Islam believes in social justice and so it adopts just principles in distribution and production growth. Capitalism attempts to call for similar concepts, which can be seen as generally logical and which man, by no means, can shun. But in trying to develop the conceptions and implement them, we will find the difference between Islam and secular systems in both method and way. In capitalism, freedom knows no boundaries. In theory, individuals can do what they desire to. In doing so, it believes that the non-existence of limits or restrictions results in economic freedom, in competition and the increase of production. But to achieve a suitable and satisfactory economic level is for all people, makeshift and inexorable laws have to be enforced, based upon such theories as the laws of wages, supply and demand etc. Unlike this, Islam adopts its own methods. It never opens the gates for individual selfishness to flourish like in capitalism. Islam believes in individual ownership, community ownership and state ownership, as it is expounded in the books of fiqh, traditions and in the Holy Qur’an. In case selfishness and urges of greed prevail, and to prevent exploitation and economic injustice from sweeping over the community, Islam has laid down lawful and moral restrictions related to ownership, investment and consumption in defense of manipulation and deprivation.

Besides, Islamic economic takes great emphasize on the role of the market, families, society and government in determining a success in economy. The market is not the only institution where people interact in human society. They also interact in the family, the society, and the government, and their interaction in all these institutions is closely interrelated. There is no doubt that the serving of self interest does help raise efficiency in the market place. However, if self-interest is overemphasized and there are no moral restraints on individual behavior, other institution may not work effectively – family may disintegrate, the society may be uncaring, and the government may be corrupt, partisan, and self-centered. Example if both the parents try to serve just their own self-interest and not willing to make sacrifices for the sake of proper care and upbringing of children demands, this family may disintegrate and children not get enough love from them. Lack of willingness to make such sacrifice can lead to a decline in the quality of the human input of all other institutions, including the market, the society and the government. It may also lead to a fall in fertility rates below the replacement level, making it difficult for the society not only to sustain its development but also its social security system.

Furthermore, while secular economics generally considers the behavior, tastes and preferences of individuals as given, Islamic economics does not do so. It places great emphasis on individual and social reform through moral uplift. Moral uplift aims at the change in human behavior, tastes and preferences and, thereby, it complements the price mechanism in promoting general well-being. Before even entering the market place and being exposed to the price filter, the consumers are expected to pass their claims through the moral filter. This will help filter out conspicuous consumption and all wasteful and unnecessary claims on resources. The price mechanism can then takes over and reduce the claims on resources even further to lead to the market equilibrium. The two filters can together make it possible to have optimum economy in the use of resources, which is necessary to satisfy the material as well as spiritual needs of all human beings, to reduce the concentration of wealth in a few hands, and to raise savings, which are needed to promote greater investment and employment. Without complementing the market system with morally-based value judgments, we may end up perpetuating inequities in spite of our good intentions through inaction, non-choice and drifting.

The other distinction that differentiate between these two is Islamic economic emphasize on the importance of the Hereafter. This is where the concepts of the innate goodness of human beings and of the Hereafter come in – concepts which conventional economics ignores but on which Islam places a great deal of emphasis. Because of their innate goodness, human beings do not necessarily always try to serve their self-interest. They are also altruistic and are willing to make sacrifices for the well-being of others. In addition, the concept of the Hereafter does not confine self-interest to just this world. It rather extends it beyond this world to life after death. We may be able to serve our self-interest in this world by being selfish, dishonest, uncaring, and negligent of our obligations towards our families, other human beings, animals, and the environment. However, we cannot serve our self-interest in the Hereafter except by fulfilling all these obligations. This serves to provide a motivating mechanism for sacrifice for the well-being of others that conventional economics fails to provide. The innate goodness of human beings along with the long-run perspective given to self-interest has the potential of inducing a person to be not only efficient but also equitable and caring.

