The Economic Law of Islam Part (1/3)
Feature Article
The economic law of Islam has been revealed by the Almighty through His last Prophet (sws) for the purification of the economy. It is based on the Qur’anic philosophy of creation. According to this philosophy, the Almighty has created this world as a trial and test for man; every person has therefore been made to depend on others for his living. No one in this world can live independently as regards his needs and requirements. A person of the highest rank must turn to the most ordinary to fulfill them. In other words, every single person has an important role to play, without which this world cannot continue. This role depends upon his abilities, intelligence and inclinations as well as upon his means and resources, which vary from person to person. In fact, it is because of this variation that a society comes into being. Consequently, laborers and workers, artisans and craftsmen, tillers and peasants are as indispensable as scholars and thinkers, savants and sages, leaders and rulers. Every individual is an integral component of society and contributes to its formation according to his abilities. The Qur’an says:
نَحْنُ قَسَمْنَا بَيْنَهُمْ مَعِيشَتَهُمْ فِي الْحَيَاةِ الدُّنْيَا وَرَفَعْنَا بَعْضَهُمْ فَوْقَ بَعْضٍ دَرَجَاتٍ لِيَتَّخِذَ بَعْضُهُمْ بَعْضًا سُخْرِيًّا وَرَحْمَةُ رَبِّكَ خَيْرٌ مِمَّا يَجْمَعُونَ (32:43)
We have apportioned among them their livelihood in this world [in such a manner that] We have exalted some in status above others so that they can mutually serve each other. And better is your Lord’s mercy than what they are amassing. (43:32)
By creating various classes of people, the Almighty is testing whether the big and the small, the high and the low create a society based on co-operation and respect or create disorder in the world by disregarding the role each person has been ordained to play. The latter attitude would, of course, lead them to humiliation in this world and to a grievous doom in the Hereafter. The Qur’an says:
وَنَبْلُوكُمْ بِالشَّرِّ وَالْخَيْرِ فِتْنَةً وَإِلَيْنَا تُرْجَعُونَ (35:21)
We are trying you by giving you happiness and sorrow to test you, and to Us you will be returned. (21:35)
It is to salvage man in this trial that the Almighty has guided him through His Prophets and revealed this economic law to cleanse and purify him.
Following is a summary of this law:
1. The Obligation of Zakah: It is obligatory upon a Muslim to pay Zakah according to the way prescribed by the Shari‘ah from his wealth, produce and livestock if he is liable to it.
2. Sanctity of Ownership: If a Muslim has paid his Zakah dues, then his rightfully owned wealth cannot be usurped or tampered with in any way, except if on account of some violation by him. So much so that an Islamic State has no authority to impose any tax other than Zakah on its Muslim citizens.
3. Formation of a Public Sector: For the just distribution of wealth, the establishment of a public sector is essential. Consequently, everything which is not, or cannot be owned by an individual should in all cases remain in the ownership of the state.
4. Incompetence: Since a person’s way of using his wealth and property also influences the development and welfare of a society, the state, while acknowledging him to be the owner, has the right to deprive him from using them if he is proved to be incompetent.
5. Usurpation of Wealth: It is prohibited to devour other people’s wealth and property by unjust means. Gambling and interest are some horrendous forms of usurpation. Other economic activities should also stand permissible or prohibited in the light of this principle.
6.Documentation and Evidence: In affairs such as various financial transactions, making a will and acquiring a loan, the parties involved should write down a document and call in witnesses to safeguard against any moral misconduct by either of the parties.
7. Distribution of Inheritance: The wealth of every Muslim must necessarily be distributed after his death among his heirs in the following manner:
If the deceased has outstanding debts to his name, then first of all they should be paid off. After this, any legacies he may have bequeathed should be paid. The distribution of his inheritance should then follow.
No will can be made in favour of the heirs ordained by the Almighty. Similarly, no one can be an heir to a deceased who has severed his kinship with him because of some inappropriate deed or conduct.
