Sustainable quality of human life depends on the flexibility in managing and expanding wealth. Investment therefore emerges as an important instrument to secure capital growth with a potential risk of loss.
Meticulous investment planning will catalyze economic development in a country and ensure the survival of humanity. Islam is not a religion which solely emphasises on ibadah, but also encompasses a comprehensive system of human life. Islam strongly encourages people to seek the bounty of Allah SWT by engaging in any activity that may lead to the achievement of this objective.
In the realization of it, the observance of guidelines and regulations from authoritative text are required. Thus, this study aims to analyze Islamic textual evidence mainly from the Quran and Sunnah on the significance of investment. In addition, general overview from Muslim scholars pertaining to investments will also be discussed in brief. The world economic crisis has significantly awakened people on the importance of effective financial management. Investment therefore emerges as an important instrument to secure capital growth with a potential risk ofloss.
Islam demands that humans act beneficially for this life and the hereafter. A true Muslim is a person who devotes himself to develop his potential, both physically and spiritually. Managing life includes organizing our expenditure wisely as well as strengthening our financial well-being to ensure our survival. In managing natural resources,.
Published by Elsevier B. Islam commands its followers to engage in lawful activities and manage their wealth accordingly as ordained by Allah SWT and His Messenger. Islam, as a complete and practical religion, teaches us to acquire wealth in order to provide for those under our responsibility as well as to restrain our hunger and thirst, where it becomes the necessity of our life.
The wealth or resources is a blessing that God has given to mankind. From the Islamic perspectives, all wealth belongs to God and man is only a trustee who should manage it accordingly in order to achieve worldly prosperity. The Quran says:. A contemporary scholar, Sheikh Dr. Yusuf Al-Qaradhawi interpreted the above verse by denoting wealth as a great responsibility in which Allah SWT had offered to the heavens, the earth and the mountains; all of which declined but man accepted.
This responsibility requires man to carry out the duties placed as His vicegerent on earth and will be judged by Allah SWT in the hereafter. Therefore, Muslims should follow the guidelines and the injunctions of God in their professions. A blessed wealth would bring the benefits to oneself and to others. One should start giving first to his dependents. And the best object oj charity is that 'which is given by a 'wealthy person from the money 'which is left after his expenses. And whoever abstains from asking others for some financial help, Allah SWT will give him and save him from asking others, Allah SWT 'will make him self-sufficient".
In general, wealth or assets should be used to meet the needs of humans at all levels; individual, family, society and country. You 'will surely be tested in your possessions and in yourselves. And you 'will surely hear from those who were given the Scripture before you and those who associated others with Allah much abuse. But ij you are patient and fear Allah-indeed, that is for the matters worthy oj determination According to Abdullah , halal rizq will be blessed while haram prohibited rizq will result in anxiety and uneasiness. A person will not enter paradise if his growth is derived from haram or illegal efforts Islam has concluded that any types of work, practical acquisition or efforts aimed towards acquiring rizq, is considered as ibadah i.
It does not only bring return on this earth but it will also be compensated in the hereafter. Islam is the only religion which specifies and dictates how man should perform his business and manage economic activities in accordance with the teaching of the Quran and Sunnah. Thus, a person entrusted in managing wealth can achieve the highest degree of virtue falah by spending out his wealth within the boundaries prescribed by the Shari'ah.
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A1 Ghazali , a great Muslim jurist, said "The very objective of the Shari'ah is to promote welfare which lies on safeguarding human faith, life, intellect, posterity and property". On the other hand, the Shari'ah explicitly specifies a set of rules and principles that regulates the legitimate sources of acquiring al-mal property as well as its growth and its disposal.
These moral limits are meant to achieve two vital objectives; to promote socioeconomic justice and to uphold the concept of al-Ihsan. Al-Ihsan is. Investment in Arabic is known as al-Istismar which refers to activities that increase wealth or revenues al-Mausu'ah al-Fiqhiyyah, According to Kamus Dewan , investment can be literally defined as the capital invested in a transaction with the purpose of multiplying the profits. In technical terms, it is known as an activity of capital investment in the forms of properties and money to achieve long term profits in a project Mazin Ubaydat, Based on these definitions, it can be deduced that capital and profits are the main factors in investment or business, besides its durations in the long run.
