Economic from islamic perspective

Economics from the Islamic perspective

CHAPTER 1: INTRODUCTION OF ISLAMIC ECONOMIC

1. DEFINITION OF ISLAMIC ECONOMIC

• Social science that studies the unlimited desire which is used by nature resources with the common sense and limited efforts to achieve happiness in this world and also hereafter.
• Is about science social which is study according a limited passion, low thinking and use in a limited way but in long term happiness in life and hereafter.

1. GOALS AND VALUE ECONOMIC SYSTEM IN ISLAMIC.

• Creating a peaceful life wellness.
• Establish of cooperation and fairness.
• Ensure adequate basic requirements to avoid fear in the community.
• Achieve peacefully.
• Fulfil basic life.
• Does not use too much source but effective.
• Fair in development, luxury and income.
• Self -free guarantee.
• Fair and collaborations

1. PHILOSOPHY OF ISLAMIC ECONOMIC.

1.3.1 General Philosophy

• Based on concept of tauhid.
• Obey in order of Allah.
• Accept a faith and trust to Allah.

Types of general philosophy are:

1. Relationship human to Allah (Hablumminallah)

Tauhid Ulluhiyyah

• Trust Allah through pillars of faith and make connection to Allah by pillars of religion.

Faith inside human

• Always to be patient.
• Obey to Allah.
• Trust to Allah after struggles.
• Example: As business man, who always obey to Allah and avoid usury in their way of business.

6 pillars of faith

• Trust to Allah.
• Trust the angel of Allah.
• Trust and recite the kitab.
• Trust the messenger of Allah.
• Trust the judgement day.
• Trust the faith in life.

5 pillars of Islamic

• Declare of shahadat.
• Always pray 5 times in a day and night.
• Pay of zakat.
• Fasting in Ramadan.
• Make hajj.

1. Relationship among human (Habluminannas)

Tauhid Rububiyyah

• A good attitude to other such as do not to be arrogant because we need another people to fulfil our activities in life.
• Islam teaches us how to manage our economic in a good way.
• Example: Do not deny other people right and always make a good relationship to other such as pay the zakat.

1. Relationship between human to nature/ environment

Tauhid Rububiyyah

• Allah is the owners of all human trust and human is a holder luxury which is given by Allah.
• All economics must be obeying the rules of Allah.
• The principle of business must focus to make justify and charity among society.

1. Special Philosophy

1. Tazkiyyah (devoted to god)

1. Purification

• Maqasid Al-Shariah aim: A defends of bad side and wasteful.
• Example: Reject usury and all bad side inside business.

1. Islamic Economy

• A human purification property.
• Example: Pay the zakat

1. Yaum Al Ba’th (Day of Judgement)

• Human must be always in the line which already been fixed by religion.
• Human must be careful of what have they done in the world, because all of their activities must have responsibility in front of Allah.
• Khalifah (officer of Allah)

• Human is a slave to Allah.
• Responsible on own duty as slave of Allah.

1.4 PRINCIPLES OF ISLAMIC ECONOMIC

1.4.1 Ownership (Milkiyyah)

• Ownership based to Shariah.
• Types of ownership are:

1. Full ownership

• Physically ownership of good with the same interest.
• Example: house.
• 4 ways according Shariah are:

b. Part Ownership

• Divided by two categories are:

• •Ownership Property •Ownership Benefit

1. Social Justice

• Angel of Allah principle towards human being as below:

Allah right

Public right

Moral right

Civil right

Luxury right

1. Government Intervention

Islamic Activities.

• Management.
• Strategy.
• Arrangement.

Economic Activities

• Apply moral values in life.

Example: Care of human right.

• Society guarantee.

Example: Care of poor people right such as pay the zakat.

• Fair and square.

Example: All people must be has a same opportunity.

• Against of usury.

Example: Cannot deny the other people right in profit.

1. CHARACTERISTICS OF ISLAMIC ECONOMIC

1. Rabbaniyyah Economic

1. Act as the basic human activities.
2. Act as goal to be close to Allah.
3. Follow the line which is been fixed by Allah.

1. Akhlaqiyyah Economic

1. Syumul (complete).
2. Stay away from sins.

1. Wasatiyyah Economic

1. Always is low profile.
2. Islam gives human opportunity to feel love.
3. But do not against the religion

1. Insaniyyah Economic

1. Do our responsibility as human.
2. Obey and recite Quran and Sunnah.
3. Stay away from jealousy to others.

1.6 SOURCES OF ISLAMIC LAW

1.6.1 Primary Sources

1. Al Quran

• Recite.
• Given times by times to make the Muslims understand of Quran overall.
• Angel acts as the messenger from Allah to Nabi Muhammad s.a.w to bring the Surah.

1. Sunnah

• The act, conference and words which is from Nabi Muhammad s.a.w.
• The moral value which is teach by Nabi Muhammad s.a.w.
  1. Secondary Sources

1. Ijma’

• Collaboration among “mujtahid” to make a decision.

1. Qias

• Make a similarity with similar characteristic.

CHAPTER 2: DEFINITION OF ISLAMIC ECONOMIC SYSTEM

2.1 THE HIERARCHY OF CONSUMPTION IN ISLAMIC ECONOMIC SYSTEM

1. Darruriyah

• Those want whose satisfaction is absolutely essential as without doing the man cannot survive.
• Fulfil human right.
• For example: Food, clothing, and shelter.

1. Hajiyyah

• To make human feel more comfortable.
• For example: Car and high way.

1. Tahsiniyyah

• To make human activities smooth and effective.
• For example: Hand phone and computer.

1. Kamaliyah

• Make human feel comfortable until can achieve.
• Stand for those wants which provide comforts and convenience to man.
• For example: Good of food, good of clothes and good of house.

1. Tarafiyyah

• Excessive expenditure on unnecessary and superfluous wants is called luxury.
• For example: Very expensive dress and use of gold.