After giving the parents and the spouses their shares, the children are the heirs of the remaining inheritance. If the deceased does not have any male offspring and there are only two or more girls among the children, then they shall receive two-thirds of the inheritance left over, and if there is only one girl, then her share is one-half. If the deceased has only male children, then all his wealth shall be distributed among them. If he leaves behind both boys and girls, then the share of each boy shall be equal to the share of two girls and, in this case also, all his wealth shall be distributed among them.
In the absence of children, the deceased’s brothers and sisters shall take their place. After giving the parents and spouses their shares, the brothers and sisters shall be his heirs. The proportion of their shares and the mode of distribution shall be the same as that of the children stated above.
If the deceased has children or if he does not have children and has brothers and sisters, then the parents shall receive a sixth each. If he does not even have brothers and sisters, then after giving the husband or wife his (or her) share, one-third of what remains shall be given to the mother and two-thirds to the father. If there is no one among the spouses, then all of the inheritance shall be distributed among the parents in this same proportion.
If the deceased is a man and he has children, then his wife shall receive one-eighth of what he leaves, and if he does not have any children, then his wife’s share shall be one-fourth. If the deceased is a woman and does not have any children, then her husband shall receive one-half of what she leaves and if she has children, then the husband’s share is one-fourth.
Together with these rightful heirs or in their absence or, as in some cases, from the left over inheritance, the deceased can make a near or a distant relative, aside from his parents and children, an heir. If the relative who is made an heir has one brother or one sister, then they shall be given a sixth of his share and he himself shall receive the remaining five-sixth. However, if he has more than one brother or sister, then they shall be given a third of his share and he himself shall receive the remaining two-thirds.
If a person dies without making anyone his heir, then his remaining legacy shall be distributed among his male relatives according to the principle ‘اَلْاَقْرَبْ فَالْاَقْرَبْ’(nearest to the next nearest).
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This is the law the Almighty has revealed to us to purify our economic dealings. While following this law in letter and spirit, a person may encounter financial difficulties and he may have to sacrifice his interests. The real reward for this is the Kingdom of Heaven which the Almighty will grant him on the Day of Judgment. However, He has promised that if the Muslims in their collective capacity adhere to faith and adopt a God-fearing attitude, the Almighty shall provide them abundantly in this world as well:
وَلَوْ أَنَّ أَهْلَ الْقُرَى آمَنُوا وَاتَّقَوْا لَفَتَحْنَا عَلَيْهِمْ بَرَكَاتٍ مِنْ السَّمَاءِ وَالْأَرْضِ (7: 96)
Had the people of these cities accepted faith and kept from evil, We would have showered the blessings of the heavens and the earth upon them. (7:96)
According to the Qur’an, the Prophet Noah (sws) recounted before his nation this established practice of the Almighty in the following words:
فَقُلْتُ اسْتَغْفِرُوا رَبَّكُمْ إِنَّهُ كَانَ غَفَّارًا يُرْسِلْ السَّمَاءَ عَلَيْكُمْ مِدْرَارًا وَيُمْدِدْكُمْ بِأَمْوَالٍ وَبَنِينَ وَيَجْعَلْ لَكُمْ جَنَّاتٍ وَيَجْعَلْ لَكُمْ أَنْهَارًا (71 :10-12)
I said to them: ‘Ask forgiveness from your Lord. He is Oft-Forgiving. [As a result], He shall send rain upon you in abundance and give you increase in wealth and children and bestow on you gardens and shall bring forth for you springs of water’. (71:10-12)
The Old Testament says in this regard:
If you fully obey the Lord your God and carefully follow all his commands I give you today, the Lord your God will set you high above all the nations on earth. All these blessings will come upon you and accompany you if you obey the Lord your God: You will be blessed in the city and blessed in the country. The fruit of your womb will be blessed, and the crops of your land and the young of your livestock – the calves of your herds and the lambs of your flocks. Your basket and your kneading trough will be blessed. You will be blessed when you come in and blessed when you go out. (Deuteronomy, 28:1-7)
After this preliminary discussion, I will now attempt to explain this law in detail. (The verses of the Qur’an on which this law is primarily based are stated in bold.)
