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Islamic Economic System

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Islamic Economic System
INTRODUCTION
Islam is a complete code of life which offers its own social, political and economic systems to guide human behavior in all spheres of life. History has recorded that the economic system of Islam, for the first time in the world had established social and economic justice during the period of al-Khilafah al-Rashidah. In any ideal Muslim society, socio-economic justice is considered as one of the most significant characteristics for the social, political, and economic as well as all realms of human interaction. Exploitation and any source of unjustified enrichment in Islam are prohibited. The Holy Qur’an has emphatically instructed Muslims not to acquire each other’s property wrongfully. Islam is not an ascetic religion. It takes a positive view of life as the natural outcome of the belief that human beings are the vicegerents of Allah (Swt).
The conditions for interest/riba has been laid down as increase in principal amount and increase with respect to payment period, the more period causes more increase. Interest/riba has been categorized into two types. After describing interest/riba and its types, reasons have been sought for prohibition of interest/riba from Quran referring to Surah Al-Rum-39, Surah Al-Nisa-161, Surah Al-Imran 130-2 and Surah Al-Baqrah 275-281. Help from Hadith (Muslim, Ahmed, Tirmidhi and Ibn-e-Majah) has also been sought. Interest/riba generates various evils like moral evils, social evils and economic evils.
The goals of socio-economic justice and equitable distribution of income and wealth are integral parts of the moral philosophy of Islam. However, one of the socio-economic reforms made by Islam was the prohibition of riba (interest). About the efficacy and usefulness of the prohibition of interest in Islam, Muslim economists have tried to provide the juridical clarity and support based on reason, as opposed to mere belief. The purpose of this paper is to spell out the meaning of riba or interest, its different kinds, and



References: 1. Abdul, Ghafoor, A.L.M. Islamic Banking, Interest– free Commercial Banking, Geroningen: Apptec Publications, 1995. 4. A.H. Farooque, interest-free banking in Pakistan, Institute of bankers in Pakistan-Karachi, 1980 5 6. Ahmad, Ziauddin, et al., eds., (1983) Money and Banking in Islam, Islamabad: Institute of Policy Studies. 7. Ahmad, Ziauddin. (1984) "Concept and Models of Islamic Banking: An Assessment," paper presented at the Seminar on Islamization of Banking, Karachi (November) 8 11. Archer & Abdul, 2002 Takaful policy in an interest-free Islamic economy - nature and scope, International Centre for Research in Islamic Economics, Jeddah. 12. Chapra M.U. (1985) Towards a just Monetary System Islamic Foundation London 13 16. Economic Survey, 2006-07, Ministry of Finance, Govt. of Pakistan 17 18. Hamid Zangeneh (1995). A Macroeconomic Model of Interest Free System Paper published in the Pakistan Development Review 34:1 (Spring 1995) PP. 5-68 19 30. Kalecki, M.: "Trend and the Business Cycle", Economic Journal, 1968. 31. Kalecki, M.: Selected Essays on the Dynamics of the Capitalist Economy, Cambridge University Press, 1971. 32. Keynes, J.M., The General Theory of Employment, Interest and Money, London, 1936, p.22. 33. Khan Abdul Jabbar (1991). Non Interest Banking in Concept Practice & Evaluation, Royal Book Company Karachi 34 37. Mufti Syah-d-din Kakakheil, Bai Muajjal aur Bai Murabaha, Mahnama Hikmat-e-uran Lahore. (Jan 1992). 41. Rahman, 1979 'Islamic interest-free banking ', I M F Staff Papers, March, 3 (1):1-27. 47. Usmani Muhammad Taqi (1995) Developing an Interest-Free Economy – Encyclopedia of Islamic Banking and Insurance Published by Institute of Islamic Banking and Insurance London 48

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