1. BAITULMAL

• The Baitulmal and financial institutions holding assets in Islamic countries.
• Property accumulated in the treasure Baitulmal is a national treasure that belongs to all the people who lived and settled under the auspices of the Islamic government.
• The Baitulmal in accordance with the view of Al- Mawadi was recorded division place and wealth accumulation.
• More precisely intended as treasury Baitulmal has received from various sources in financial and property accumulated by Islamic countries such as zakat, waqf property, and other taxes.
• The Baitulmal contains a concept and a sense of the vast property which is based on faith and piety with confidence that Allah is the Creator.
• Administrator and Superintendent of the universe, while the caliph was as a trustee to manage the assets accumulated in the treasure.

2.2.1 Roles of Baitulmal

1. Charitable institutions.
2. Providing assistance and charitable contributions and donations to the public.
3. Planning and distributing society’s wealth in the whole socio economic and political set-up of the nation.
4. Social institutions.
5. Microfinance institutions.

1. Baitulmal in Malaysian Context

1. Fact is the scope of the Baitulmal account roles than the concept behind the national treasury.
2. Serves as the national treasury through institutions and their influence on government policy.
3. Acts as a central bank that serves the nation’s financial system.
4. If viewed from the cortex in early Islamic Baitulmal, it appears treasury of a nation.
5. Administration and coordination of Baitulmal narrowed the scope and function by creating two fractions in the administration, the national treasury through Malaysia and the Ministry of Finance through the state Baitulmal.
6. In terms of administration, the Baitulmal is more systematically with many of the provisions conferring jurisdiction.
7. “Majlis Agama Islam” to manage the scope and functions of Baitulmal management is desirable tailored to the needs and wants of local time.
8. Income and expenses of Baitulmal shall be in accordance with the provisions of the law Allah in the Quran and Sunnah of His Prophet as well as the law Istinbat promoted as consensus.
9. Analogy and other resources in conformity with the spirit of Islamic law, such as Al-Mursalah Maslahah, Istislah, Istishab and Istihsan.

2.3 PRINCIPLES OF ISLAMIC ECONOMIC

1. Truth and Taqwa

• Is consumption in Islam about free, needs and right but still in “taqwa.”

1. Principle of Halal

• Islamic teach us to make a right decision based on law of Islam.
• The halal sources can be haram if been use in wrong way.
• Example: A man cannot wear the jewels such as accessories.

1. Principle of Cleanliness and Wholesomeness

• Islam straight about the cleanliness stuff because dirt stuff can make heart bad.

1. Modesty Principle

• Is about to be always modesty and no to be over.
• Islamic also against us to be proud to yourself.

1. Welfare Which Based on Benefits and Maslahah Principle

• Islamic teach human to always use Allah gift in our quantity
  need and not to be wasteful.

1. Moral Principle in Terms of Spirituality and Morality.

• Always remember Allah for whatever we have done.
• Always thankful and satisfied with what we have.

2.4 OBJECTIVE OF SHARIAH

• A human life way as guide in Quran by Allah and teach by Nabi Muhammad s.a.w. as below:

• Divisions of Maqasid Al-Syariah.
• Daruriyyah (necessities).
• Hajiyyah (requirements).
• Tahsiniyyah (beautification).

2.5 OBJECTIVE OF PRODUCTION IN ISLAMIC

• Produce something but not as final goals. The final goal is about Allah how to achieve happiness in life and hereafter.
• Responds Toward Allah Order’s

• Always do as what have been write in Quran and leave the badness.

• Self-Safety.

• Prevent yourself for doing wrong.

• Basic / Life Needs

• Islamic care what the important things to human to keep still life.

• Accommodate Needs According to Dependant

• To make human realise and always buy something which is important to life.

• Country Needs

• Shop in government order for the country development but not to waste.

2.6 ETHICS OF PRODUCTION IN ISLAMIC

• Method of Production and Ethic are in Line

• Hardworking to success and use multi way to achieve it without bother the other people right.
• Always try to fair to everyone.
  

• Sources of Production Uses Effectively

• Human are free to feel luxury in life but do not use it in wasting.

• Production Must be Wording of Evil and Attaint Good

• Islamic already fixed with something that relate to “halal and haram”. The halal will bring benefit and also with the opposite.

2.7 FACTORS OF PRODUCTION FROM THE ISLAMIC PERSPECTIVE

1. Capital

• Islamic economics are against human to be take usury because can causes inflation in country beside can bother the other people right.

1. Land

• Land to be use to agriculture to full human basic life to still life.
  

1. Labour

• To make a big production needs a human energy.

1. Entrepreneurship

• Refer to people who do business to make a big profit.

CHAPTER 3: CONSUMPTION AND PRODUCTION ISLAMIC ECONOMIC

3.1 DEFINITION OF CONSUMPTION

• Consumption can be defined in many ways, but for the best result is usually described as the final purchase of goods and services by individuals.

3.2 THE IMPORTANCE OF CONSUMPTION

• As we know that consumption is one of the bigger concepts in economics and it really importance because it is to help determine the growth and success in the economy.

3.3 THE PHILOSOPHY OF CONSUMPTION

• Philosophy are established to provide guidance to individual through Islamic economic such as benefits, ownership, devotion and also trusty.

1. Benefits

• Shortly requirement is based on the benefit.
• There are five basic things benefits that individual must be alert such as life, religion, intellect, property and descendants.

1. Ownership

• The product can be used only when it does occur after right of ownership.

1. Devotion

• Usage of consumption is life activity that did not to escape the ultimate goal of life which is self-devotion to the Gods.

1. Trusty

• Consumption also is trust of God to individuals and also individuals should be good in attitude.

3.4 PRINCIPLES OF CONSUMPTION IN ISLAMIC

• Principles of truth and piety on based right.
• Principle of hygiene.
• The principle of simplicity.
• Principles based on welfare benefit.
• Principle of moral.

3.5 CONDITIONS OF CONSUMPTION IN ISLAMIC

1. Cause right.
2. Right intentions.
3. Work properly (use to the right kind).
4. Implement correctly.

3.6 REGULATIONS OF CONSUMPTION IN ISLAMIC

1. Use the property properly and must be the best possible.
2. Consumption of good bearing.
3. Balancing in using consumption of property.
4. Using without prejudice.
5. Using with lawful possession.
6. Must use with reasonable benefit.