1. The Obligation of Zakah
وَأَقِيمُوا الصَّلَاةَ وَآتُوا الزَّكَاةَ وَأَقْرِضُوا اللَّهَ قَرْضًا حَسَنًا وَمَا تُقَدِّمُوا لِأَنْفُسِكُمْ مِنْ خَيْرٍ تَجِدُوهُ عِنْدَ اللَّهِ هُوَ خَيْرًا وَأَعْظَمَ أَجْرًا (20:73)
And [in the daytime and at night] establish the prayer and pay Zakah and [for the cause of your religion and state] lend to Allah a befitting loan, and remember whatever good you send forth for yourselves you shall find it with Allah better than before and greater in reward. (73:20)
In the verse quoted above, and at numerous other places in the Qur’an, Muslims are directed to pay Zakah from their wealth. In religious parlance, Zakah means the wealth given in the way of Allah to obtain purity of heart and to obtain the blessings of Allah. The root of the word Zakah in Arabic has two meanings: ‘purity’ and ‘growth’. The words ‘purify them’ in the first and ‘people who will increase their wealth’ in the second verse quoted below allude to these two meanings of the word:
خُذْ مِنْ أَمْوَالِهِمْ صَدَقَةً تُطَهِّرُهُمْ وَتُزَكِّيهِمْ بِهَا (103:9)
Take alms from their wealth [O Prophet!] in order to purify them with it. (9:103)
وَمَا آتَيْتُمْ مِنْ رِبًا لِيَرْبُوَا فِي أَمْوَالِ النَّاسِ فَلَا يَرْبُوا عِنْدَ اللَّهِ وَمَا آتَيْتُمْ مِنْ زَكَاةٍ تُرِيدُونَ وَجْهَ اللَّهِ فَأُوْلَئِكَ هُمْ الْمُضْعِفُونَ (39:30)
That which you give as loan on interest that it may increase on [other] people’s wealth, it has no increase with Allah; but that which you give as Zakah, seeking Allah’s countenance, it is these people who will increase their wealth [in the Hereafter]. (30:39)
Subsequently, this word was specifically used for the wealth a Muslim gives to those in authority to meet the collective requirements of a state. It is evident from the Qur’an that like Salah (prayer), Zakah has always remained an essential ingredient of the Shari‘ah given to the Prophets of Allah. When the Almighty directed the Muslims to pay Zakah, it was not an unknown thing to them. All the followers of the religion of Abraham (sws) were well aware of its philosophy as well as its rates and statutory exemptions. Consequently, there was no need to state the details of Zakah in the Qur’an. It was a pre-existing Sunnah which the Qur’an only revived and which the Prophet (sws), on the Almighty’s bidding, established as a directive of the Shari‘ah among the Muslims. If, irrespective of the differences of the jurists in understanding the concept of Zakah, the details of this directive which have reached us through the consensus of the Companions of the Prophet (sws) and their practical perpetuation, and which now stand validated through the consensus of the Ummah are studied as regards their bases in the Shari‘ah, then they can be stated as:
1. Items
Nothing except the tools of production, personal items of daily use and a fixed quantity called nisab are exempt from Zakah. It shall be levied annually on wealth of all sorts, livestock of all types and produce of all forms of every Muslim citizen who is liable to it. However, if some need arises, an Islamic State can give relaxation on any item.
2. Exemption (Nisab)
The statutory exemptions (nisab) in wealth, livestock and agricultural production are fixed as:
(a) Wealth: 5 ounces / 612 grams of silver or its equivalent
(b) Produce: 5 Wasaqs / 1119 kilograms of dates or their equivalent
(c) Livestock:5 camels, 30 cows, 40 goats
3. Rates
(a) Wealth:2 ½% annually
(b) Produce:(i) 5 %: on all items which are produced by the interaction of both labor and capital, (ii) 10 %on items which are produced such that the basic factor in producing them is either labor or capital and (iii) 20% on items which are produced neither as a result of capital nor labor but actually are a gift of God.
