SHARI AH FRAMEWORK OF WEALTH MOBILIZATION {FOR A JUST SOCIETY}

SHARI AH FRAMEWORK OF WEALTH MOBILIZATION {FOR A JUST SOCIETY}

OVERVIEW OF THE STUDY The global economics and financial crises of today was the result of: Unfair distribution of wealth; Wide practices of lending with Riba Unwise consumption Huge gap between the rich and the poor and; Wide spread of poverty. All these urged economists to search for alternative ways to solve such problems. This brings in the question of whether the Islamic approach of wealth mobilization is capable of solving such problem or not 2

OBJECTIVE OF THE STUDY The main objectives of this paper are: To provide the shari ah framework for wealth mobilization and To explain the roles of all distributive and redistributive institutions in solving the above mentioned problems for fair and just society. INCEIF 6/17/2014 3

WHO IS RESPONSIBLE FOR THE CURRENT GLOBAL IMBALANCES? 1. GLOBAL RESPONSIBILITY: MAN HIMSELF Allah swt in His Holy Qur'an mentioned that: ظ ه ر ال ف س اد ف ي ال ب ر و ال ب ح ر ب م ا ك س ب ت أ ي د ي ال ن اس ل ي ذ يق ه م ب ع ض ال ذ ي ع م ل وا ل ع ل ه م ي ر ج ع ون "Corruption has appeared in the land and the sea on account of what the hands of people have wrought, that he may make them taste a part of that which they have done, so that they may return." Surat al-rum(30:41) 6/17/2014 INCEIF 4

Cont.. WHO IS RESPONSIBLE FOR THE CURRENT GLOBAL IMBALANCES? 2.INDIVIDUAL LEVEL: MUSLIMS RESPONSIBILITY Allah (swt) send a comprehensive system to serve mankind in the best way: ال ي و م أ ك م ل ت ل ك م د ي ن ك م و أ ت م م ت ع ل ي ك م ن ع م ت ي و ر ض يت ل ك م ال إ س ل ام د ي ن ا This day I have Perfected your religion For you, completed My favour upon you, And have chosen for you Islam as your religion. (Surat al-maidah 5:3) The Prophet (pbuh) said: "تركت فيكم ما إن تمسكتم به لن تضلوا أبدا كتاب اهلل وس نتي " I have left two things behind me for you (the Ummah). You will never go astray as long as you follow these two things. One of these two things is Allah s Holy Book (the Quran al-kareem) and the other is the Sunnah of his Most Beloved Prophet (pbuh). (Muwatta Imam Malik). INCEIF 6/17/2014 5

CURRENT SCENARIO 1. UNFAIR DISTRIBUTION OF WEALTH this crisis did not begin in the financial markets and it hasn t ended there. started since the 1970s introduction of technology, big corporations start increasing there productivity, hence increase profits of the rich while the wages of the employees remain the same. Hence, more supply less demand 6

CURRENT SCENARIO 2. LENDING WITH RIBA Rich start lending the employees through BANKS with interest (+) to increase the employees wages to be able to buy their products (increase demand). Employees are now happy to buy more products but they realized that they have to pay with interest (-) Resulting in decreasing their wages. Hence huge gap between the rich and the poor (+) (-) 7

CURRENT SCENARIO 3. WIDE GAP BETWEEN THE RICH AND THE POOR Including Arab countries 76.6% of the total wealth of the world consumed by 20% of the world s richest population, 21.9% consumed by 60% of the world s middle class population and; only 1.5% of its wealth consumed by 20% world s poorest INCEIF 6/17/2014 8

4. SPREAD OF POVERTY (INCLUDING MUSLIM COUNTRIES) According to the latest statistics of 2012 on global issues on poverty, almost half of the world are facing poverty: over 3 billion people live on less than $2.50 a day; 640 million live without adequate shelter; 925 million people suffer from hunger; 400 million have no access to safe water; 270 million have no access to health services; 10.6 million died before they reached the age of 5 and almost 1 billion are illiterate. INCEIF 6/17/2014 9