This term is further enhanced in the viewpoint of Islamic economy by utilising the Shari'ah law. As defined by Al-Hawariyy , investment in Islam is regulated by the Shari'ah in realizing the objectives of Islamic economy that may lead to the significant changes of Muslim community. Similarly, Sano Qutub emphasizes that investment is an action of individual or organizational body in managing wealth that complies with the Shari'ah principles to gain profit in securing his responsibility as Khalifah of Allah SWT.
These views therefore illustrate the significance of investment in Islam from various aspects. Nonetheless, the ultimate goal is to perform investment as remembrance and thankfulness to Allah SWT for His benefits and blessings as mentioned in the Holy Quran:. Our involvement in any economic activities including investment, however, should not cause us to deviate from Allah SWT.
In fact, we are always reminded to show our gratitude towards Allah SWT. Therefore, when these principles are applied, investment should be able to free mankind from bondage of poverty. Islam does not obligate its followers to rely only on their fate, but display their earnest effort to earn a better living. The above Hadith contains a command from Prophet Muhammad SAW to manage the wealth of orphans in a proper way by investing it. The purpose is to avoid the wealth from being decreased and depleted. If the wealth is managed wisely by involving it in an investment, it can be multiplied and secure the benefit to the orphan.
No one should carry out any activities that contradict the Islamic law because of the belief that Allah SWT can provide and recall anything at any time.
Education And Economy in The Sunnah
Therefore, a Muslim should be humble and moderate at all times. Qur'an outlines that the basis of wealth and its nature belong to God. Allah SWT has bestowed upon humans the responsibility to manage wealth. However, it is only right to symbolize wealth belonging to God, so it must be harnessed and channelled in the right way as endorsed by the Shari'ah. Islam is a comprehensive religion because it governs and secures every aspect of human life. It encompasses personal and societal well-being as it relates to the worldly life and the hereafter. Muslims should therefore manage their wealth wisely and systematically to secure their future.
Human beings must know their responsibilities in managing their wealth and property wisely because everything will be questioned in the hereafter. Investment is a good way to make proper use of savings and to achieve our goals in life. In terms of investment funds, the organizations that manage individual savings get to share the benefits at the same time as each fund has its own mechanism, capital, subscription, maturity and expected returns and risks Tayar, Nowadays, the demand for money has increased because of three motives. They are transaction motive, precautionary motive and speculative motive.
The transaction motive refers to the demand for money for the current and daily transaction. As for precautionary motive, it holds the money at the time when unpredictable contingencies such as unemployment and accidents occur. Lastly, speculative motive refers to the desire of the public to hold cash balances to meet the advantage in market movements regarding the future changes in price and rate of interest. Out of the three motives, precautionary and speculative motives encourage people to save money while the banks will use the money to lend to businessmen for investment purposes.
Investment sectors in Malaysia have grown rapidly as catalyzed by the positive development of economy. With various investment products offered, the concern for a Muslim is to identify its suitability with the principles and guidelines of Shari'ah. Any investment activity must avoid prohibited elements such as interest riba , uncertainty gharar and gambling maysir that is involved in the structure of the transaction.
In fact, there are many external elements that need to be considered. Otherwise it will affect the compliance of Shari'ah. In the above hadith, Prophet Muhammad SAW emphasized the obligation of being involved only in legal activities and to avoid the opposite.
Islamic Economics (Master, Doctorate)
Thus, our responsibility as a Muslim is to ensure that our investment activities comply with the Shari'ah principles and Maqasid al-Shari'ah. However, in today's world, the high cost of living has put extreme pressure on people in that they begin to see everything from the economic perspectives. On the other hand, any science, whether social or natural, must be based on a solid epistemological foundation.
Such an orientation subsequently provides axioms, assumptions and methodological formalism to the entire body of theory and application. Einstein said that science without epistemology remains muddle-headed Bohr, The rise of heterodox economics in recent times is of a deeply ontological and epistemological origin. Even neoclassical economics is epistemological in nature according to its own axiom of economic rationality.
All of the science that we have inherited rests on the epistemology of heteronomy Bhaskar, Heteronomy conveys the nature of dualism between a priori and a posteriori domains of reasoning. Such issues can be discussed to bring out the distinctive difference between rationalism of the Occidental theory of science and the episteme of unity of knowledge of the tawhidi methodological worldview. This is the ineluctable axiom of tawhid as the monotheistic law of unity of knowledge.