3.7 OUTLOOK OF IMAM AL- GHAZALI THROUGH OF CONSUMPTION

1. Must be used in moderation or at minimum level.
2. All needs must be used in Allah way.
3. Stuff must be clear from bad side negative.
4. The use consumption must be focus to Allah.
5. Consumption must have a good moral value.
6. Always be thankful for everything.
   

3.8 OBJECTIVE OF PRODUCTION

1. Self-safety.
2. Human needs.
3. Country needs.
4. Prepare self needs in medium size.
5. Prepare needs for future.
6. Social service in Allah way.
7. Development of firm.

3.9 FACTORS OF PRODUCTION IN CONVENSIONAL ECONOMIC AND ISLAMIC ECONOMIC

Conventional Islamic

• Land Land
• Labour Sources
• Capital Mount
• Bussinessman Flora & Fauna

3.10 STEPS OF PRODUCTION IN ISLAMIC

• Limit Production in Luxury
• Charity of Priorities
• Human Right Priorities
• Make more labour among society

3.11 ETHICS OF PRODUCTION

• Production sources cannot be used for wasting.
• Always have a good moral value.
• Against wasting.
• Take profit but no monopoly.

3.12 EFFECTS OF CONSUMPTION TOWARDS PRODUCTION

• People still can make charity.
• Luxury quota does not fall.
• No request for banned stuff.
• Request for sources of needs stuff and comfortable still high.

CHAPTER 4: CONCEPT OF BUSINESS IN ISLAMIC

4.1 CONCEPT OF BUSINESS IN ISLAMIC

1. Islam courage ummah to explore in bussiness.Work in bussiness is one of a good things in Islam and we were pay for it in hereafter.The way of bussiness in Islam is been fixed.

4.2 BASIC BUSINESS IN ISLAMIC

1. Selling is about a activities to get something use money to have it such as:

1. Selling Pillar.
2. Condition of Selling (customers and supplier).
3. Condition about the stuff that we can buy.
4. Ijab dan Qabul.
5. Benefits of Selling.
6. Polite

4.3 KHIYYAR

Refers about choices that customer can apply either they buy the stuff or not.

4.3.1 Types of Khiyyar

1. Khiyar Majlis.
2. Khiyar Syarat.
3. Khiyar Keaiban.
4. Khiyar Ta’yin.
5. Khiyar Ru’yah.

4.4 CHARATERISTICS OF ISLAMIC BUSINESS

1. Akad.
2. Honesty.
3. Sharp measure.
4. Fair.
5. Protection.
6. Halal service and stuff.
7. Good service.
8. No usury.
9. Did not be cruel toward employees.
10. Quality.

Did not forget our duty as human when bussiness :

• Pray to Allah
• Zakat

1. 5 ETHICS OF BUSINESS

•Al- Adl Wal Ihsan Principles

•Responsibility as Customer, Supplier, and Government

4.6 INSTRUMENTS OF ISLAMIC BUSINESS

1. Al- Mudharabah (Profit Sharing)

• Refers to a sharing capital among business partner and will be arrange with the one business partner but the profit will share together.
• Mudhrabah Pillars are:
• • Mudharib.
  • Sahib al mal
  • Al-mal.
  • Work.
  • Profit.
  • Sighah (Offer and Acceptance).

1. Al- Musyarakah (Capital Sharing)

• Refers to a sharing capital with two or more business partner and will manage by one business partner but the profit will be sharing together.
• Musyarakah Pillar are:

• Bond Holder.
• Capital.
• Project.
• Sighah (Offer and Acceptance).

• Types of Musyarakah are:

• Al-‘Inan Company.
• Al-Wujuh Company.
• Al-Mufawadhah Company.
• Al-Abdan Company.

1. Al- Murabahah

• Refers a cost plus profit.
• Murabahah Pillar are:

• Supplier.
• Customer.
• Selling.
• Price.
• Sighah (Offer and Acceptance).

1. Al- Bai’ Salam

• Based on agriculture product.
• Bai’ul Salam Selling Pillar.

• Musallam Alaih.
• Mussalam.
• Mussalam Fih.
• Ra’sul Mal.
• Sighah (Offer and Acceptance).

1. Al- Wadi’ah

• Refers to an agreement between owners with bank to take care the safety of their stuff.
• Al- Wadi’ah Pillar

• The Owner.
• Stuff.
• The People who be responsible to take care the stuff.
• Sighah (Offer and Acceptance).

1. Al- Qardhun Hasan

• Refers to an agreement between creditor and borrower about loan without any interest but fixed in term. This agreement gives priorities to charity borrower.
• Al- Qardhun Hasan Pillar

• Creditor.
• Borrower.
• Money.
• Sighah (Offer and Acceptance).

1. Al-Kafalah

• Refers to a guarantee between creditor and borrower to finish loan.

1. Ar-Rahnu

• Refers to an agreement between owner and mortgage.
• Ar-Rahnu Pillar are:

• Al-Rahin.
• Al-Murtahin.
• Al-Marhun.
• Loan.
• Sighah (Offer and Acceptance).

4.7 THE EFFECT OF BUSINESS TOWARD ECONOMIC, SOCIAL AND MORAL

1. Economic: Multi economic.
2. Social: No more feel prejudices in poor society.
3. Moral: Always feel thankful and appreciate it.

4.8 RIBA

1. Refers to an interest in business.

4.7.1 Types of Riba

• Riba Nasiah
• Riba Al-Fadl
• Riba Al-Qardh
• Riba Al-Jahiliyyah

1. The Effect of Riba
2. Effect to creditor and Effect to borrower.

1. Implication of Riba Towards Economics

• Investment down.
• Economics slow down because of Riba.
• Inflation.
• Destroy country sources.

1. Implication of Riba to Social and Culture

• No justified.
• Greedy.
• Slow down social charity.
• Big distance between rich and poor.

1. Implications of Riba to Moral and Spiritual

• Deny the other people right.

• Arrogant.
• Be materialistic.
• Make human been lazy.

1. The reason Prohibition of Riba

1. Make business way smooth.
2. Dangerous to society.
3. Exists in religion law

CHAPTER 5: ISLAMIC FINANCIAL INSTITUTIONS

5.1 WHAT IS BAITULMAL?

Baitulmal defined as ‘house property’. Baitulmal is a financial institution that acts as the national treasury that collects various sources of national income. Baitulmal also serves as a trustee for the public treasury for Muslim.