CONT., MUSLIM COUNTRIES BORROWED WITH RIBA SPREAD OF POVERTY According to Mr. Obasanjo, the ex-president of Nigeria during the G8 meeting, he said: All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors interest rates. If you ask me of what is the worst thing in the world, I will say it is compound interest. INCEIF 6/17/2014 10

5. UNWISE SPENDING GLOBAL PRIORITY $ BILLIONS Military spending in the world 780 Narcotics drugs in the world 400 Alcoholic drinks in Europe 105 Cigarettes in Europe 50 Business entertainment in Japan 35 Pet foods in Europe and the United States 17 Basic health and nutrition 13 Perfumes in Europe and the United States 12 Reproductive health for all women 12 Ice cream in Europe 11 Water and sanitation for all 9 Cosmetics in the United States 8 Basic education for all 6 1,458.00 INCEIF Source: Adopted from the World Bank Development Indicator 2008. Website: http://www.globalissues.org/article/26/poverty-facts-and-stats 11

CURRENT SCENARIO THE NEED FOR GLOBAL JUSTICE This is a crisis of the system itself, meaning the only solution is a total change in the structure of the economy. INCEIF 6/17/2014 12

SHARI AH PERSPECTIVE OF WEALTH MOBILIZATION (REMEDIES FOR THE ABOVE MENTIONED PROBLEMS ) Islam is not just a religion of worship, it is a comprehensive discipline that includes all aspect of sciences including economics It lays down a comprehensive economic system which has many distribution and redistribution institutions that have to function in parallel for a fair and just society. The Islamic system of distribution of wealth is unique in the sense that it helps to circulate the wealth from the have to the have not, and automatically solve all the above mentioned problems. 13

DISTRIBUTION AND REDISTRIBUTION INSTITUTIONS Hadith of the Prophet (pbuh) "ال تزول ق د م ا ع ب د يوم القيامة حتى ي سأل عن أربع عن ع م ر ه فيما أف ناه وعن جسد ه فيما أب اله وعن ماله م ن أي ن أخذه وفيما أن ف ق ه وعن ع لم ه ماذا ع م ل به ". According to this hadith man will be held accountable in the next world on four main things including how he acquires his wealth and spends it? (distribution and redistribution of wealth) INCEIF 14 6/17/2014

DISTRIBUTION OF WEALTH HOW TO ACQUIRE THE WEALTH? Beginning of the production process In Islam, there are two kinds of people who have a right to wealth: 1. Those who directly participated in the process of production, 2. Those who didn t take any direct part in the process of production but enjoyed a co-share in their wealth, (until they will be able to participate in the process of production). 6/17/2014 INCEIF 15

SHARIAH FRAMEWORK FOR WEALTH MOBILIZATION DISTRIBUTION & REDISTRIBUTION 1.DISTRIBUTION OF WEALTH/HOW TO ACQUIRE THE WEALTH? (have and have not) K N O W L E D G E MEANS OF ACQUIRING WEALTH 1.PRIVATE ENTERPRISE INSTITUTION 2.ALTERNATIVE INSTITUTIONS TO RIBA TRADE & BUSNIESS (COMMERCIAL ACTIVITIES) VOLUNTARY INSTITUTIONS COMPULSORY INSTITUTION Agriculture Sector Industrial Sector Infrastructure Sector Mining & Constructions INCOME AND WEALTH ACQUIRED -Rent -Wages, Salaries -Profit, Dividends, etc. Alternative institutions to Riba Receivers Service Sector E T H I C S 2. REDISTRIBUTION OF WEALTH/HOW TO SPEND THE WEALTH? Givers SPENDING ON MAN S NEED (Hierarchy of Muslims Needs) RE-DISTRIBUTION Compulsory and Voluntary