It exists not simply in utterance. Rather, as Imam Ghazali said, the understanding of tawhid as methodological worldview has sixty stages with increasing depth Karim, Islamic economics casually adopted an utterance around the outer husk of declaring tawhidi belief without knowing its world-system dynamics and axiomatic character in the building of socio-scientific thought, meta-science and applications Naqvi, The tawhidi methodological worldview is the universal and unique foundation of all Islamic intellection.
It is formal in nature if properly used for the construction of the cognitive and material world-system and its specifics. Such formal intellection with its methodology, methods and application is equally applicable to the building of meta-science in the entire world of learning. On the indispensability of the tawhidi methodological worldview in the mundane world-system, Ibn Arabi wrote in his Futuhat Ibn al-Arabi trans.
Chittick, :. The first way is by way of unveiling. It is an incontrovertible knowledge which is actualized through unveiling and which man finds in him. He receives no obfuscation along with it and is not able to repel it[…]. This way is lower than the first way, since he who bases his consideration upon proof can be visited by obfuscations which detract from his proof, and only with difficulty can he remove them. The Islamic economic approach, which only utters tawhid at the beginning and at the roots, is unable to formalize the monotheistic meaning as a methodology, formalism and application.
Contrary to this narrow attitude is the induction of the progressive knowledge of unraveling the tawhidi methodological worldview into socio-science and economics. We will thereby refer to the tawhidi epistemological foundation of Islamic economic science by the term TIE. In TIE, consequently, the Kantian problematique of heteronomy as enforced partition between the moral imperative of the a priori domain and the practical reasoning of the a posteriori domain has entered Islamic socio-scientific thought in general and Islamic economics and finance in particular in a most surreptitious way.
It bears its endogenous dynamics of organic unity of being and becoming concerning mind and matter. The tawhidi methodological worldview is thus indispensably required to give the universally and uniquely original, revolutionary, essential Islamic foundation to what may be referred to as TIE and finance, science and society Choudhury, As was mentioned above, Islamic socio-scientific intellection in general and Islamic economics and finance in particular have not been able to blaze the emergence of a field of heterodox economics.
Heterodox economics by itself is a deeply ontological and epistemological inquiry Lawson, This is equivalent to uttering but not knowing how to cognize and apply the methodology of tawhid in the building of meta-science for rendering to the world of learning. Will it stay this way? The possibility is not to be found in the present state of Islamic thought by missing out the episteme of tawhid. Yet, substantive effort and contributions in this direction persist.
The present paper elaborates on the epistemological methodology of tawhid for the groundwork of a heterodox Islamic economics and finance. The resultant tawhidi methodology is found to be rigorously analytical, invoking science, formalism and analytical depth, as well as universal application to particular issues and problems.
It is a gross mistake and complete denial of scholarly knowledge to say that tawhid is sheerly philosophical and that deep erudition of it in Islamic economics is not understood. The good things are to be accepted, the bad things shunned. It is a reflection of the unity of being and becoming along the dynamics of forming complementarities between the good and recommended things of life. The good things of life participate and complement in unity of inter-causal relationship. The bad things compete and marginalize each other.
There is no scope of unifying for purposive unity, except to marginalize each other by association and differentiation. In Islamic economics, borrowing from mainstream and orthodox economics, the postulates of competition and marginalism are accepted. This paper explains how the nature of tawhidi methodology is intellectually heightened by feedback of cause and effect circularity centered in knowledge par excellence. God is the fullness of knowledge that is embodied in the monotheistic law as the primal ontology, meaning theory of being and existence.
They together explain the nature of the paired and the differentiated universe oppositely. They provide the ways of moral construction by consciousness of unity of knowledge in the details of the conscious universe. Thus, the nature of Islamic economics is axiomatically premised in tawhidi methodology of unity of knowledge functioning as organic relations of being and becoming. The result is the continuous nature of evolutionary learning emerging from inter-causality between the participatory and complementary good things of life.
