Page 37 - CMA Journal (Mar-Apr 2025)

Focus Section

Lessons from Islamic Economies

around the World

The Islamic economy is based on divine principles Islamic economic
outlined in the Quran and the teachings of the Prophet instruments like
Muhammad (Peace Be Upon Him) in the various Hadith. Mudarabah (profit-
Unlike conventional economic models, the Islamic sharing) and
economy incorporates ethical values, social justice, and Musharakah (joint
sustainable financial practices. It promotes a system that partnership) reflect Raza Saeed, FCMA
is fair, interest-free, and rooted in morality to ensure these principles by CEO, Raza Saeed & Associates
prosperity for all members of society. The main pillars of ensuring shared risks and profits between investors
the Islamic economy are briefly described below: and entrepreneurs.
1) Prohibition of Interest (Riba) - The Quran strictly 3) Wealth Distribution and Social Welfare - Islam
forbids interest-based transactions (riba), as they mandates financial inclusivity through the obligation
lead to economic exploitation and social inequality. of Zakat (charitable giving) and encourages
voluntary charity (Sadaqah).
“Allah has permitted trade and has forbidden riba.”
(Quran 2:275) “And establish prayer and give Zakat, and whatever
good you put forward for yourselves—you will find it
The Prophet Muhammad (PBUH) also warned with Allah.” (Quran 2:110)
against dealing in interest:
The Prophet (PBUH) emphasized the role of charity in
"Allah has cursed the one who consumes riba, the one economic justice:
who gives it, the one who records it, and the two
witnesses to it." (Sahih Muslim 1598) "He is not a believer whose stomach is full while his
neighbor goes hungry." (Sunan Ibn Majah 3253)
The prohibition of riba ensures a just financial system
where money is earned through productive means Through wealth redistribution, Islam ensures that the
rather than exploitative lending practices. rich contribute to the welfare of the poor, reducing
economic disparities and promoting financial
2) Risk-Sharing and Fair Trade - Islam encourages inclusion.
ethical business transactions that are based on
fairness and transparency. The Quran emphasizes 4) Avoidance of Speculation and Uncertainty
honesty in trade: (Gharar) - Islamic finance discourages speculative
activities that create economic instability. The
“Do not consume one another’s wealth unjustly or send Prophet (PBUH) prohibited transactions involving
it (in bribery) to the rulers in order that (they might aid) excessive uncertainty (Gharar):
you.” (Quran 2:188)
"The Messenger of Allah forbade selling what is not in
Similarly, the Prophet (PBUH) promoted fair trade your possession." (Sunan Abu Dawood 3505)
and condemned fraud:
This principle protects people from fraud, economic
"The truthful and honest trader will be with the bubbles, and unjust financial practices, fostering
Prophets, the truthful, and the martyrs." (Tirmidhi 1209)
economic stability.

ICMA’s Chartered Management Accountant, Mar-Apr 2025 35