5.2 SOURCES OF BAITULMAL

Sources of Baitulmal in Islamic countries are composed of three types namely the special property, common property, and property tax.

5.2.1 Special Property Refers to revenue where the sources and receivers thereof have been prescribed by law. Source of assets included in this category are Zakat Fitrah and Zakat Property. Zakat can be defined as the collection rate required on property and income in accordance with the rules and specific conditions to be distributed to specific groups.

Zakat Fitrah is required once a year for those who lived during the Islamic month of Ramadan until the first day of Shawal. It seeks to purify ourselves and hearts. Zakat is issued by types of food that filling or rate the same in the form of currency.

Zakat Property is property must consist of essential property in the various sectors of the economy such as the following:

1. Zakat crop is levied on crop yield, durable such as rice, wheat, dates and others and imposed a 5% to 10% of the net proceeds nisab at each harvest. This nisab was 653 kg.
2. Zakat of livestock are livestock that must be paid zakat such as camels, buffaloes, cows and goats which are productive in nature. The conditions are has been nisab, even a year, not used as capital goods and can reproduce by itself.
3. Zakat of gold and silver from Zakat due to the nature of the trade and also be able to continue the production process. Property owners are obliged to pay Zakat even if it is not used for any productive purpose. The rate is 2.5% of the weight of the metal that has reached the minimum has been nisab weight and haul. Nisab for gold is weighing 85 grams and nisab for silver was 594 grams.
4. Zakat on business is imposed on all forms of business, such as stock or inventory, cash and debt receivables including the current property. Fixed assets not subject to Zakat because it is used as a basis for business. Zakat on business be issued by 2.5% of total current assets which were enough a year and has reached the level of parts. For business partnerships, Zakat is calculated according to the proportion of shares or paid-up capital of each partner.
5. Zakat of income is based on the obligation of Zakat crops (the effort and income) and Zakat of currency (nuqub). Method of payment are divided into two categories:

• Zakat monthly income imposed on wages or income earned each end of month if has been nisab (by crop in parts).
• Zakat annual income is imposed on the amount of salary or income for a year if has been nisab (by nisab of gold or silver).

1. Zakat savings refer to money saved in various forms of savings, such as savings banks, savings in the form of treasury bills, loans to companies and savings in the Employees Provident Fund (EPF). Money that has been saved for a year and has been nisab of Zakat 2.5%. There are two opinions about the savings of non-liquid that are:

• It is considered property 'perfect possession' and should be removed after the charity of haul and has been nisab.
• It is considered 'not perfect possession' as long as not in the hands of savers, the charity must only be issued once the money withdrawn.

1. Zakat property in shares refers to money invested in the company, business enterprise or investment bodies. Zakat payment methods depend on the intention of the shares owned. The asset shares for business purposes then the zakat 2.5% and if for investment then zakat of 10%.

5.2.2 General Property

Refer to all types of property collected by the government except zakat and taxation. General property resources include all types of property in the form of:

1. Not be owned by individuals, such as natural resources.
2. Belonged to the Muslim community either explained or not explained specifically use.
3. Any property derived from the war.

Source of general government assets include:

1. Fai’ property was the property of the Islamic government revenue derived from non-Muslims by peaceful means.
2. Ghanimah is a property derived from the non-Muslims by way of wealth or war.
3. Ma’adin refers to property value that is in the earth such as gold, silver, copper, iron, and others. This property can be handed over to an individual or a company to be undertaken and be taxed on it.
4. Rikaz refer to of ignorance residual latent in the earth or in the ground mawat which basically belongs to the landlord and be taxed on it.
5. Luqatah is a property value that has been found and is believed to be owned by Muslims. This property must be advertised for a year to find his master. If cannot find the owner, then the property will belong to dependents.
6. Wakaf refer to the absolute surrender of the property for the benefit of interests other than his master.
7. Wasiat is transfer of ownership in Islam that gives the opportunity owners of property to transfer some of their wealth into the hands of others who are not beneficiaries.
8. Sadaqah is any property that is spent for charitable purposes.
9. Nazar is an acknowledgment to get closer to Allah by doing well, and the acknowledgment must be met.
10. Kaffarah is reward or penalty prescribed by Islam when a person against the order of Allah that is specific. It is imposed on Muslims who commit the following offenses:

• Not fulfilling vows.
• Perjury.
• Lovemaking in the daytime in the month of Ramadan.
• Do “zihar” with wife.

5.2.3 Property of Taxation Tax is the main source of Islamic national treasury.

It includes the following:

1. Kharaj means the form of rent or revenue or taxes collected from the land alienated. The land which is still performed by the owner will be imposed zakat (for land owned by non-Muslims).
2. Al-ard ushriyah (ushr) is the land where people accept Islam without war. The land which is still performed by the owner will be imposed zakat (Muslim- owned land).
3. Jizyah is a tax shelter that is required for all the people “zimmi” infidels living in Muslim countries or countries under Muslim protection.
4. Ushur is the tax be imposed on the export of commodities trading overseas or imported into Muslim countries. Tax rates vary according to the status of a citizen.

5.3 THE ROLES OF TREASURY IN FISCAL POLICY AND MONETARY POLICY ISLAMIC

5.3.1 Fiscal Policy

Refers to manage government revenue sources and control over government spending to achieve economic goals. The roles played by the treasury are:

1. Collect and manage the collection of zakat and taxation.
2. As a place of saving a national treasure collected from the people.
3. Conducting economic cooperation at the international level.
4. Adviser to the government in determining the direction of spending.

The important and goals of Fiscal Policy are:

1. Economic stability able to handle the recession and unemployment.
2. Growth and economic development in achieving the goals of the country.
3. Distribution system in accordance with the requirements and obligations under the enforcement and regulatory government.
4. Spread the message of Islamic and the expansion of a wider audience.
5. Efficient allocation of resources in terms of harmony and material needs.

5.3.2 Monetary Policy

Refers to the control of the money supply through central bank operations. It serves to ensure that the money supply needs of the country's economy.