Complementarity signifying participation presents the sure sign of paired unity of knowledge acting upon diversity of things. The world-system that is constructed by the tawhidi episteme is a continuously simulated universe of unity of knowledge. The process of participatory and complementary organic relations never ceases. It simply closes in the Hereafter. According to the tawhidi episteme of unity of knowledge and the imminent methodology applied to Islamic economics, this paper will prove that almost all orthodox and mainstream economic thought in its critical components, is untenable in TIE.
Continuous evolutionary learning in unity of knowledge results in annulment of steady-state equilibriums, optimization models, formal functions of maximization and almost all of the postulates of economic rationality. Only evolutionary learning models remain. The figments of optimization and steady state are eschewed.
Evolutionary equilibrium is sustained in the evolutionary learning in the socio-scientific universe of TIE. The use of tawhidi methodology of unity of knowledge and its induction of the world-system causes almost all of the postulates of mainstream and orthodox economic theory to be null and avoid. They are replaced by the holistic, knowledge-induced, evolutionary learning of economic reasoning. Yet, Islamic economics, as we have inherited it, adheres to such postulates. The following are some of the rejections of mainstream economic theory by TIE: Scarcity: The core mainstream orthodox economic axiom is scarcity of resources.
This is true both in the absolute and relative meanings of resource scarcity. Yet, such states of scarcity are recoverable ones towards reviving abundance. That is, moral reconstruction is always the goal and possibility of the tawhidi evolutionary learning worldview that increases resources continuously. Resources are thus endogenized continuously by knowledge. The result then is non-existence of the concept of marginal rate of substitution, and relative prices of all kinds, which together characterize the neoclassical mainstream economic world-system in both microeconomics and macroeconomics.
Scarcity by technical definition represents the resulting opportunity cost of marginalism. As fuzzy surfaces caused by continuous evolutionary learning cannot allow for marginal rate of substitution to exist and relative prices to be defined along smooth surfaces. Therefore, the postulate of scarcity must be annulled in TIE. Opportunity cost and marginal rate of substitution marginalism : Because of the continuously endogenous effect of interaction, integration, and evolutionary learning as properties of the pairing, i. In this way, the entire consumer indifference curve, welfare surfaces, and the production possibility curve do not take shape and form.
Objective functions of mainstream and orthodox economics: The non-existence of smoothly concave-to-the-origin indifference curves and production isoquants, and smooth convex-production-possibility curves imply that the well-behaved types of utility function and production function in substitutes do not exist. Besides, substitutes cannot exist in the continuously evolutionary learning by pairing the complementarities of goods, services and productive inputs. Ethically speaking too, in the first-order condition of relationship between goods and productive inputs, the economic expansion path remains positively sloped.
In the second-order condition of allocation of resources, it is possible that one of the goods and services receives differentially less than the other. But both gain along the positive economic expansion path.
Relative prices of goods, services, and productive factors: The non-existence of smooth indifference curves, production isoquants, and production possibility surfaces cannot allow for well-determined relative prices. Market prices: In the absence of well-determined relative prices, consumer demand curves and market demand curves cannot exist in their smooth forms. This also happens due to the absence of a simple price-quantity relationship for a specific good in demand and supply. Rather, other critical factors militate against it and intervene as a direct consequence.
Education And Economy in The Sunnah
Examples of such systemic interferences are dynamic preferences of choice and endogenously related variations on other characteristics, e. Besides, under the effect of increasing returns to scale, the total cost curve, average cost curve and the productivity curve of output altogether remain continuously evolutionary and downward shifting with endogenous learning.
Marginal productivities of productive factors: The absence of substitution and its replacement by pervasive complementarities between goods, services and productive inputs cannot allow for marginal productivities of inputs, goods and services. All other characteristics of non-existing steady-state equilibrium and optimal points cannot allow for marginal productivities to exist.
Dynamic preferences as by induction of technological change: The evolutionary learning properties of the utility curve therefore consumer indifference curve and production function therefore production isoquants are causally related with dynamic preferences, tastes and technology.
Consequently, all the properties of rational choice theory are annulled in the presence of evolutionary learning and pervasive organic complementarities caused by the tawhidi axiom of organic unity of knowledge and its effect on the evolutionary learning pairing universe.
