Page 68 - CMA Journal (Mar-Apr 2025)

Focus Section

Conventional Economic System (CES) Limitations demands. At the same time, they prioritize customer
support and community development, ensuring
In contrast, the Conventional Economic System (CES)
long-term sustainability and alignment with ethical and
largely revolves around the accumulation and
shariah principles.
deployment of monetary capital. It treats money as the
central organizing factor in production, trade, and The ultimate goal is not just profitability but also the
resource allocation. Lending and interest-based achievement of Al-Falah—a state of well-being, success,
structures dominate, with profit and liquidity serving as and moral integrity.
primary drivers. Resources outside capital often receive Social Responsibility and Investment Screening
limited attention. Exit routes from debt cycles are
complex, and returns are often constrained by currency IES integrates social responsibility through compulsory
fluctuations and inflationary pressures. The monetary Corporate Social Responsibility (CSR) practices. It
focus can lead to artificial economic growth detached operates within a 360-degree model encompassing:
from real social needs.
• Shariah-compliant financial products & investments.
Islamic Economy: A Holistic Model • Environmental and social governance (ESG) principles.
for Growth • Multiple screening methods for ethical compliance.
The IES framework fosters an environment rooted in • Active contributions toward social upliftment and
stewardship and sustainability. It aims for purification wealth equity.
and growth of wealth, continuous economic circulation,
The system harmonizes Islamic banking, Islamic finance,
divine rewards, social solidarity, and spiritual
takaful (Islamic insurance), and jurisprudence to ensure
development. It aligns money with its Islamic
equitable wealth distribution and societal uplift.
concept—as a blessing, an amanah (trust), and a means
of facilitating trade and communal benefit rather than a Structural Foundations of Islamic Economic Thought
commodity for speculative trade.
The broader architecture of Islamic economics includes
IES emphasizes trade as a foundational pillar. It
production (using human capital and resources), ethical
encourages the free flow of goods and services across
marketing strategies, transparent transactions (via barter
continents, upholds rights demarcation, promotes
or currency), and governance structures such as Hisbah
equitable access to markets, and simplifies trade
(market regulation) and Bait-ul-Maal (public treasury).
settlements. These elements enhance unity and
long-term economic survival. IES, Islamic banking systems (IBS), and Islamic finance (IF)
operate within a cyclical model that connects the
Zakat, a fundamental pillar of the IES, links economic activity
economy, society, and environment. This model aims to
to interfaith harmony, community development, social
preserve natural endowments while driving sustainable
welfare, poverty alleviation, disaster relief, education,
development.
healthcare, and empowerment. In essence, zakat transforms
economic growth into a tool for societal development. Global Trends and Pakistan’s Role
Core Foundations of the Islamic Economy Globally, the Gulf Cooperation Council countries—such
The Islamic Economic System rests on pillars such as trade, as Saudi Arabia, the UAE, and Kuwait—along with
investment, governance, ethical contracts, responsible Malaysia, dominate Islamic banking and finance. Pakistan
consumption, justice, property rights, and balanced currently holds only 1.2% of global Islamic banking
wealth distribution. The system views wealth as a test and assets, indicating substantial room for growth and
trusts it to circulate broadly within the economy. deeper integration of IES principles.
Key objectives include minimizing exploitation, Synergy with ESG and Regulatory
supporting the underprivileged, providing essential Frameworks
services, and fostering long-term prosperity. Individual
liberty, property rights, natural limits on inequality, and Islamic finance aligns naturally with ESG principles. It
broad wealth circulation are upheld, alongside social promotes transparency, environmental protection, and
welfare and prohibition of exploitative institutions. social justice, and opposes harmful practices like financial
derivatives, short selling, and interest-based instruments.
Profit with Purpose: Dual Objectives of IES Transactions are always asset-backed, with risks and
Islamic economic models aim to deliver not only financial rewards shared fairly. Regulatory oversight, client
success but also spiritual fulfillment. They encourage engagement, and compliance with ESG criteria make
innovation and adaptability, embrace technological Islamic finance a viable alternative model in today's
advancements, and respond to changing market global economy.

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