"Islamic economics is the knowledge and the application of the injunctions and the rules of the Sharia in regard to acquisition and disposal of the available resources for providing satisfaction to the individuals in order to enable them to perform their obligations to Allah' and the society".
In this definition the word injunctions signifies the prescriptive and the prohibitive injunctions of the Qur'an and the Sunna. The rules of the Sharia used in the definition signify the set of principles determined with precision and their subordinate legal maxims which the great Muslim jurists have derived from the Do's and Don'ts to ensure and to determine the Islamicity of any act, institution or policy. These rules are the systematic exposition of the spirit of the legal text (nass) intended to guide man towards different situations in human society throughout the ages. They provide broad contours within which policy making can be pursued and its validity judged. The legal maxims, on the other hand, are amenable to trade-offs and substitutions.
Before reproducing these rules and applying them, as far as possible, to contemporary economic situations and problems it is necessary to take care of the following precautions that are necessary to protect one from fallacious analogy, misleading over-confidence and lapse:
1.
Recourse may be made to reasoning based on these rules only if the Qur'an and the Sunna do not provide guidance on an issue. Consensus of early jurists (Ijma) also commands priority over the legal maxims. Injunctions of the Qur'an and instructions of the holy Prophet are also to be taken as a whole. The method of deriving conclusions from them are known and should be followed. Legal decisions based on them are contained in the compilations made by great jurists and scholars.
Jurists have also recorded the judgments and the opinions that are based on the consensus (Ijma) of early' ulama'. This leaves a large number of issues that require a decision keeping within the limits of the Sharia. For example, the legal opinion in regard to profit-sharing in a joint venture is that:
"Profit is to be distributed according to the agreement but loss is to be borne in proportion to capital contribution".
In this rule the ratio of the distribution of profit according to agreement can be reviewed in light of business conditions. It may be left to the partners to decide the ratios of profit-sharing or otherwise an Islamic government or central bank may fix a range within which the partners should share profits. The government may even lay down that, like losses profit-sharing would also follow the ratio of respective capital contributions by different partners. The liability of loss, however, has to be borne strictly in proportion of capital contribution since this rule enjoys the consensus of the scholars. The government has no right to change this ratio nor can the business partners make an agreement that violates the rule. Similarly in Bay 'salam advance payment of cash is a condition that has been laid down by consensus of 'Ulama'. Deferred payment or adjustment of price against loan is not permissible. It is the consensus of 'Ulama' that business partnerships/(Shirka and Mudaraba) are treated as legal forms of joint venture. Thus there can be disagreement about forming a joint stock limited liability company, a trust, a cartel, a syndicate or a corporation but the legality of Shirka and Mudaraba may not be doubted.
2.
It has to be fully kept in mind that all the injunctions of the Sharia seek to benefit human beings and eliminate harm. But those benefits and harms are not entirely left to the judgment of man. In a large number of cases those benefits and harms have been specified in the Qur'an and Hadith and should be made the criteria of judgment. In cases where benefits and harms are not pointed out human intellect will judge the virtue or vice of any act. Thus intellect would be guided by sound reasoning, experience, prevalent practice and sound judgment of scholars who have well understood the spirit of the Sharia and are scrupulous. Whether or not state trading- should be allowed depends largely on experience. Should there be a difference in the wages of different workers and in the pay scales of different categories of employees depends upon custom and prevalent practice. Should any industry be nationalized in the interest of the community depends upon sound judgment of competent persons. The Sharia prohibits those trades and activities that involve ignorance and uncertainty since they may lead to disputes, strife and animosity. It is sound judgment that will decide which forms of present day trades and activities should be prohibited and which should be allowed and protected by law.
3.
The exigencies of the situation sometimes require that a lawful act should be disallowed for perseverance of public interest. Similarly there are situations under which an unlawful act has to be tolerated during a short period of contingency. But of the two situations, allowing an unlawful act is much more serious than banning a lawful act. The safe and preferable way is to retain the essential illegality of the act even when it is unavoidable to have recourse to it under compulsion of circumstances government, for instance, may be compelled to pay interest on credit purchases of military hardware. Despite this compulsion, however, it should not be disregarded that payment of interest is unlawful and that serious thought should be given to eliminate that situation as quickly as possible.
4.