The same kind of result is true of technology. Unlike the exogenous nature of technology in mainstream orthodox economic theory, technology is endogenously determined by continuous evolutionary learning. Such learning phenomenon in unity of knowledge affects resources, preferences and choices by their mutual interaction and integration followed by continuous evolution. These are substantive characteristics of evolutionary learning TIE that are explained in detail throughout this paper.
Economic rationality: This is a mainstream orthodox axiom based on full information and pre-ordering of given preferences as datum, so as to establish internal consistency of the neoclassical theory in problem-solving. However, in Islamic economic theory according to the tawhidi methodological worldview, the postulate of full information is untenable.
The tawhidi universe to which we are exposed by cognition and experience under evolutionary learning in unity of knowledge can never allow for discontinuity of knowledge and thereby differentiation oppositely in the states of non-learning. Besides, dynamic preferences and endogenous technological change under the impact of evolutionary learning in unity of knowledge cannot be pre-ordered.
Over time, it has been tweaked by Muslim scholars to adjust for changes in the socio-political and economic circumstances without sacrificing the basic principles laid out in the Holy Quran and reinforced by the Holy Prophet, peace and blessings of Allah be upon him.
The Holy Quran provides a framework for mankind, teaches man his obligations towards Allah and serves as the guiding light by which human beings should conduct their social and economic affairs. Islamic economics is a complete system that defines the rules of engagement for the social and economic behavior of individuals. Among the several principles, which the Divine revelation sets out for this purpose, the following constitute the basic building blocks of Islamic Economics:.
Islam provides every individual with some basic socio-economic rights, such as the right to access factors of production — land, labour and capital economic justice , the right to be heard and redress of grievances legal justice , and the right to safety, education, satisfaction of basic needs, access to public property, etc. It is incumbent upon the rulers of the time to ensure that the socio-economic rights of individuals are respected and fulfilled. Following in the tradition of the Holy Prophet sa , the Promised Messiah as and his Khulafa have constantly reminded us that equity, justice and fair play are the foundations of the Islamic economic system, or for that matter, any socio-economic system, and must remain in place for that system to be feasible and sustainable in the long run.
Hazrat Khalifatul Masih V aa has reminded world leaders on several occasions that unless economic, legal and social justice is restored and maintained within and among countries, the world will never be at peace. Economic injustice and social injustice have always been the root cause of wars and human destruction. Greed and fear make the powerful uncomfortable, who in turn suppress the basic rights of the weak to remain in control.
As Muslims, we firmly believe that God Almighty is the real and ultimate owner of all property on this planet and man as His vicegerent is entrusted with this property, which man must use according to His instructions. Thus, ownership of private property land, commodities and capital by man is subject to the sovereignty of God Almighty, and man will be accountable for its use on the day of judgement.
This belief sets us apart from the other two common economic systems, where individuals are considered either directly as owners of all private property capitalism , or collectively as owners of all property socialism. Interest, or riba , is defined as the excess over and above the principal amount lent or borrowed.
Term to maturity of a loan refers to the time period for which the money has been lent. In conventional economic systems, lenders get paid interest for providing the loan facility for a specified period of time. Islam prohibits riba in all of its forms as it amounts to exploitation of the weak, usury and allows wealth to accumulate in the hands of a few, thereby increasing the gap between the rich and the poor. The Holy Quran strictly prohibits the use of riba in commercial transactions. Riba has been prohibited in all revealed religions for being exploitative and the prime cause for injustice in economic distribution, leading to grave effects on human societies.
This prohibition is clearly stated in numerous places. For example:. He loves not the ungrateful sinner. But if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it. On the occasion of his last Hajj, the Holy Prophet sa declared all outstanding riba among Muslims to be cancelled. On behalf of his uncle Abbas ra , he cancelled all riba owed to him by his borrowers.
While prohibiting riba , which gives rise to some sort of risk-free capital, Islam provides believers an alternative mode of finance, the profit and loss sharing agreement, to conduct their economic transactions.
The concept of profit and loss sharing, which gives rise to risk-based capital, was first practiced in Medina after the Holy Prophet sa and his companions migrated from Mecca. At that time, the economy of Mecca was dominated by the Jews and was predominantly riba -based. After reaching Medina, the Holy Prophet sa instructed the migrating Muslims to indulge in agriculture and trade on a profit and loss sharing basis.