Therefore, as a guideline, Shari’ah is designed as a set of rules and regulations that aims of protecting public interest and the welfare of the people in this life and hereafter. The objective of the Shari`ah is to promote the well-being of all mankind, which lies in safeguarding their faith (din), their human self (nafs), their intellect (`aql), their posterity (nasl) and their wealth (mal). Whatever ensures the safeguard of these five serves public interest and is desirable. The guideline of Islamic economics is in the discipline of muamalat, which presents a framework for conduct in the civil arena. It deals in part with economic functions in an Islamic society but not comprehensively with factors impacting upon economic behavior since it is concerned solely with legal relationships between members of the society. In fact, the goals of the Islamic economics include fulfillment of the basic needs for food, clothing, shelter, medical care and education for all humans, ensuring equality of opportunity to all preventing concentration of wealth and reducing inequality in the distribution of income and wealth so as, among other things, wealth does not become a means of domination of man by man, ensuring to all the freedom to pursue moral excellence, and ensuring stability and economic growth to an extent necessary for realization of the above-mentioned goals.


Islam is a way of life. Being a Muslim means one will absorb the whole philosophies of Islam in everything he does in life. So do economics. The difference between Islamic economics compared to secular ideology is not just on prohibition of interest, gambling and other unjust transactions where value creation is of the halal kind. The unique principles that make Islamic economics differs lies on its ideological and doctrinal bases, the, basis of contents and the legal organization of life, the way Islam implements its economic concepts and objectives, the emphasize on the role of the market, families, society and government, the value on individual and social reform through moral uplift, and the importance of the Hereafter.

Question No. (2)


Worldview can be defines as “a set of implicit or explicit assumptions about the origin of the universe and the nature of human life. Meanwhile, from Islamic point of view, worldview is “a metaphysical survey of visible as well as the invisible worlds including the perspective of life as a whole, is not a worldview that is formed merely by the gathering together of various cultural objects, values and phenomena into artificial coherence”, or can be considered as vision of reality and truth. Islamic worldview is in fact a dual worldview, this world of action and accountability for the actions in the next, while the secular worldview is focusing on worldly rather than spiritual.

The core elements of Islamic and Secular worldviews: A comparison.

There are a few similarities between Islamic and Secular worldview in general, even though there will be differences if we look in depth. Both are concern on the allocation and distribution of resources and both emphasize the fulfillment of material needs, even though in Islamic economics there is an equal emphasis on the fulfillment of spiritual needs. Besides, both recognize the important role of market mechanism in the allocation and distribution of resources, but in addition, Islamic economics argues that the market may not by itself be able to fulfill even the material needs of all human beings. This is because it can promote excessive use of scarce resources by the rich at the expense of the poor if there is undue emphasis on the serving of self-interest.

Instead of some similarities, there are a lot of differences between these two worldviews, and we will be discussing through it here.

Firstly, the secular and materialist worldviews attach maximum importance to the material aspect of human well-being and tend generally to ignore the importance of the spiritual aspect. In contrast with this, Islamic worldviews give attention to both the material as well as the spiritual aspects of human well-being. Islam sees both these aspects – material and spiritual – of human existence as unitary wherein the material and the moral considerations as well as the here (Now) and Hereafter of human life are inextricably entangled.

Apart from that, the secular worldview looks at happenings in the world from a rationalistic viewpoint, while excludes religious or ethical considerations. It promotes pursuit of self-interest as guiding human behavior and saw no conflict between individual and social interests. Besides, it makes a distinction between reason and revelation as the source of knowledge. It considers reason alone as its source, including economics. The secular worldview is conditioned by science alone i.e. any subject that goes beyond the limits of human reason is not acceptable. Furthermore, and more fundamentally, the secular man-made worldview can change infinitely at the discretion of man as his external stimuli and attitude change.

However, Islamic view does not necessarily reject the role of reason in human development. They, however, recognize the limitations of reason and wish to complement it by revelation. Islamic worldview is based on the Qur’an and the Sunnah – it is has a moral code of conduct. It grants freedom of action within the Shari’ah boundaries. It also emphasizes on justice and moderation as well as gives priority to social interest if it is in clash with individual interest. Islam invites people to observe and think but within the framework of Shari’ah. Thus, the Shari’ah, although flexible in certain areas is not replaceable and therefore, cannot be influenced by any human whim, while, at the same time; it promotes change and aims to influence human intentions, conduct and behavior towards the Straight Path. In addition, the Islamic worldview values reason as a source of knowledge, but in addition it assigns a role to sapience and revelation as inalienable sources. It is not a product of human thought resulting from any scientific inquiry: it is a divine direction leading to a unique way of life. It links the life in this world with life in the Hereafter. Thus, the Islamic worldview, although it respects the rational mind, is not confined to the limits of human reason or to observable scientific investigations (‘reality’): it contemplates both, the observables and the non- observables. In other words, ‘material science’ is the ultimate word under the Secular worldview, whereas under the Islamic worldview it is not.

