Complete Islamic Economic Principles and Practices

Complete Islamic Economic Principles and Practices

Nikereact.org – In the implementation of Islamic economic principles and practices, there are certain standards that must be adhered to and must not be violated. Every transaction made must be in accordance with Islamic law. There are many notions about the practice of Islamic economics that you need to know.

Understanding the Principles and Practices of Islamic Economics

Complete Islamic Economic Principles and Practices

Understanding the principles and practices of Islamic economics is everything related to the principles and rules of Islamic law that must be obeyed in the practice of economic activity. Starting from buying and selling transactions, exchanging goods, to the issue of debts.

Everything related to the transaction process is regulated in such a way that its implementation does not violate Islamic regulations so that it does not fall into the practice of usury. In practice, the principles and practices of Islamic economics rely heavily on what is called a contract.

The contract is the key and the main focus that determines whether the transactions carried out are in accordance with Islamic law or not. If it is proven that there is a violation in terms of the contract in the transaction, it could be that the transaction carried out contains elements of usury so that it is forbidden to do so.

To better understand Islamic economics,  can use the book Introduction to Islamic Economics as a reference that discusses the early emergence of Islamic Economics in the 1970s.

1.1. Understanding Muamalah

Muamalah is another term for transactions in the Islamic economic system. The definition of muamalah itself is an exchange activity that provides certain benefits for the goods or things that are exchanged. Many activities are included in muamalah.

Some of them are activities of buying and selling goods in which there is an exchange between money and goods, debts and receivables, borrowing and renting. Even muamalah activities also cover all matters such as farming, trading, association, and others.

No exception in terms of business and capital, both are still included in muamalah activities. Every muamalah activity that is carried out is clearly regulated in the Qur’an so as not to fall into the usury process which is declared haram.

Islamic economics, which is based on noble values from various sources of Islamic teachings such as verses from the Qur’an, Hadith of the Prophet, and many others, can be found in the book Philosophy of Islamic Economics.

1.2. Verses about Muamalah

Islam has strictly regulated its economic practices to be in accordance with the guidance of Allah Subhanahu Wa Ta’ala and the Prophet Muhammad Shalallahu ‘Alaihi Wasallam. Even the rules regarding economic practice in Islam are clearly regulated in the Quran and hadith.
There are six main verses in the Qur’an which specifically regulate the practice of Islamic economics. The following are verses about muamalah that you need to know, including:

a. Prohibition of activities that contain elements of usury

Listed in Q.S. Al Imron (3) verse 130, which reads:

Complete Islamic Economic Principles and Practices (2)

Complete Islamic Economic Principles and Practices 5

Meaning:

O ye who believe! Eat not usury doubled, and keep your duty to Allah, that ye may prosper.

In this verse, God clearly and emphatically commands the believers to stay away from various types of usury practices. One example of usury is giving a debt by asking for more or interest from another person while paying off the debt. The law is haraam.

As a philosopher, Musa Asy’arie also presented his thoughts on the philosophical aradigm of Islamic Economics discussed in a book entitled Paradigm of Islamic Economic Philosophy Musa Asy’Arie Bk.3.

b. Prohibition of using vanity or wrong methods

Complete Islamic Economic Principles and Practices (3)

It is stated in Q.S. An Nisa (4) verse 29, which reads:

It means:

O you who have believed, do not eat each other’s wealth in a false way, except by way of commerce which is carried out with mutual consent between you. And do not kill yourselves; Verily Allah is Most Merciful to you.

In the verse it is explained that for anyone who believes that wants to acquire wealth, it must be done on the basis of mutual benefit, not one loss and one gain. Implementation in accordance with Islamic law will not cause harm to other parties.