The roles played by the treasury are:

1. Formulate policies and implement of planning and development.
2. Develop and enact monetary policy and public funding.
3. Function as lender of last resort.

The important and goals of Monetary Policy are:

1. Stability in the real value of money is achieved by controlling inflation.
2. Full employment through the provision of human resources.
3. To achieve optimal growth rates.
4. Socio-economic justice in the distribution of income and wealth can be achieved by creating a system of money and banking is closely related to the values ​​of Islamic.

5.4 THE ISLAMIC FINANCIAL INSTITUTIONS

Islamic financial institutions play a role in generating productivity of finance to produce a fair of growth economy. It includes bank and non-bank institutions.

•BANK INSTITUTIONS

•Financial Institutions

•Commercial Banks

•Central Bank

5.4.1 Central Bank Central bank is the axis of the institution of Islamic banking system is needed to control and monitor all financial activities so that the flow and use of funds in the financial system can be done efficiently and effectively and to meet the requirements of the laws.

The roles of the central bank are:

1. Managing the money supply.
2. Act as major institutions that implement monetary policy.
3. Regulation and supervision of all financial institutions.
4. As bank to financial institutions, especially commercial banks.

5.4.2 Commercial Bank Commercial bank is an institution that mobilizes funds retained by the units of the economy. Existence of bank required for savings and finance as well as business-related banking

5.4.3 Financial Companies Finance companies give the possibility to the people to make two types of savings namely fixed deposits and savings deposits. Some of them are owned by commercial banks.

•NON-BANK INSTITUTIONS

•Cooperative

•Mortgage/ Ar- Rahnu

•Savings Institutions

•Insurance / Takaful

5.4.4 Insurance/Takaful Insurance concept is to help provide protection to achieve a prosperous and united society. A breakdown in the conventional insurance is illegal because there are three elements of gharar (uncertainty), maisir (gambling), and riba (usury). Insurance divided into are life insurance and general insurance.

Takaful provides coverage for facing disasters such as death and injury to the participants. Takaful divided into two types are Family Takaful and General Takaful:

• Family Takaful is leave a sum of money to heirs if destined occurred during disaster and older requirements.
• General Takaful is the protection that can be used by individuals, companies, organizations or corporations as an effort to face the possibility of calamities happened.

5.4.4.1 Differences Takaful and Insurance

TAKAFUL

INSURANCE

1. Law

• Based on Islamic law.
• There is a board member of Shariah.
• Halal.

• Not based on the Islamic law.
• Provide protection and earn money.
• Do not know haram or halal.

1. Contract

• Have the contract.
• Intend Tabarru’ (donation to the participants) and Mudharabah from savings.

• The contract exists, but to buy a policy.

1. The role of company

• Fund operators.

• Act as guarantor for the protection of insurance buyers.

1. Guarantee

• Guarantees given by the participants through money collected.

• Guarantee from the company.

1. Compensation

• Taken from the special account that is filled with the participant Tabarru’.

• Given by company money.

1. Investment

• Does not contradict with Islamic law, and no usury.

• To get high profit regardless of the type of investment.

1. Intention

• Can help each other

• Able to profitability and protection.

1. Profit

• Profit sharing (Mudharabah)

• Not clear.

1. Principles

• The agreement described sources of money.

• There are elements of gharar, maisir, and usury.

1. Transactions

• The transactions conducted clear whether the maturity, experience the risks and pull the self.

• Profits from investments not allocated to participants.
• Benefit payments: insurance company as a guarantor.

5.4.5 Mortgage Ar- Rahnu is an Islamic pawnshop system with lower wage rates by percentage (1% of value of goods). Keeping of the wages are based on the value of the goods or the current price of gold in the market. Instalment payments are allowed and guaranteed to get the excess after the auction transaction.

Conventional pawnshops are oriented of usury where the interest rate is high up to 24% of the loan value. Interest payments and outstanding balance will not be returned to the borrower after the auction run.

5.4.5.1 Differences Ar- Rahnu and Conventional Pawnshops

AR- RAHNU

CONVENTIONAL PAWNSHOPS

No activities based on usury.

Using usury

If the borrower is insolvent, the collateral will be auctioned to incur debt, the excess will be refunded

If not able to pay the debt will increase because of using the rate of interest and the collateral will eventually be owned mortgage provider

Wage rates charged on the loan and the wages store.

Loans given interest rate

In matters the contract agreement there should be during mortgage

Just common agreement

5.4.6 Cooperative Cooperatives is a socio-economic organization comprising, financed, and administered by a group of people and collaborative efforts to promote the economic interests of its members. The characteristics of cooperatives are:

1. Sells of goods to its own members at a reasonable price.
2. The excess profits earned and retained as part of the profit reserve for future use and made available to members in the form of dividends.

Dividends paid on the amount of purchases made ​​and not based on the amount of capital contributed.

Principles of Islamic Cooperatives are:

1. To avoid the engaging in the practice of usury.
2. To implement Islamic of Muamalat.
3. To raise awareness of the spirit of mutual help.

5.4.7 Savings Institutions Savings institutions are non-profit institutions but aims to provide assistance during emergencies and hardship on the members.

A charity institution is based on the practice of charity and good deeds required by Islam. Donations will be distributed to people who have spent in worship, education, welfare, and economic development.

Death Benefit is the body that manages the financial resources of the members and will be given to members and beneficiaries in the event of death in an amount decided by the committee at no charge

CHAPTER 6: THE DISTRIBUTION OF INCOME AND WEALTH IN ISLAMIC

6.1 THE CONCEPT OF FAIRNESS IN THE DISTRIBUTION OF INCOME AND WEALTH IN ISLAMIC

Fairness is a relative thing depending on the situation and atmosphere of a place. To ensuring fairness undertaken, three of guidelines required that:

1. Eliminate the subjective convergence.
2. Rewards of the appropriate factors such as factors of production.
3. “Infaq” to a non-factor.

