Book reference: p.117 — "'Islamic financial and economic system is the solution to human financial problems.' Discuss." | p.132 — "Explain the basic principles of the Economic System of Islam."

Core Principles of the System

• Ownership belongs ultimately to Allah
  • Man holds wealth as a trustee (Khalifah), not an absolute owner (2:284, 57:7).
• Permission of private property
  • Real but conditional, within ethical and legal limits — unlike pure communism.
• Prohibition of Riba (interest)
  • 2:275, 2:278-279 — money may not earn merely by existing.
• Prohibition of Gharar (excessive uncertainty/speculation) and Maysir (gambling)
  • 5:90 — gain from manufactured uncertainty or pure chance is closed off.
• Obligatory Zakah
  • Systematic wealth redistribution levied on accumulated wealth (see Theme I).
• Halal earning and prohibition of exploitation
  • Fraud, hoarding (Ihtikar), and short-changing in trade (83:1-3) are explicitly condemned.
• Balance between individual enterprise and collective welfare
  • Unlike pure capitalism (unchecked accumulation) or pure socialism (abolition of private property).

Problems of Conventional Systems Islam Addresses

• Interest-based debt crises — Riba creates compounding debt burdens; prohibited outright (2:275, 2:278-279).
• Wealth concentration — Zakah and inheritance laws actively redistribute wealth (59:7) rather than letting it accumulate in few hands.
• Speculative uncertainty (Gharar) — prohibited in contracts; reduces speculative bubbles and financial fraud.
• Hoarding (Ihtikar) — explicitly condemned (9:34); encourages circulation and productive investment.

Key Instruments

• Zakah — mandatory wealth tax/redistribution (see Theme I).
• Mudarabah — profit-sharing partnership (one party provides capital, other provides labour/expertise).
• Musharakah — joint venture partnership with shared profit/loss.
• Ijarah — leasing.
• Qard Hasan — interest-free benevolent loan.