So that harmony between others will be created because of the element of mutual help and help with others without any element of coercion. People’s lives will be more just, peaceful, and prosperous.

c. Prohibition of using unjust methods

Complete Islamic Economic Principles and Practices (4)

It is stated in a Hadith of Muslim History, which reads:

Meaning:

The hadith quoted from Abu Hurairah radhiallahuanhu taken from the words of Rasulullah shalallahu ‘alaihi wasallam contains a prohibition so that fellow servants of Allah do not envy each other, deceive each other, and anger each other to break the relationship of brotherhood. Muslims are brothers with other Muslims so there should be no action tyranny or persecution among fellow Muslims. Even the hadith strictly forbids Muslims to insult and deny others. Haram blood of every Muslim over other Muslims.

d. Prohibition on playing scales, measurements, halal, and quality

Complete Islamic Economic Principles and Practices (5)

Listed in Q.S. Al Muthaffifin verses 1 – 3, which reads:

It means:

1. Woe to those who cheat (in measuring and weighing)!

2. (That is) people who when they receive a dose from another they ask for it to be fulfilled,

3. and when they measure or weigh (for others), they reduce.

The verse explicitly states that those who play with the scales by asking for the measure to be filled when receiving others and reducing the dose when giving to others, then they will be harmed. This verse is at the same time a threat.

e. Prohibition of gambling/speculating

Complete Islamic Economic Principles and Practices (6)

The prohibition of buying and selling gharar or speculation is clearly prohibited as followed from Abu Hurairah radhiallahuanhu in the hadiths of Muslim Turmudzi, Nasa ‘, Abi Daud, Ahmad, and Ibn Majah. The hadith explicitly reads, “The Prophet forbade the buying and selling of speculation (gharar).”

f. Prohibition of transacting illegal goods

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From Aisha, she said: “When the end of Surah al-Baqarah came down, the Prophet read it to his companions in the mosque and then forbade the khomer trade.” (Other subjects: Muslim 2985, Nasa’i 4586, Abi Daud 3086, Ahmad 23063) [1]

As quoted from Aisyah radhiallahuanhu in the hadith of Muslim, Ahmad, Nasa’I, and Abi Daud, it is stated that the Prophet recited the last verse of Surah Al-Baqarah and announced to his companions in the mosque that the khomer trade was unlawful.

Knowing the verses and hadiths that explicitly regulate Islamic rules related to muamalah above, then the things that are prohibited and should not be done must not be done in practice.

1.3. Kinds of Muamalah

Muamalah activities include several transactions, including the following:

1.3.1 Buying and Selling

Buying and selling is an activity in which there is an agreement to exchange objects that the buyer wants to own at the appropriate price as offered by the seller. Buying and selling activities are permissible and lawful as stated in Q.S. Al Baqarah (2), paragraph 275 which reads:

There are several conditions that must be met and followed by the perpetrators of buying and selling in Islam so that the practice is in accordance with the Shari’a, including:

  1. There are money and goods that are used as transaction instruments, both of which must be lawful and pure, useful, goods can be handed over, and the condition of the goods is known by the perpetrators of buying and selling, and belongs to the seller himself.
  2. The seller and the buyer must meet the requirements as reasonable, mature/adult persons, and carry out the transaction of their own volition without any element of coercion.
  3. There is a contract or ijab qabul stated by the seller, “I am selling this object to you at a price…” Then the buyer answered, “OK, I will buy this object at the stated price.”

1.3.2 Khiyar

Khiyar is one of the muamalah transaction activities that gives freedom to the seller or buyer to decide whether to continue the sale and purchase transaction or cancel the transaction.

Khiyar may be done, but there must be conditions that must be followed and carried out on the basis of consensual feelings without any element of coercion. There are several types of khiyar that you need to know, including:

a. Khiyar Terms is a khiyar process that is used as a condition in a buying and selling transaction. Where the seller himself immediately said, “I sell this item at that price and the khiyar condition is for one week.”

b. Khiyar Assembly is a khiyar process in which the seller and
the buyer is in the same place where the transaction or bargaining process takes place. Both the seller and the buyer both have the same right to cancel the transaction if something is not to their liking.

c. Khiyar defect (aibi) means that the buyer is given the right to
return goods that have been purchased if a defect is found, thereby reducing the quality and function of the value of the goods. This means that buyers can complain if there are items that do not match the order.

1.3.3 Riba

Riba is forbidden in Islam and it is expressly regulated in the Quran. Why is usury illegal? This is because the notion of usury itself is the value of money interest that is in excess of exchanging goods or borrowing money.