ALTERNATIVE INSTITUTION TO RIBA 1. INSTITUTION OF BAI /TRADE و أ ح ل الل ه ال ب ي ع و ح ر م الر ب ا Allah hath permitted trade and forbidden usury (Surat al-baqarah 2: 276) ال ت أ ك ل وا أ م و ال ك م ب ي ن ك م ب ال ب اط ل إ ل ا أ ن ت ك ون ت ج ار ة ع ن ت ر اض م ن ك م Do not devour another s property wrongfully unless it be by trade based on mutual consent. (4:29) OPENS THE DOOR FOR MANY FINANCIAL INSTITUTIONS i.musharakah/partnership/profit and Loss Sharing ii.mudarabah/profit Sharing Principle iii.murabahah/mark-up Principle iv.ijarah v.qard Hassan م ن ذ ا ال ذ ي ي ق ر ض الل ه ق ر ض ا ح س ن ا ف ي ض اع ف ه ل ه أ ض ع اف ا ك ث ير ة Who is he That will loan to God A beautiful loan, which God Will double unto his credit And multiply many times? (Surat al-baqarah 2:245) 17

SHARI AH FRAMEWORK FOR WEALTH MOBILIZATION DISTRIBUTION & REDISTRIBUTION 1.DISTRIBUTION OF WEALTH/HOW TO ACQUIRE THE WEALTH? (have and have not) K N O W L E D G E MEANS OF ACQUIRING WEALTH 1.PRIVATE ENTERPRISE INSTITUTION 2.ALTERNATIVE INSTITUTIONS TO RIBA TRADE & BUSNIESS (COMMERCIAL ACTIVITIES) VOLUNTARY INSTITUTIONS COMPULSORY INSTITUTION Agriculture Sector Industrial Sector Infrastructure Sector Mining & Constructions INCOME AND WEALTH ACQUIRED -Rent -Wages, Salaries -Profit, Dividends, etc. Alternative institutions to Riba Receivers Service Sector E T H I C S 2. REDISTRIBUTION OF WEALTH/HOW TO SPEND THE WEALTH? Givers SPENDING ON MAN S NEED (Hierarchy of Muslims Needs) RE-DISTRIBUTION Compulsory and Voluntary

ALTERNATIVE INSTITUTION TO RIBA 2. INSTITUTION OF SADAQAH ي م ح ق الل ه الر ب ا و ي ر ب ي ال ص د ق ات و الل ه ل ا ي ح ب ك ل ك ف ار أ ث يم Allah will deprive usury of all blessing, but will give increase for deeds of charity (Surat al-baqarah 2: 276) OPENS THE DOOR FOR MANY FINANCIAL INSTITUTIONS i.institution of Sadaqah: Provides direct donation in cash or in kind to needy relatives, needy friends or needy neighbours in situation where they face crucial need rather than being force to borrow with riba. ii.institution of Takaful, Provide financial assistance and a kind of protection based upon the principles of mutual cooperation/ta awun,. iii.institution of Waqf: Provides perpetual financing for all needed goods and services in Muslim society (such as education, healthcare, national security, different kinds of agricultural and industrial products, transportation facilities and basic infrastructure without any cost to the government) 19

SHARI AH FRAMEWORK FOR WEALTH MOBILIZATION DISTRIBUTION & REDISTRIBUTION 1.DISTRIBUTION OF WEALTH/HOW TO ACQUIRE THE WEALTH? (have and have not) K N O W L E D G E MEANS OF ACQUIRING WEALTH 1.PRIVATE ENTERPRISE INSTITUTION 2.ALTERNATIVE INSTITUTIONS TO RIBA TRADE & BUSNIESS (COMMERCIAL ACTIVITIES) VOLUNTARY INSTITUTIONS COMPULSORY INSTITUTION Agriculture Sector Industrial Sector Infrastructure Sector Mining & Constructions INCOME AND WEALTH ACQUIRED -Rent -Wages, Salaries -Profit, Dividends, etc. Alternative institutions to Riba Receivers Service Sector E T H I C S 2. REDISTRIBUTION OF WEALTH/HOW TO SPEND THE WEALTH? Givers SPENDING ON MAN S NEED (Hierarchy of Muslims Needs) RE-DISTRIBUTION Compulsory and Voluntary