(c) Livestock
(i) CAMELS
– From 5 to 24 (camels): one she-goat on every five camels
– From 25 to 35: one one-year old she-camel or in its absence, one two-year old camel
– From 36 to 45: one two-year old she-camel
– From 46 to 60: one three-year old she-camel
– From 61 to 75: one four-year old she-camel
– From 76 to 90: two two-year old she-camels
– From 91 to 120: two three-year old she-camels
– Over 120: one two-year old she-camel on every forty camels and one three-year old on every fifty camels
(ii) COWS
– one one-year old calf on every thirty cows and one two-year old calf on every forty cows
(iii) GOATS
– From 40 to 120: one she-goat
– From 121 to 200: two she-goats
– From 201 to 300: three she-goats
– Over 300: one she-goat on every hundred goats
4. Heads
The heads for which Zakah is to be spent were never unclear. It was always expended on the poor and needy and on the collective requirements of the Muslims. However, when the hypocrites in the time of the Prophet (sws) raised certain doubts about these heads, the Qur’an unequivocally stated them:
إِنَّمَا الصَّدَقَاتُ لِلْفُقَرَاءِ وَالْمَسَاكِينِ وَالْعَامِلِينَ عَلَيْهَا وَالْمُؤَلَّفَةِ قُلُوبُهُمْ وَفِي الرِّقَابِ وَالْغَارِمِينَ وَفِي سَبِيلِ اللَّهِ وَاِبْنِ السَّبِيلِ فَرِيضَةً مِنْ اللَّهِ وَاللَّهُ عَلِيمٌ حَكِيمٌ (60:9)
Zakahis only for the poor and the needy, and for those who are ‘amils over it, and for those whose hearts are to be reconciled [to the truth], and for the emancipation of the slaves and for those who have been inflicted with losses and for the way of Allah and for the welfare of the wayfarers. This is an obligation decreed by the Almighty, the All-Knowing and the Wise. (9:60)
Here are some details of the heads of Zakah mentioned in this verse:
(a) ‘الْفُقَرَاءِ وَالْمَسَاكِينِ’ (al-fuqara wa’l-masakin):The poor and the needy.
(b) ‘الْعَامِلِينَ عَلَيْهَا’ (al-‘amilina ‘alayha):1 the salaries of all employees of the state.
(c) ‘الْمُؤَلَّفَةِ قُلُوبُهُمْ’ (al-mu’allafat-i-qulubuhum): all political expenditures in the interest of Islam and the Muslims.
(d) ‘فِي الرِّقَابِ’ (fi’l-riqab): for liberation from slavery of all kinds.
(e) ‘َالْغَارِمِينَ’ (al-gharimin): for helping people who are suffering economic losses, or are burdened with a fine or a loan.
(f) ‘ِفِي سَبِيلِ اللَّهِ’ (fi sabilillah):for serving Islam and for the welfare of the citizens.
(g) ‘اِبْنِ السَّبِيلِِِ’ (ibnu’l-sabil): for helping travelers and for the construction of roads, bridges and rest houses for these travelers.
This is all as far as the Shari‘ah regarding Zakah is concerned. However, since there exist some general misconceptions about it, the following points must remain in consideration:
Firstly, there is no basis in the Qur’an and Sunnah for the condition of ‘تمليك ذاتى’ (personal-possession) imposed by our jurists. Therefore, just as Zakah can be given in the personal possession of an individual, it can also be spent on projects of his welfare2.
Secondly, if the basis of the directive is taken in consideration, industrial produce of all forms, production of all forms based on various skills, rent of various items or buildings of all forms, salaries (reward for labor) and fees of all forms obtained in various ventures must be classified as produce and not as wealth; therefore, the Zakah imposed on them should be based on the rates specified by the Prophet (sws) for land produce.
Thirdly, according to the above mentioned principle, Zakah on leased-out houses, properties and other rented items should be that which is levied on produce, and if they are not rented out, its rate should be that which is levied on wealth.
Fourthly, the Nisab of all items which are analogously linked such as those above can be fixed by the state, if need be, by analogy with the ones specified.