For example like this, you borrow money from Fitri for IDR 100,000.00. However, Fitri asks you to return Rp. 110,000.00. So the Rp10,000.00 money that must be returned is usury and this is prohibited in Islam.

In sharia economic regulations, usury is further divided into several types as follows:

  • Riba Qordi is a process of borrowing money in which the borrower must return the value of the money borrowed plus the interest / excess.
  • Riba Fadli is the process of exchanging goods of the same type but different in scale.
  • Riba Nasi’ah is a sale-purchase contract procession in which the delivery of the purchased goods is carried out a few days later.
  • Riba Yadi is a contract of buying and selling goods of the same type and the same scale, but during the handover process the seller and buyer are in separate positions.

1.3.4 Accounts Payable

Debt transactions are carried out by handing over assets or objects to someone with an agreement that the assets or objects will be returned within a certain period of time. In this transaction, there are three pillars that must be fulfilled, namely:

  1. There are actors who do debts and those who give credit
  2. There are goods or assets as objects of debts
  3. There is an agreement between the creditor and the debtor

In its implementation, in order to stay away from usury, the goods or assets returned must be in accordance with what was borrowed. If there is an excess given by the debtor of his own free will, then the property or item is lawful.

On the other hand, if the person giving the credit asks for an additional when the property or goods are returned, then the addition is unlawful. This is because there was no mutually agreed agreement beforehand.

1.3.5 Leasing

In Islam, the term lease is called ijarah.

This transaction is carried out by giving certain rewards to someone who rents out goods or objects to other people. There are several conditions and pillars of ijarah that must be met, including:

  1. The rental transaction process must be carried out because it is at the will of each one
  2. Both the one who rents and the one who rents must both be of good sense and mature
  3. The condition and nature of the goods must be determined from the start
  4. The leased goods will become the full rights of the lessee or tenant’s guardian for a period of time that has been mutually agreed upon
  5. It must be stated clearly how long the tenant will use the item.
  6. There was an agreement from the start regarding the rental price and how to pay it
  7. Both parties must know the benefits that will be taken from the goods

Leases are not only in terms of goods, but also labor contracts. There is a collective agreement that must be fulfilled in the employment contract. The agreement relates to the type of work, hours worked, length of work, salary, payment system, and benefits.

can find other thoughts and principles of Islamic economics related to economics, management, and finance in the book History of Islamic Economic Thought.

1.3.6 Shirkah

Syirkah means a contract made by two or more parties who both make an agreement to build a business with the aim of making a profit.

The pillars that must be fulfilled in the syirkah contract include the following:

  1. There are two parties who carry out the contract or ‘aqidani’
  2. The object of the contract or ma’qud ‘alaihi is clearly mentioned which includes capital and work
  3. The existence of management activities or tasharruf as a valid condition for the syirkah contract.

Syirkah consists of several types, namely:

  1. Syirkah ‘abdan is a type of syirkah in which two or more parties do not contribute capital (charity) and only work contributions
  2. Syirkah ‘inan is a syirkah in which both parties contribute to each other both in terms of capital and work
  3. Syirkah wujuh is a collaboration carried out based on one’s position, expertise, and character
  4. Mufawadhah syirkah is a syirkah carried out between the two parties by combining all the previously mentioned types of syirkah.

1.3.7 Mudharabah

Mudharabah contract is also known as a cooperation contract in which the first party is the provider of capital or shahibul mal, and the other party is the manager or mudarrib.

Mudharabah is divided into two types based on the benefits obtained, namely:

  1. Mudharabah muqayyadah means that the business carried out will be limited by time, type of business, and place of business.
  2. Mudharabah mutlaqah means that the form of cooperation carried out between the capital owner and the capital manager is broad in scope and has no limitations in terms of time, type of business, or place of business.

1.3.8 Musaqah, Muzara’ah, and Mukhabarah

The definition of musaqah is a collaboration between farmers and garden owners.

The type of agreement is that the garden owner hands over the land to the farmers to manage and then the harvest will be divided according to a mutual agreement.

  1. Muzara’ah is a collaboration carried out in the field of agriculture between farmers who work on the fields that provide plant seeds and the land owners themselves.
  2. While Mukhabarah is a collaboration between the land owner and the farmer, but the seeds are provided by the land owner.