ALTERNATIVE INSTITUTION TO RIBA 3. INSTITUTION OF ZAKAH ZAKAH GIVERS و م ا آ ت ي ت م م ن ر ب ا ل ي ر ب و ف ي أ م و ال ال ن اس ف ل ا ي ر ب و ع ن د الل ه و م ا آ ت ي ت م م ن ز ك اة ت ر يد ون و ج ه الل ه ف أ ول ئ ك ه م ال م ض ع ف ون And that which you give in gift (to others), in other that it may increase (your wealth by expecting to get a better one in return) from other people s property, has no increase with Allah; but that which you give in Zakat seeking Allah s Countenance, then those they shall have manifold increase. (Surat al-rum, 30:39) Compulsory, to purify Muslim society from all types of corruption: خ ذ م ن أ م و ال ه م ص د ق ة ت ط ه ر ه م و ت ز ك يه م ب ه ا و ص ل ع ل ي ه م إ ن ص ل ات ك س ك ن ل ه م و الل ه س م يع ع ل يم Of their goods (wealth), take alms, that so thou mightest purify and sanctify them; and pray on their behalf. Verily thy prayers are a source of security for them: And Allah is One Who heareth and knoweth. Surah Al-Taubah, (9: 103) 21

CONT., Recipients of Zakah INSTITUTION OF ZAKAH إ ن م ا ال ص د ق ات ل ل ف ق ر اء و ال م س اك ين و ال ع ام ل ين ع ل ي ه ا و ال م ؤ ل ف ة ق ل وب ه م و ف ي الر ق اب و ال غ ار م ين و ف ي س ب يل الل ه و ا ب ن الس ب يل ف ر يض ة م ن الل ه و الل ه ع ل يم ح ك يم "Zakat is for the poor, and the needy and those who are employed to administer and collect it, and the new converts, and for those who are in bondage, and in debt and service of the cause of Allah, and for the wayfarers, a duty ordained by Allah, and Allah is the All-Knowing, the Wise". (Sura Al-Tauba, 9:60) Reduce the gap between rich and poor and eliminate poverty ك ي ل ا ي ك ون د ول ة ب ي ن ال أ غ ن ي اء م ن ك م In order that it may not (Merely) make a circuit Between the wealthy among you. (Sura al Hashir 59:7) INCEIF 6/17/2014 22

ROLE OF DISTRIBUTION OF WEALTH IN REDUCE THE GAP BETWEEN THE RICH AND THE POOR FINANCE THROUGH INTEREST/RIBA FINANCING THROUGH TRADE. 6/17/2014 INCEIF 23

ROLE OF DISTRIBUTION OF WEALTH IN ELIMINATING RIBA AND ERADICATION POVERTY 6/17/2014 INCEIF 24

After acquiring wealth through the process of production and according to the teaching of Islam, spending also has to follow the teaching of Islam,. HOW TO SPEND THE WEALTH? 25

SHARIAH FRAMEWORK FOR WEALTH MOBILIZATION DISTRIBUTION & REDISTRIBUTION 1.DISTRIBUTION OF WEALTH/HOW TO ACQUIRE THE WEALTH? (have and have not) K N O W L E D G E MEANS OF ACQUIRING WEALTH 1.PRIVATE ENTERPRISE INSTITUTION 2.ALTERNATIVE INSTITUTIONS TO RIBA TRADE & BUSNIESS (COMMERCIAL ACTIVITIES) LENDING INSTITUTION (AL-QARD HASSAN) VOLUNTARY INSTITUTIONS COMPULSORY INSTITUTION Agriculture Sector Industrial Sector Infrastructure Sector Mining & Constructions INCOME AND WEALTH ACQUIRED -Rent -Wages, Salaries -Profit, Dividends, etc. Alternative institutions to Riba Receivers Service Sector E T H I C S 2. REDISTRIBUTION OF WEALTH/HOW TO SPEND THE WEALTH? Givers SPENDING ON MAN S NEED (Hierarchy of Muslims Needs) RE-DISTRIBUTION Compulsory and Voluntary