6.1.1 The Important of the Distribution

1. Prevent concentration of ownership of the factors of production and wealth to a few people.
2. Create a fairness and justice in distribution of wealth and income to achieve "Al- Adalah Al-Ijtima'iyyah."
3. Eliminate the significant gap between the rich and poor that wealth is not monopolized by a handful of the rich only.
4. Overcome personal and public distribution through the understanding of the problem of ownership of the factors of production.
5. Do not deny the right of those who are not directly involved in economic activities, in particular the right of "Had Al-Kifayah."
6. Understand the concept of justice that a person earns from a variety of sources with different capabilities in the Islamic economic system.
7. So that wealth is not monopolized by a handful of the rich only.

6.1.2 Principles of Distribution

1. Principle of Fairness.
2. Principle of Al- Ihsan

Help from top to bottom through the process of transferring wealth from the rich to the poor or called “infaq” to a non-factor the returns that are not involved with the production and they are not able to work.

Distribution of imbalance condition caused by several factors among which are the differences in terms of skills, capital ownership, nature, employment situation, educational attainment, and others.

To ensure that every in need of assistance entitlement in the form of minimum the requirements and narrow the gap between rich and poor.

6.1.3 Methods of Distribution

•Division Of Ownership

•Primary Right To Property

•Secondary Right To Property

•Prevention Of Property Irregularities

•Redistribution

1. Division of ownership

• Division of property ownership cannot be focused on certain groups, but it should be enjoyed by all individuals in the society.
• Owned property must fulfil his rights to not be centralization on a small part of society.
• Ownership divided into three forms:

• Individual ownership.
• Public ownership.
• Country ownership.

1. Primary Right To Property

• Refers to property acquired directly through its direct contribution to production activity.
• The methods are based on the ability of its people exploited natural resources.
• These returns are their right.

1. Secondary Right To Property

• Refers to property acquired indirectly and determination of rights is prescribed by Allah.
• Recognized when they are really not able to meet their basic needs.

1. Prevention Of Property Irregularities

• This method is to guarantee the flow of assets to perfection.
• Measures in Islamic law are taken in the form of prohibition to be observed.

• Prevent the practice of usury.
  • Prevent the practice of freezing property / prohibition of property hide.
• Prohibition of waste.
• Prohibition of business activities contrary to law.
• Unhealthy business.

1. Redistribution

• Redistribution process aims to ensure that every poor person is able to accept and become the owner of real wealth at the minimum level.
• Distribution methods are divided into two groups, namely:

• Those who are capable of earning a livelihood.
• Those who are not able.

• The main steps for the redistribution method is divided into two types as shown below:

  •Legislative Steps

  • (Compulsory Steps)

  •Faraid

  •Zakat

  •Moral Steps

  • (Voluntary Steps)

  •Sadaqah

  •Minha

  •(the grant in the form of donations)

  • Wills

  •Waqf

1. 2 INSTRUMENTS OF DISTRIBUTION OF WEALTH AND INCOME IN ISLAMIC​

1. •First Instruments

   •Zakat

   •Faraid

   •Wills

   •Second Instruments

   •Rent

   •Wages

   •Profit

   •Third Instruments

   •Sadaqah

   •Fai'

   •Ghanimah

   •Waqf

   •Kaffarah

2. 6.2.1 Steps of Distribution

3. Payment of zakat and "usyn."
4. Prohibition of usury on loans consumption and production.
5. Implementation of inheritance law to guarantee the inter-generational transfer of wealth fairly.
6. Promote lending without interest (Qard Al- Hasanah)
7. Encourage giving charity to the poor by those who have incomes that exceed requirements.ZAKAT

8. 6.3.1 Meaning of Zakat In terms of language: A growing and fertile. In terms of terminology: Issuing certain rate of some particular property to be given to certain groups with certain conditions.

   6.3.2 The Conditions of Zakat

• Islam
• Independent
• Perfect possession
• Has been nisab (price, volume, value)
• Has been haul (period)
• Intent

1. 6.3.3 Those Entitled to Receive of Zakat

   •Fakir

   •(Al-Fuqara)

   •The Poor

   •(Al-Masakin)

   •The Debtor

   •(Al-Gharimin)

   •Amil of zakat or manager

   •(Al-Amilin)

   •To free slaves

   •(Al-Rikab)

   •Mualaf

   •(Al-Muallaf)

   •Wayfarer

   • (Ibn Sabil)

   •People are struggling to Allah (Fisabilillah)

2. 6.3.4 The Importance of Zakat in Islamic

• Able to educate and build an individual's personal.
• Build a caring attitude among those who are less fortunate.
• Solve the problem of poverty

The Roles of Zakat in Islamic Economic

1. Monetary Policy

• The basis of the determination and compilation of money in terms of quantity, availability, and cost.
• Islam encourages the mobilization of savings for economic development balanced.
• Islam encourages the provision of other services to the public effectively.

1. Fiscal Policy

• Zakat are the most important result in an Islamic country.
• Zakat are physical mechanism and the distribution most important of economic Islamic.
• Are physical basis of available.
• Stabilize the country's income and employment automatically.
• Are transfer payments to a poor.
• Prevent hoarding and stimulate investm

Effects of Zakat

Economy

• Increase the purchasing power.
• Prevent the accumulation of wealth is monopolized by wealthy people.
• Reduce unemployment.
• Move the assets frozen.
• Helping more stable income distribution among the poor.

Social

• Create a just society and mutual help.
• Spending for social welfare.
• Will not create a feeling of envy in society.
• Can reduce crime rates and crime factors.
• Purification of the property will help to save people from the impurities of sin.

Moral

• Eliminate the greed and stinginess among of the rich.
• Reduce the gap between the haves and the poor.
• Gives physical and spiritual to the recipient of zakat.
• A test of faith and piety.
• Purifying properties of mixed ownership right and wrong.

Difference Between of Zakat and Taxati

1. Religious duties and rituals

The policy undertaken by the government to raise revenue

1. Obligatory for Muslims and must pay in any event

Charged to all people and can be excluded by the ruling government

1. Rate determined by the Al-Quran and Sunnah and cannot be changed

Rates may be amended from time to time in accordance with government requirements

1. The types of expenses and people that can be received are stated in the Al- Quran and Sunnah

Can be changed and adapted by the government in accordance with the requirements

1. Received from wealthy people and expensed to the needy.

Give benefits to wealthy people and the poor and sometimes wealthy people obtain more benefits

1. Aimed to block the distribution of wealth inequality and wealth concentration to prevent certain people only

The main purpose is to raise revenue

1. FARAID

The distribution of inheritance in Islamic which means the division of the estate to the heirs of the deceased member in accordance with the provisions of Allah in the Holy Quran and the Prophet's hadith.