1.3.9 Banking

The bank is identical as a place to store money. The definition of a bank itself is a financial institution that has the task of collecting funds from the public and then channeling it using an interest system. There are two types of banks currently in the community, namely:

  1. Sharia/Islamic Banks are financial institutions that carry out their operations with the Islamic sharia system and meet the requirements that are clean from usury.
  2. Conventional Banks are financial institutions that have the function to collect funds and distribute them to those in need with an interest system.

1.4 Sharia Insurance

Sharia insurance is also known as at-Ta’min which means protection, coverage, tranquility, and security. Insurance is also part of muamalah transactions where the legal basis is that it is permissible (jaiz) with certain terms and conditions.

Guidelines regarding sharia insurance are regulated directly and guided by the Fatwa of the Sharia Council.

All transaction processes and products offered must comply with the provisions of Islamic law. What is regulated in Islamic Shari’a law is nothing but the interests of the Muslims themselves. So that as a devout and obedient Muslim, you must fully support by implementing the principles and practices of Islamic economics as a whole.

The following are books on Islamic economics:

Introduction to Islamic Economics

The development of Islamic economics is something that cannot be separated from the development of Islamic history itself. And this book discusses Islamic Economics, as the study of modern science only emerged in the 1970s, but thoughts on Islamic economics have emerged since Islam was revealed through the Prophet Muhammad SAW, because the reference to Islam is the Qur’an and hadith. The emergence of Islamic economics in the current era has yielded results with many re-discussions in the realm of modern business, such as Islamic financial institutions/Islamic banking, and so on.

Islamic economics

“This book was compiled by a team of writers from the Center for the Study and Development of Islamic Economics (P3EI) at the Islamic University of Indonesia, Yogyakarta, within the framework of cooperation in writing financing assistance from Bank Indonesia. Hopefully this support can be read as a concrete form of Bank Indonesia’s discretion towards improving the quality of human resources as the main capital for the development of the Islamic banking industry in particular and the Islamic financial system in general.” “Islamic economics reference books for academic community strata: S1, S2, and S3 are indispensable; Alhamdulillah, this book can be used as a reference in the education process for pious human resources, God willing. Amen.” Prof. Dr. Suroso Imam Jazuli (Dean of the Faculty of Economics, Airlangga University Surabaya) “The discussion does not only touch on economic mechanisms but also moral values ​​in the economy, making this economics textbook has advantages over similar books.” Dr. M. Syafii Antonio (Chairman of the Tazkia High School of Islamic Economics, Bogor)

Islamic Economics Revised Edition

The development of the Islamic banking and finance system, which is currently reaching its peak of growth and is increasingly being widely known by the public, cannot be separated from the author’s observations. Explanations in terms of existing policies and regulations strengthen the existence of the development of an Islamic economic system at a practical level. Likewise, in terms of supervision of institutional expansion and developed Islamic financial products are also discussed in this book. This 4th edition of the Islamic Economics book shows that this book has truly earned a place among academics and practitioners of Islamic economics, so it is not an exaggeration if I also recommend to the Chancellor and Dean who manages the Islamic Economics Study Program at UIN, IAIN, STAIN and PTKIS to be able to use this book as a reference and reference.

Islamic Economics Theory Its Application

This Islamic Economics book is a textbook intended to provide a guide for teaching Islamic Economics in universities. All themes were discussed in succession, starting from microeconomics to economic policies carried out by monetary authorities. All of this discussion is presented comprehensively by stating the reasons naqli from the Qur’an and hadith. Economic theories born by classical Islamic economists such as Abu Yusuf, al-Ghazali, Ibn Taimiyah, and Ibn Khaldun. Supported by existing contemporary theories.

Islamic Economic System

The book in hand is one of the reference books on Islamic economics that has become a reference for world academics. The range of main themes that are structured with the systematics of modern economics makes it easier for those who are interested in knowing what and how the Islamic concept is in terms of production, distribution, accounts payable, income, and state spending. The main theme is also complemented by various supporting topics such as interest, property rights, land, labor, and comparative analysis between the current dominant economic system and Islam.

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