EKONOMI SYARIAH

1.  Norm setting environment
 Welfare of the society at large
 Constraints for the economic function of the
state
 Unity and entitlement to equality

2.  Dissociation with either socialism or
capitalism
 Religion embeds a broader social/cultural
framework

3.  Zakat
 Fair deals and hard working
 Gharar(riba):capitalizing on uncertainty
 Qirad (profit sharing and risk sharing)
 Capital formation and economic growth

4.  The Islamic doctrine of economics permits
degrees of individual freedom and state
intervention, but leaves the determination of
these degrees to the wisdom and
consciousness of those involved. This
flexibility has made Islamic economics open
to alternative options within its framework.

5.  Avoidance of ribã: there is quite a bit of
controversy about inclusions and exclusions
from this rule (government debt interest
payments, for instance)
 Payments of zakat (poor dues): sometimes
appears as income tax (10% on irrigated
lands and 5% on non-irrigated ones) or
wealth tax (various rates?)

6.  Working hard at one’s profession:” A man has
not earned better income than that which is
from his own labor”.
 Obeying various behavioral injunctions: not
wasting resources, fraudulent business,
consuming in moderation, performing good
works for the community, etc.

7.  Avoidance of aleatory contracts and other
enterprises of chance(gharar). When buyer
and seller are in no position to predict full
financial consequences of a transaction, e.g.
buying fruit on a tree before it ripens.
Gambling, forward trading, lotteries, etc
would be examples. Insurance policies sales
are on the borderline.

8.  Property: “ To him along belongs
everything in the galaxies and everything
between them.” Individuals are holding
property in trust, receiving the profits but
are accountable to Him regarding its use.
No direct objection to private property but
some ambiguity in language and
enforcement.

9.  Interest is explicitly forbidden, profit is not.
Profit in in an accounting sense contains a
number of different elements like implicit
interest payment on capital “accounting
profit”

10.  Rental incomes are more complicated. Land
rents have existed from times immemorial.
Predominant form is sharecropping. Fixed
rents with absentee landlords (Egypt). The
sharecropping rent is close to qirad, fixed
rents are ribã.

11.  Acceptance of profits and to a certain degree
rents will result in inequalities: “Allah decreed
some of you to have more wealth than others.
Do the people who have more wealth share it
equally with their dependents and slaves?”

12.  Profit sharing (qirad): deposits to be
channeled into ownership shares in a
particular investment effectively making a
depositor a partner in a business. A bank
becomes a proto-mutual fund.

13.  Attenuation of speculative demand for capital
 Demand for cash and inflationary
expectations
 Supply of money is government fiat only?
(100% reserves according to some, no bank
creation of money)

14.  Disequilibrium of cash balance
 Constant price level and savings rate
 If cashD<S then prices of land, stock etc are
bid up and their nominal returns are lowered
so that the supply and demand for cash
balances is equalized. If prices and savings
were flexible than equalization would result
in inflation.

15.  Income and substitution effects between
current and future consumption
 Long-termism of consumers
 Increased risk factor of saving
 The discounting is discouraged