2. Sanctity of Ownership
فَإِنْ تَابُوا وَأَقَامُوا الصَّلَاةَ وَآتَوْا الزَّكَاةَ فَخَلُّوا سَبِيلَهُمْ (5:9)
If they repent, establish the prayer and pay Zakah, leave them to themselves. (9:5)
This verse explains to the Idolaters of Makkah the conditions which they had to fulfill to become Muslim citizens of the Islamic state of Madinah. If this context of the verse is kept in consideration, it follows from the words ‘فَخَلُّوا سَبِيلَهُمْ’ (fa khallu sabilahum: leave them to themselves) that just as an Islamic State cannot tamper with the life, honor and freedom of expression of people who have acquired its citizenship after fulfilling the conditions stated in the verse, it also has no right to commit any excesses against their assets, wealth and property. If they accept Islam as their religion, establish the prayer and are willing to pay Zakah, the Almighty bids the state to leave them to themselves and not forcibly demand a single penny from them once they have paid Zakah. The Prophet (sws), while explaining this directive, is reported to have said:
أُمِرْتُ أَنْ أُقَاتِلَ النَّاسَ حَتَّى يَشْهَدُوا أَنْ لَا إِلَهَ إِلَّا اللَّهُ وَأَنَّ مُحَمَّدًا رَسُولُ اللَّهِ وَيُقِيمُوا الصَّلَاةَ وَيُؤْتُوا الزَّكَاةَ فَإِذَا فَعَلُوا عَصَمُوا مِنِّي دِمَاءَهُمْ وَأَمْوَالَهُمْ إِلَّا بِحَقِّهَا وَحِسَابُهُمْ عَلَى اللَّهِ (مسلم: رقم 22)
I have been directed to fight3 with these people until they testify to the oneness of Allah and the prophethood of Muhammad, establish the prayer and pay Zakah. If they accept these conditions, their lives shall be given protection except if they are deprived of this protection on the grounds of some offence they commit4. As far as their account is concerned, it rests with Allah. (Muslim: No. 22)
In the sermon of the Last Hajj, the Prophet (sws) asserted that the wealth of a Muslim has eternal sanctity. Without the permission of the Almighty no one – not even the ruler of the Muslims – has the authority to violate this sanctity. The following subtle words allude to this:
إِنَّ دِمَاءَكُمْ وَأَمْوَالَكُمْ حَرَامٌ عَلَيْكُمْ كَحُرْمَةِ يَوْمِكُمْ هَذَا فِي شَهْرِكُمْ هَذَا فِي بَلَدِكُمْ هَذَا (مسلم: رقم 1218)
Indeed, your blood and your wealth are as sacred and inviolable as this day5 of yours, this month6 of yours in this city7 of yours. (Muslim: No. 1218)
It is evident from this discussion that an Islamic state has no right to impose any sort of tax on its Muslim citizens except Zakah, the rates of which have been fixed in their wealth by the Almighty through His Prophets.
This is an unimpeachable directive of Islam. It is this very directive through which Islam not only ends once and for all a great tussle between a state and its citizens in financial matters, but also eliminates the possibility of a state creating imbalance in the national economy by exceeding the resources available to them.
3. Formation of a Public Sector
مَا أَفَاءَ اللَّهُ عَلَى رَسُولِهِ مِنْ أَهْلِ الْقُرَى فَلِلَّهِ وَلِلرَّسُولِ وَلِذِي الْقُرْبَى وَالْيَتَامَى وَالْمَسَاكِينِ وَابْنِ السَّبِيلِ كَيْ لَا يَكُونَ دُولَةً بَيْنَ الْأَغْنِيَاءِ مِنْكُمْ (7:59)
And whatever the Almighty has bestowed on His Prophet from the people of the cities, it is reserved for Allah and His Prophet and the relatives of the Prophet8 and the orphans and the needy and the wayfarers so that it may not circulate in only the rich among you. (59:7)
The context of this verse is that in the Prophet’s times when people demanded that the wealth, land and assets obtained from the enemy against whom no war had been waged be distributed among them, the Qur’an refused this demand; it asserted that they belonged to Allah and the Prophet (sws) and were reserved for the collective requirements of the state and religion, and for the poor and needy. This, according to the Qur’an, was necessary so that wealth should not get concentrated among the rich and that it be directed to those sectors of the society who, because of their natural disabilities and lack of resources, are unable to struggle for their livelihood or for some reason are left far behind others in earning for themselves.