Furthermore, secularism often argue that maximum material well-being can be best realized if individuals are given unhindered freedom to pursue their self-interest and to maximize their want satisfaction in keeping with their own tastes and preferences. In their extreme form they do not recognize any role for Divine guidance in human life and place full trust in the ability of human beings to chalk out a proper strategy with the help of their reason. In such a worldview there is little role for values or government intervention in the efficient and equitable allocation and distribution of resources. When asked about how social interest would be served when everyone has unlimited freedom to pursue his/her self-interest, the reply is that market forces will themselves ensure this because competition will keep self-interest under check. Differently, for Islamic worldview, they do not totally reject the need for individual freedom or the role that the serving of self-interest can play in human development They, however, emphasize that both freedom and the pursuit of self-interest need to be toned down by moral values and good governance to ensure that everyone’s well-being is realized and that social harmony and family integrity are not hurt in the process of everyone serving his/her self-interest.

Looking from the economic point of view, the secular economics claims to be value free, which in fact it is not because not to have a value is itself a value. Conversely, Islamic economics has moral and ethical values of which it cannot brook any violation.

In Islam freedom to choose values is restricted, yet it had already been properly aligned in the Holy Quran and the prophet’s Sunnah. While pursuit of self-interest is the invisible hand that regulates economies in secular economy, Islamic economists mostly reject this view out of hand and equate it with selfishness. This does not seem valid. Islam approves the pursuit of self-interest because it is instinctive with human beings. Muslims perform their religious obligations in their own interest. It need not equal selfishness, especially if Shari’ah norms were observed. In addition, secular economist claimed that if available resources are scarce they must avoid waste and maximize production. As a consumer they should attempt to derive maximum satisfaction from their limited incomes. Islam is not opposed to maximization per se. however, maximization is value-neutral; what is maximized, how and to serve what ends are the deciding factors.

While the profit maximization is the main intention in doing business in secular economy, Islam is aiming towards primacy of justice and social welfare. Besides, while conventional or secular economics generally considers the behavior and tastes and preferences of individuals as given, Islamic economics does not do so. It places great emphasis on individual and social reform through moral uplift. Moral uplift aims at the change in human behavior, tastes and preferences and, thereby, it complements the price mechanism in promoting general well-being.


In sum, the concept of worldview that guides and regulates an economy is visionary, contextual, and flexible within limits. The basic differences between the secular (capitalistic) and the Islamic economic worldviews center on the issues concerning the foundation and ideology in the system, reason-revelation interface, the sort of values entertained and promoted, as well as how it differ in economic contextual.

Question No. (3)


The economic problem is one of the fundamental economic theories in the operation of any economy. It asserts that there is scarcity, or there are finite resources available that are insufficient to satisfy all human wants. The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labor) are to be allocated. In short, the economic problem is the choice one must make, arising out of limited means and unlimited wants.

The economic problem is most simply explained by the question “how do we satisfy unlimited wants with limited resources?” The premise of the economic problem model is that human wants are constant and infinite due to constantly changing demands (often closely related to changing demographics) of the population. However, resources in the world to satisfy human wants are always limited to the amount of natural or human resources available. The economic problem, and methods to curb it, revolves around the idea of choice in prioritizing which wants can be fulfilled.

Concepts of Economic problems

There are three concepts that associated with the economic problems discussed above: (1) needs, (2) wants, and (3) choice. Human needs are material items that people need for survival, such as food, clothing and some form of housing. In Islamic point of view, needs comprehend five foundations, namely (a) Religion, (b) Physical self, (c) Intellect or Knowledge, (d) Offspring, and (e) Wealth. Until the Industrial Revolution, the vast majority of the world’s population struggled for access to basic human needs

While the basic needs of human survival are important in the function of the economy, human wants are the driving force which stimulates demand for goods and services. In order to curb the economic problem, economists must classify the nature and different wants of consumers, as well as prioritize wants and organize production to satisfy as many wants as possible.