We are attempting here to identify only a few of the vast number of rules that the great jurists have laid down. Interpretation and application of these rules require thorough knowledge of Islamic law and jurisprudence. Emphasis on a single rule ignoring the total perspective, its scope, qualifications and limitations may often lead to a blunder. Such is the case that Muslim economists are advised to ignore these rules unless they are guided by reliable experts of Sharia. Nevertheless, possibility of error in interpretation and application by the author cannot be ruled out. The readers who may like to apply them ought to discuss their problems with scholars of authoritative competence on the subject rather than building upon this discussion.
With the above precautions the rules that seem to be relevant to economic policies and institutions may be briefly reproduced in the following pages. The discussion mostly contains the examples that early jurists have adduced. In some cases, however, examples or contemporary situations have also been added.
(1) Claim and Practice:
The Qur'an insists that Muslims should demonstrate consistency in faith and practice and in words and deeds (2:208: 24:51; 30:30; 33':70: 41:30; 61:2,3). It is this basic requirement that has led to the formation of a number of rules in the Sharra to determine and judge the relationship between intention and deed and between claims and acts.
The first legal maxim in this respect reads as following:
* "The basis of every order is the intention thereof a judgment based on an order should follow the intention and purpose of that order"
The rule embodied in this maxim has been applied by early jurists mostly on acts of rituals, but it is just as equally applicable to other spheres of activity. The liability of a person who finds somebody's goods lying in the way and picks it up will be contingent upon the intention with which he has picked it up. If he intends to hand it over to the owner and has made it known to' others he will be treated as a trustee and will not be required to indemnify the owner in case the property is destroyed while in his possession. But if he has kept it as owner he would be treated as a usurper, Ghasib, and will be required to indemnify the owner in case the property is destroyed. The rule is also amenable to performance of visibly different acts leading to the achievement of the same object. Let us take an example from our own times. Nationalization of financial institutions in some countries may be the result of political ambitions while in some others it may aim at correcting mismanagement and regulating credit; and yet in some other countries it may be aimed at preventing foreign tion. Nationalization in socialist countries has a deep-rooted philosophical basis and underlying rationale quite different from the one which prompts nationalization of key industries in non-socialist countries. On the other hand, different actions by different countries by way of granting rebates on export, making available easy credit to exporters, fixation of import tariffs, laying down licensing procedures and quota restrictions in connection with imports etc., may aim at achieving a common cause of improving the balance of payments position. The relationship between intention and act could further be elaborated by the following examples:
1.
A man makes an earning:
1.
For the satisfaction of his selfish urges.
2.
For personal consumption and demonstration effects.
3.
For complying with the divine command to earn for the sake of survival and spending on noble causes.
In all above cases the act is the same but the intention/object is different.
2.
A man may grow and sell grapes to the consumer or to the manufacturer of wine.
3.
A fanner may grow poppy for sale of seeds or to prepare opium or drugs. In all these cases it is the intention that determines the legality or illegality of the act or an individual.
The same is also true in the case of public policies. Inscription of sacred words on coins may intend to symbolize a distinctive feature or the inscription may be desecration of sacred words. The former may be acceptable but the latter would be treated to be offensive.
In short it is the intention of the government in carrying out an act or in making policy that matters.
The relationship between an act and intention could take the following forms:
1.
Acts/policies that are good in themselves and are actuated by good objectives/intentions. For example, a government might seek to promote public welfare through Zakat and charity funds, donations, government revenues and just and equitable taxes.
2.
Acts and policies that are not good in themselves but are resorted to for achieving commendable objectives. The instances that immediately come to mind are winking over smuggling in order to allow some people to earn their livelihood or mobilizing funds for charity by means of games of chance and by floating interest-bearing loans and bonds.
3.
Acts and policies that are actuated by objectionable intentions but lead to good results. An example is the nationalization of an industry or of an industrial unit with a view to harassing or black-mailing one's political opponents but the step might result in providing job security to workers, reduction in the prices of products, elimination of cut-throat competition and waste, and standardization of the products and avoidance of incongruent growth of industry.
4.
Objectionable intentions with objectionable policies. The example is conniving at smuggling of wine into the country for use by Muslims.
It will be found that form No.1 (good acts with good objectives) is an ideal situation and has to be pursued. Form No.4 is to be rejected outright. In Nos. 2 and 3, the government has to make amendment of policy in the former and of objective in the latter. It should be noted that the announced phraseology of the policy sometime betrays the implicit objectives. The government may announcece its policy of providing a house to each shelter less family but in practice it could be unaffordable by a shelter less man. It is actual acts and policies rather than proclamations that determine the intention. This is so because of a sub-rule which governs contractual obligations:
"Contracts are to be understood in relation to their intention and substance, not by the words and phrases used: so a bay bi'l-wafa' will be held as a mortgage",
Surety ship (kafala) implies coextensive liability while transfer of debt (hawala) implies discharge of the principal debtor. If a contract of transfer of debt (hawala) is made with the condition to hold the principal debtor liable in case the transferee fails to discharge the debt, contract even though termed as a contract of hawala will be treated as a contract of kafala. suretyship. Similar will be the treatment of a contract of kafala in case the principal debtor is discharged after contract of suretyship is signed.