6.4.1 Types of Property that can be categorized as Inheritance

1. Property of a permanent.
2. Property cannot be permanent or can move.
3. The debts of the deceased.
4. Property which has been charged by the deceased and redeemable.
5. The property was purchased by the deceased during his lifetime in the form of a purchase that has paid the money but has not received his belongings.
6. Other properties that have the value of materialism.

6.4.2 Types of the Justice Islamic Estate System

1. Justice in family system.
2. Fairness in determination as beneficiaries.
3. The balance between the rights and the responsibilities of the family and community.
4. Justice for women.
5. Justice for children.
6. Justice to the parents.
7. Division between the relatives justice.

6.4.3 Goals to Faraid

1. Tools to lead and shape a just society.
2. Acknowledgment and guarantee the rights of beneficiaries.
3. Expand and strengthen fraternal relations.
4. Culture of cooperation between family members, promote and protect of the estate.
5. Attention to the importance of beneficiaries.

6.4.4 Rights that must be Resolved before the Division of Property

1. The debt related to the property.
2. The management costs of the deceased / funeral expenses.
3. The debt related to dependents of the deceased.
4. The matrimonial property.
5. Implement a will of the deceased.

6.4.5 Function of Baitumal in Faraid

1. No heirs entitled to receive.
2. Beneficiaries have received their part, but there are residual of the estate.
3. Deceased’s property that is not claimed by anyone.
4. No heirs.

6.4.6 Distribution of the Estate According to the Specified Distribution

RATE

HEIR

1/2 (5 persons)

1. Husband when the wife does not have children or grandchildren.
2. Solitary daughter.
3. Solitary granddaughter.
4. Solitary sisters of the same parents.
5. Solitary sisters of the same father.

1/4 (2 persons)

1. Husband when the wife has children or grandchildren.
2. Wife when the husband does not have children or grandchildren. If more than one wife, they share ¼ the property.

1/8 (1 person)

1. Wife (one or more) when the husband has a grandson and son.

2/3 (4 persons)

1. Two daughters or more.
2. Two granddaughters or more.
3. Two sisters of the same parents or more.
4. Two sisters of the father or more.

1/3 (2 persons)

1. Mother when the deceased does not have children or grandchildren, or two or more relatives from all parties.
2. Brother or sister or two more times with his grandfather.

1/6 (7 persons)

1. Father when the deceased has children or grandchildren.
2. Grandfather when the deceased has children or grandchildren.
3. Mother when the deceased has children/grandchildren,or two brothers/more relatives from all parties.
4. Grandmother of the mother or the father.
5. Granddaughter and her daughter.
6. Sisters of the same father with a sister of the same parents.
7. Brother or sister of the same mother.

1. WILLS

Wills is a positive effort consciously done by someone with the purpose of increasing welfare the charity.

In terms of language: Derived from the word of “wassa” or reigned, advice or promising. In terms of terminology: A grant or donation of property by a person to another person or having passed either the word the will is spoken or not.

1. SOURCES OF WEALTH AND INCOME BY THE FACTORS OF PRODUCTION

1. Rent

An agreement between the property owner and the tenant of the benefit which means the tenant will be pay rental payments to the owner of the property with the conditions agreed by both.

Rent regulations in Islamic must comply with two key principles:

• Justice

• Welfare

6.6.1.1 Pillars of rent

1. The owner of the property.
2. Tenants.
3. Benefits of rental.
4. Rental fee.
5. Contracts.

6.6.1.2 Terms of rental

1. To be clear on the knowledge of both parties, goods leased clear in terms of benefits.
2. Consists of a qualified person to implement the contract.
3. Forms of rentals permitted by Islamic law and conform to reality.

6.7 WAGES

Price or the amount of money paid to employees under the contract by an employer for services performed.

6.7.1 Minimum of Wages Minimum of wages should be set at least to cover the basic needs for life so that employees can live thoroughly.

6.7.2 Maximum of Wages Employees can only claim a maximum of wages from the employer balanced by of what they contribute to the production

6.7.3 Level the Real Wages

1. Level / standard of living of workers.
2. The strength of the employer organization.
3. Trust in Allah and the Day of Judgement.

1. PROFITS IN ISLAMIC

Return to sector of entrepreneurs and serve as an incentive to entrepreneurs. Profit in Islam is more concerned with justice and well-being of all people, as every member of society has the right respectively.

CHAPTER 7: THE PLANNING AND THE ECONOMIC DEVELOPMENT IN ISLAM

SECTION A: PLANNING IN ISLAMIC ECONOMIC

7.1 THE PLANNING CONCEPT IN ISLAMIC ECONOMICS

The planning is a process that involves all individuals in the organization, the variable of the internal and external environment that are managed in the short-term needs in the world and the hereafter immortal term needs to achieve the goals of Al- Falah.

7.2 OBJECTIVES OF ISLAMIC ECONOMIC PLANNING

1. To exploit the resources of nature that many of Muslim countries are poor and underdeveloped.
2. To customize the resources to the rapidly increasing number of people across the Islamic countries.
3. To create economic stability and reducing waste denounced by the Islamic.
4. To assist in obtaining the distribution of income and wealth which more balanced as required by Islamic.
5. To avoid the oppression of monopoly, speculation and wastage of business as opposed to the social in the system of competition.

7.3 THE PLANNING PROCESS

•Statistical of Planning

•Programmes/Operational

•Implementation of Planning

•Monitoring

•Evaluation of Planning

1. Measures the Effectiveness of “Statistical of Planning”

1. Provide education and re-training to foster the true of Islamic values in life.
2. Make a complete benchmark of the physical facilities, economic and social throughout the country.
3. Setting short-term priorities and long-term having regard to the following:

The overall objective of planning.

Priority sectors and dependencies.

Applications of productivity test to various alternative uses of development funds.

The ability of the administration.