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One assumption often made in mainstream neoclassical economics is that humans inherently pursue their self-interest and the market mechanism best satisfies the various wants different individuals might have. These wants are often classified into individual wants, which depend on the individual’s preferences and purchasing power parity, and collective wants, those of entire groups of people. Things such as food and clothing can be classified as either wants or needs, depending on what type and how often a good is asked for. Wants are effective desires for a particular product, or something which can only be obtained by working for it.

The economic problem fundamentally revolves around the idea of choice, which ultimately must answer the problem. Due to the limited resources available, businesses must determine what to produce first to satisfy demand. Consumers are considered the biggest influences of this choice, and the goods which they want must also fit within their budgets and purchasing power parity.

Solving the economic problems from Islamic perspective.

The first point is about the concept of ownership of wealth in Islam. It states that all wealth belongs to God, and human beings hold them as trustees of God. It is up to the individual to decide how much of this excess he should give back for the cause of God. In other word, after earning wealth through fair and lawful means, one should satisfying their personal genuine and legitimate needs in a moderate and prudent way. After doing so, they should spend it for the cause of Allah; example is for the welfare of the poor and less fortunate people. Besides, payment of zakat that is obliged to each Muslim gives the same function here. Thus, helping others in such ways would at least fulfill the basic human needs; our first economic problem discussed above.

Furthermore, because of Islam differentiates between the basic needs and luxuries, thus, there exists no concept of relative scarcity of resources in Islam. The resources available on earth are sufficient to secure the basic needs (food, clothing and shelter) of fifty billion human beings. Such a misunderstanding has concealed the reality that starvation, poverty, and economic backwardness, result from misdistribution exasperated by man-made laws and systems. Proper distribution of resources will be sufficient enough to satisfy the basic needs of human, yet, Islam teach the followers to be grateful on what he has or own.

In Islam, public revenue from oil and natural resources would be used to secure the needs of the whole Muslim ummah. The Khilafah would provide public and vital resources without charge to cover the needs of every individual and family, and monopolies that multinational corporations maintain to dictate the lives of the people would dissipate.

Its contribution in developing the Islamic societies

Implementing those principles discussed above can contribute in development of Islamic societies, as well as for the nation as a whole. When every Muslims contribute with the intention to help others, let say the contribution is gathered by the state, thus, with sufficient funds, the state would be able to provide for basic necessities of life such as food, clothing, shelter, education and healthcare to every citizen at a reasonable standard. The state would also discharge all of its duties of state welfare and would set up all big projects for economic development. Indirectly, it would provide employment to all those who are jobless.

Besides, the state can performs such welfare activities like maintains social services, wages Jihad against the foreign aggression, maintains facilities like railways, road, waterways, bridges, as well as provides protection to the individual in respect of his life, honour and property. So whatever remains with a person after satisfaction of his needs in a moderate way, he would hand over this surplus to the state.

Furthermore, because of Islam differentiates between the basic needs and luxuries, thus, teach the Muslim to fulfill the basic needs, and in the same time, must moderate in luxuries. Wealth is a test by God, and Muslims should strive to pass this test by not becoming worshipers of hoarded wealth. By passing this test, will increase one’s faith and godliness.

In addition, the affectivity with which the Islamic economic systems correctly defines economic problem and secures the needs of every individual, and eliminates all forms of economic and social corruption, would enable fuel for Islamic policy of the state that would enable the Khilafah to easily spread Islam ideologically throughout the world.


The economic problems that basically arise from scarcity are faced by all humans in this world. Human, by his nature, always has unlimited wants, yet own limited resources to fulfill his needs and wants. Choices must be made in accordance to his own preferences and priorities. However, Islam, as a unique religion, found some ways to control, if not totally solve this economic problems by its principles and guidelines to be practiced by Muslims as a way of life. Cooperation and implementation by the governing bodies such as state can help in the development of Islamic societies.

Question No. ( 5 )

What is poverty?