SHARI AH RULES FOR CONSUMPTION/SPENDING ي ا ب ن ي آ د م خ ذ وا ز ي ن ت ك م ع ن د ك ل م س ج د و ك ل وا و اش ر ب وا و ل ا ت س ر ف وا إ ن ه ل ا ي ح ب ال م س ر ف ي ن Children of Adam! Wear your beautiful apparel At every time and place Of prayer: eat and drink: But waste not by excess, For God loveth not the wasters. (al-araf 7:31) و ال ذ ين إ ذ ا أ ن ف ق وا ل م ي س ر ف وا و ل م ي ق ت ر وا و ك ان ب ي ن ذ ل ك ق و ام ا Those who, when they spend, are not extravagant and not niggardly, but hold a just (balance) between those (extremes) Surat al-furqan (25:67) ي ا أ ي ه ا ال ذ ين آ م ن وا أ ن ف ق وا م م ا ر ز ق ن اك م م ن ق ب ل أ ن ي أ ت ي ي و م ل ا ب ي ع ف يه و ل ا خ ل ة و ل ا ش ف اع ة و ال ك اف ر و ن ه م ال ظ ال م ون INCEIF ye who believe! Spend out of (the bounties) We have provided for you, Before the Day comes When no bargaining (Will avail), nor friendship Nor intercession. Those who reject Faith they Are the wrong-doers. Al-Bagara (2: 254) 6/17/2014 27

CONSUMPTION/SPENDING IN ISLAM HIERARCHY OF MUSLIM S NEED Daruriyyat (Necessities) Hajiyyat (Conveniences) Tahsiniyyat (Refinements/Beautifi cation) Zakah Sadaqah 28

UNWISE SPENDING GLOBAL PRIORITY $ BILLIONS Military spending in the world 780 Narcotics drugs in the world 400 Alcoholic drinks in Europe 105 Cigarettes in Europe 50 Business entertainment in Japan 35 Pet foods in Europe and the United States 17 Basic health and nutrition 13 Perfumes in Europe and the United States 12 Reproductive health for all women 12 Ice cream in Europe 11 Water and sanitation for all 9 Cosmetics in the United States 8 Basic education for all 6 1,458.00 INCEIF Source: Adopted from the World Bank Development Indicator 2008. Website: http://www.globalissues.org/article/26/poverty-facts-and-stats 29

DISTRIBUTION OF WEALTH FOR WISE AND JUST SPENDING 6/17/2014 INCEIF 30

CONT., DISTRIBUTION OF WEALTH FOR WISE AND JUST SPENDING 6/17/2014 INCEIF 31

WEALTH CIRCULATION 1.DISTRIBUTION OF WEALTH K N O W L E D G E MEANS OF ACQUIRING WEALTH 1.PRIVATE ENTERPRISE INSTITUTION 2.ALTERNATIVE INSTITUTIONS TO RIBA TRADE & BUSNIESS (COMMERCIAL ACTIVITIES) LENDING INSTITUTION (AL-QARD HASSAN) VOLUNTARY INSTITUTIONS COMPULSORY INSTITUTION Agriculture Sector Industrial Sector Infrastructure Sector Mining & Constructions INCOME AND WEALTH ACQUIRED -Rent -Wages, Salaries -Profit, Dividends, etc. Alternative institutions to Riba Receivers Service Sector E T H I C S 2. REDISTRIBUTION OF WEALTH Givers SPENDING ON MAN S NEED (Hierarchy of Muslims Needs) RE-DISTRIBUTION Compulsory and Voluntary

CONCLUSION To conclude, Islam provides many distributive and redistributive institutions within the structure of Islamic economic system which need to be studied in depth and to be put in practice honestly for solving the current economic and financial crises for fair and just societies for all mankind. INCEIF 6/17/2014 33

END OF PRESENTATION THANK YOU FOR LISTENING 34