Consistency between development planning with the programs and resources available.

1. Establishing the renewal a special development for the sectors / specialty subsectors and the backward districts.
2. Developing a national guideline document which covers aspects of thinking, target of micro and macro, the programs and policies.

7.4 GUIDELINES OF PLANNING IN ISLAMIC

1. Piety to God before, during and after of implementation the planning.
2. To plan for the future to get a result.
3. Planning must be developed which can change the state from a poor to a better.
4. A reasonable of planning which is accessible and acceptable to all people.
5. Any decision is made by deliberation.

SECTION B: DEVELOPMENT IN ISLAMIC ECONOMIC

7.5 THE CONCEPT OF DEVELOPMENT

An increase in per capita income the community in a period of time.

Western Approach: A series of economic activities that increase the productivity of the overall economy. Focus on the conversion of source material to determine a country is based on materialism is income.

Islamic Approach: Covering all aspects of economic development and human development in total. Islam considers the development of economy as part of a broader development of human development. It is comprehensive and value-oriented aimed at improving of human well-being in all aspects and control of human development on the basis of the actual through the process of gratitude and justice.

7.6 FOUNDATIONS OF ISLAMIC ECONOMIC DEVELOPMENT

1. Basis of Philosophy

“Tauhid Uluhiyyah.”

• Belief in the oneness of God and everything that exists in this universe is His belonging- only.

“Tauhid Rububiyyah.”

• Belief that God only has the right and can provide sustenance, care and nourishment of His-create including humans.

“Tazkiyyah An-Nafs.”

• Purification and development of human or economic agents spirited and aims of Islamic.

• Concept of success that includes success in the world and the hereafter.

Justice and goodness

• Creating structure and environment that supports the achievement of justice, kindness and cooperation among individuals that personal interest does not exceed the public interest.

People of Islam as vicegerent of God.

1. Basis of Ethical and moral

Does not to compromise in instruction of the lawful and unlawful.

Basis in the first category is to restore and improve the wrong.

Basis in the second category is prohibiting of corruption.

Economic ethics is asking the human to make things a good and forbid of bad deeds.

Example: usury (riba)

1. Basis of Economy

To create economic prosperity based on the work and labour force of each member in a society that are able to work.

The Islamic allows the various forms of economic activities that away from the usury.

Example: The concept of Mudharabah.

1. Basis of Social

Emphasizes the social of unity among Muslims.

As the backbone of the social basis and a fixed goal for economic policy as the corrective measures at the moments agitation.

To set up the basic structure of the economy through market functions.

Able to achieve the minimum distribution gap.

7.7 CHARACTERISTICS OF THE DEVELOPMENT OF ISLAMIC ECONOMICS

1. Development of an integrated nature (spiritual, physical, and material).
2. Development of a comprehensive geographical.
3. Development that is not dependent on other party.
4. Development that will enhance the understanding of religion.
5. The progress is actual and not artificial only.

7.8 DEVELOPMENT PRINCIPLES OF ISLAMIC ECONOMICS

1. Prioritize the importance of a balanced.
2. Develop the natural resources with good morals.
3. Always prioritize the public benefit/problem.
4. Always positive and received a good reform.
5. Focus on human development.

7.9 EFFECTS THAT ARE NOT IN ACCORDANCE WITH THE DEVELOPMENT OF ISLAMIC

1. Occur the decay of moral among teenagers of Islam because Islamic values in life.
2. Progress is not on par with the west country or too dependent.
3. Islamic countries will be suppressed.

7.10 ECONOMIC DEVELOPMENT STRATEGY

1. Conventional Economic Development Strategies. Conventional economic development strategies in the five determinants of economic development are:

•The growth of the labor force

•The growth of the capital stock

•Land

•Raw material

•The economic development

Islamic Economic Development Strategies. Economic development strategies in Islamic specified in terms of current use of the factors of production in accordance with Islamic law. The economic Islamic system emphasizes the establishment of the institutional framework for the systematic strategy include

•Government

•Legal Institution

•Education System

• Regulatory Body

•Baitulmal

CHAPTER 8: ASSESSMENT OF THE MALAYSIAN ECONOMY

8.1 MALAYSIAN ECONOMIC SYSTEM

Malaysian practices a mixed economy system for private and government system in together to decide on the fundamental problems of the economy.

8.2 SYSTEM FEATURES OF THE MALAYSIAN ECONOMY

•Elements Of Islamic

•Eg: Islamic Bank, Ar-Rahnu, Takaful, and others.

•Elements Of Doubtful

•Eg: Usury, gambling, corruption, monopoly, and others.

•

•Elements Of Capitalist

•Eg: Using political influence and position to gain wealth unfairly.

•

•Elements Of The Socialist / Communist

•Eg: UDA, FELDA, RISDA , and others.

8.3 THE PURPOSES OF GOVERNMENT INTERVENTION IN A MIXED ECONOMY

1. To ensure and maintain the stability development of the national economy.
2. To ensure more even distribution of income and prevent repression of unfair.
3. To provide public goods efficiently to improve social welfare and prosperity.
4. Monitor the external effects an adverse to the public.
5. Monitor the monopoly forces.

8.4 MEASURES OF GOVERNMENT INTERVENTION IN A MIXED ECONOMY

1. Implementation of an efficient system of zakat.
2. Implement the laws to control illegal activities.
3. Launch a campaign to instil moral values.
4. Provision of equitable income distribution.
5. Control the prices.

8.5 THE ECONOMIC PROBLEMS IN MALAYSIAN

•SOCIAL ECONOMIC PROBLEMS

•Problem of Morality

•Problem of Faith

•CURRENT ECONOMIC PROBLEMS

•Problem of Unemployment

•Problem of Malaysian Economic System (Capitalism)

• Problem of Income Distribution

•Problem of Poverty

8.6 SOLUTION TO THE ECONOMIC PROBLEM IN MALAYSIA

1. Provision of equitable distribution of income to overcome poverty and unemployment.
2. Launch the campaign to instil good values ​​to overcome the problem of corruption and fraud.
3. Implementing an improved system of zakat efficient to increase the income of the government to implement social welfare.
4. Enforce the legislation to control illegal activities and monopoly.