In case a government issues a license to set up an industry, or start a trade or import some merchandise it will not be lawful to sell the license because the object of the license was the authorization to set up an industry or trade or purchase of goods but not to make the license itself an article of trade.
Likewise if the banks declare their policy of financing their clients on non-interest bases it would be necessary to do so and not merely continue the same practice and seeking to rationalize it in Islamic terms by changing the relevant nomenclature such as calling it "buy-back" or "mark-up".
It will not be permissible for the banks to practice Shirka and Mlidaraba in such a way as to ensure a fixed rate of return for the banks while the liability of bearing loss or an uncertain amount of remaining profit is transferred to the working partner.
To take another case, if the government allots plots of land to individuals with the object of providing accommodation for themselves the allottee will be al1olating the implicit terms of the agreement by converting it into a commercial or industrial site or by treating it as merchandise.
In case the government allots agricultural land to a farmer for the purpose of cultivation, the land will have to be used for the purpose for which it was allotted. This allotment will not confer absolute right authorizing the allottee to claim the royalty of sub-soil wealth if it has been found on exploration, nor will he be allowed to convert it into a forest or a commercial or residential area because these objectives are not covered under the terms of allotment.. Authorizing the possession and use \would not be stretched to imply a use which the owner does not intend to allow. Leaving land unused deprives the allottee his right over land.
(2) Doubt and Certainty:
The basic rule that resolves the conflict between doubt and certainty is contained in the principle:
"A belief amounting to conviction cannot be caused to disappear by a doubt".
The rule is based on a Quranic verses: "Most of them follow naught but conjecture. Assuredly, conjecture can by no means take the place of truth" (10:37). The Prophet (peace by upon him) also rejected entertaining doubts in the face of valid ablution (wudu). The rule thus discards the effect of doubt that disturbs the original position. This provides guidance where discretion or personal judgment and subjective evidence are relied upon; the rule is of great significance in the event of controversy on rights and obligations of contending parties in the absence of a proof on either side. The benefit of doubt arising out of a controversial position can never go to a person on whom the onus of proof lies; thus the position of an indebted person even after his death will not be affected by doubt as to a probable discharge of debt.
Similarly a claim as to the discharge of a debt will not be rejected on the basis of presumption to the contrary. A contract between two parties will be treated as binding even though there may be reasons to doubt its Fait Du jour. The rule, if read with its following subrules, provides a broader canvas of its application.
(a) "As to incorporeal matters-that do not prove themselves, the basic principle (presumption) is that they do not exist" : so that if between the active partner and the financier there be a dispute as to profit, the word of the active partner will be taken, and the financier may lead evidence to prove the actual profit."
In case a firm declares a particular amount of income during the year this will have to be accepted by the income tax authorities in the absence of evidence to the contrary. Thus doubts of the assesses statement cannot be unilaterally or arbitrarily sustained unless the income statement filed by the assesses is proved to be containing discrepancies. Business partners whether individual or banks will also be required to accept it for purpose of sharing the profit. The rejection of this declaration would require convincing proof.
In the case of a dispute over defective merchandise the above sub-rule requires presumption of defect occurrence after sale unless the buyer could prove prior presence thereof.
Similarly, a partner has no right to assume a minimum rate of profit earned by his business partner and claim his share in that profit as different from the amount stated to have been actually earned by the partner. The sub-rule provides that in case the working partner declares a certain amount of profit no more will be presumed unless the contrary is proved to be a fact.
(b) The above sub-rule is further strengthened by another sub-rule that "no reliance (should be made) on mere imagination"
(c) Another rule is that of 'freedom from obligation : so that if one destroys the property of another, and they differ as to the extent of damage, the word of the person destroying may be taken, but the owner of the property may bring evidence to prove the excess.
Thus in case of loss in business a partner cannot allege willful neglect and require the latter to indemnify him for the loss. Unless he proves the contrary. Failing this proof the partner will not be personally made liable to the loss or to indemnify the other partner. Any doubt affecting his position of freedom from liability will be untenable. No arbitrary judgment of the contender would be acceptable.
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