Generally, poverty can be defined through two distinct concepts: the absolute and the relative poverty concepts. The absolute poverty is usually associated with some income level required to sustain a minimum standard of living. That income level, defined as poverty line income is often used to determine whether an individual is poor or otherwise. The individual is considered poor if his income is below poverty line income. Meanwhile, the relative poverty concept is associated with the existence of an income gap between the poor and the non-poor. As long as there is a difference in income levels of any two individuals or groups, those with a lower income are considered poor.

However, in Islamic point of view, one is considered poor if he does not possess sufficient necessities to fulfill his basic needs in each of the five foundations for good individual and social life, namely: (a) Religion, (b) Physical self, (c) Intellect or Knowledge, (d) Offspring, and (e) Wealth. All the five foundations or needs must be fulfilled, and if only one of the needs is not fulfilled, then one is still considered poor.

In addition, poverty is also associated with the concept of nisab, which is one of the two prerequisites for a Muslim to pay the zakah. Using ‘Below Poverty Line’ (BPL), this method functions as the basis of ownership of nisab, which limit makes one eligible for the payment of zakat. Anyone with wealth on or over the nisab is responsible for the payment of zakat. Thus, for those who wealth is below nisab are zakat recipients and they are treated as poor.

Causes of Poverty.

Several causes that may lead to poverty are considered, as follows:

Exploitation of Economy – Economic exploitation can be defined as the act of using another person’s labor without offering them an adequate compensation. Thus, when the compensation received is inadequate to support life, one is unable to fulfill one or more of basic needs, and this can lead to poverty.

Political – Poverty can happen when one major party, usually politician or region that have authority or power on decision-making through out the country that often causes development problems. For example, in these situations politicians make decisions about places that they are unfamiliar with, or lacking sufficient knowledge about the context to design effective and appropriate policies and programs, leads to political instability.

Interest/Riba/Corruption – Unreasonable rate of interest due to loan made can burden borrower. Example is when International Monetary Fund (IMF) donors keep the exchange rates in their favor, it often means that the poor nations remain poor, or get even poorer. Meanwhile, corruption inhibits development when leaders help themselves to money that would otherwise be used for development projects. As a result, poverty can exists when people lives in scarcity due to not getting development that supposedly enjoyed by them.

Warfare – The material and human destruction that caused by warfare is a major development problem. Drop in average income due to strike in the well-being of the average Iraqi citizen in the aftermath of the war, leads to damages to the infrastructure and social services, such as health care and access to clean water.

Agricultural Cycles – People who rely on fruits and vegetables that they produce for household food consumption (subsistence farmers) often go through cycles of relative abundance and scarcity. For many families that rely on subsistence production for survival, the period immediately prior to harvest is a ‘hungry period.’ During these periods of scarcity, many families lack sufficient resources to meet their minimal nutritional needs.

Natural Disasters – Immediate destruction caused by natural events such as hurricanes, droughts, earthquake, flooding as well as environmental forces often cause acute periods of crisis by destroying crops and animals. Thus, people may loss their homes and properties, and lack of resources even to fulfill their basic needs of living. Developing countries often much more suffer at the hands of natural disasters, because limited resources inhibit the construction of adequate housing, infrastructure, and mechanisms for responding to crises.

Prohibited industries – Prohibition industries such as gambling, alcohol and tobacco can encourage one to waste their money for these unlawful activities. Worsen situation, one may borrow money in order to satisfy this bad habits, and this can lead to poverty.

Role of Citizen in Alleviating Poverty from Islamic Perspective.

Being Muslim every citizen has some responsibilities; Muslims in the world are some of the richest. If this wealth is used as per the direction of Allah we can alleviate poverty. Islam as system and way of life is based on collective responsibility of society, ethics and principles. If we follow it we will be able remove the poverty from the society. Some of the citizen’s roles in alleviating poverty are as follows:

1.    Zakah- Zakah is the fourth of five pillars of Islam and hence is obligatory on every Muslim, who fulfills the stipulated conditions, to pay. Being a pillar of Islam, it has to be paid and collected whether the destitute and the poor exist in society or not. As such it is indeed a permanent source of revenue for the alleviation of the destitute and the poor.

2.    Sadaqa – Sadaqat is a very wide term and is used in the Quran to cover all kinds of charity. It is as simplest as when one gives smile, acts of loving kindness, utters a kindly word to others or even greeting


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