Since the wealth and assets referred to in the above mentioned verse were obtained without any real assistance from the believers merely through the Almighty’s help in accordance with His law regarding His Messengers, all of these were reserved for collective purposes. The spoils of war obtained in the times of the Prophet (sws) in various battles fought in Arabia were also owned by Allah and the Prophet (sws)9 because of the peculiar nature of these armed offensives. However, since the believers had also assisted in acquiring them by using their personal weapons, camels and horses as well as food, camps and various other items needed during these wars, it was necessary to give them their due from these spoils. Nevertheless, even in these spoils the Qur’an reserved 1/5th of the share for these collective purposes:
وَاعْلَمُوا أَنَّمَا غَنِمْتُمْ مِنْ شَيْءٍ فَأَنَّ لِلَّهِ خُمُسَهُ وَلِلرَّسُولِ وَلِذِي الْقُرْبَى وَالْيَتَامَى وَالْمَسَاكِينِ وَابْنِ السَّبِيلِ (41:8)
You should know that a fifth of the spoils you get hold of are for Allah and the Prophet and his near relatives and the orphans and the needy and the wayfarer. (8:41)
If the terminology of modern times is used, we can say that it is the purport of the Qur’an that in the economy of a country a public sector should come into being parallel to the private sector. The reason is that at the state level this is the only way through which a balance can be achieved in the circulation of wealth, and the problem of concentration of wealth in certain sections of the society as a result of the development of private sector can be resolved in an organized and planned manner.
As far as the way in which this public wealth and property are to be organized is concerned, the Shari‘ah has left the matter to the circumstances which prevail in a society and upon the general well-being of the Muslims. Therefore, the ruler of an Islamic state in consultation with the elected representatives can adopt whatever measures he deems appropriate in this regard. Consequently, it is known that the Prophet (sws) in his time gave the lands of Khaybar for crop sharing10, left certain lands under the permanent control of certain people for whom these lands had been reserved11, regarded certain lands as H~ima12, left certain things to be shared equally by every one13 , fixed the principle of ‘اَلْاَقْرَبْ فَالْاَقْرَبْ’ (nearest to the next nearest) for using the water of certain springs and canals14 or the way the Caliph ‘Umar (rta) imposed a fixed amount of tribute (Khiraj) on the state owned lands of Syria and Iraq conquered in his times, according to the extent of their produce while leaving them in the hands of their owners15.
4. Incompetence
وَلَا تُؤْتُوا السُّفَهَاءَ أَمْوَالَكُمْ الَّتِي جَعَلَ اللَّهُ لَكُمْ قِيَامًا وَارْزُقُوهُمْ فِيهَا وَاكْسُوهُمْ وَقُولُوا لَهُمْ قَوْلًا مَعْرُوفًا (5:4)
Do not give to the feeble-minded the wealth and property which the Almighty has made a means for your support and development. But feed and clothe them with magnanimity, and speak to them with kindness. (4:5)
It is clear from the context of this verse that it pertains to orphans and their guardians. The Almighty has directed us that since wealth has been made a means of subsistence and survival for man, therefore if an orphan is imprudent and naïve, then his guardians while acknowledging his personal right must also take into consideration the welfare of the family and that of the collectivity, and during the time he is unable to properly discharge his responsibilities, they must not return his wealth to him and should themselves take care of this wealth.
This is the context of the verse. However, a further reflection on this verse shows that the basis of the directive is their incompetence and not their status as orphans. Therefore, it can be concluded that if the basis of the directive exists, the above right granted to the guardians with regard to the orphans, by analogy, should also be granted to a state with regard to its citizens. This measure takes care of the welfare and well-being of the society, which must always be kept in consideration. So, if a person because of his foolishness and carelessness squanders away or ruins his wealth and resources, then it is the duty of the state to strip him from their control and management and take charge of them. However, in this case, it has been directed that the state must generously cater for his requirements from his wealth and whole-heartedly adjust all matters. The Arabic words used are ‘وَارْزُقُوهُمْ فِيهَا’ (feed them in it) and not ‘وَارْزُقُوهُمْ منها’ (feed them from it), and these words, according to Arabic usage, clearly point to the generosity with which he must be looked after.