THIS ASSIGNMENT IS A PARTIAL FULFILLMENT

FOR IE1001 PART 1

CERTIFIED ISLAMIC FINANCE PROFESSIONAL (CIFP)

INCEIF

Student Name :Engku Mohd Ikram

Student ID: 1100370

1-As Islam being the most completed religion, it is it not possible that a rich and well diverse

economy could be achieve from Islam. Islam as a progressive religious systems have

prepared a thorough guide to its follower . It has a complete guide from the appointment of

leader to the eradicating of poverty.

Zakat

Islam is a social religion. If we look at the religion, we could see that the elements of

togetherness in the religion; which does not divide the poor and the rich, they are all on the

same level. In order to narrow the gap in the society, it has legislate the law of zakat; where

every excess of earnings earn, some portion of it will be distributed among the poor and other

8 criteria of people that deserve the zakat money. The zakat money will be collected by a

legal public treasury which later will handle the distribution. The money collected is to

combat poverty, narrowing gap between rich and the poor as well as overall development.

Narrated from the Kitab Al Wasail, Prophet Muhammad saw said1;

“If the people had paid their Zakat there would have not been even one poor Muslim and

through the compulsory share specified from God, he would have become self-sufficient and

the poor, needy, hungry and naked are in problem because of the sins of the rich”.

Prophet Muhammad had mention that if the zakat money have been fully collected, poverty

can be uprooted. It only exist because unevenly distribution of wealth in the country probably

due to corruption and oppression of leaders. It is mention about 8 types of people whom zakat

should be belong to them. “Zakat is only for the poor, the needy and the officials appointed

over them, those whose hearts are made to include (to truth) and the ransoming of the

captives and those in debt and in the way of Allah, and the way farers; an ordinance from

Allah and Allah is All knowing and All wise.” It is to be noted that the term, in the way of

1 Kitab Al Wasail, Volume 6, Chapter 4.

Allah is very wide and covers all development projects as well as such items as education,

health and construction of bridges, roads, hospitals and schools.

Khums

Khums is an Islamic tax as to help the needy, eradication of poverty and propagate Islam as

well as preparing the material for the greater good of ummah. Khums is only due to the

surplus, not based on the total earnings per year like tax. As zakat is a fixed tax, khums is not

as compulsory as zakat. It only apply to those income exceeds or minus the importance

expenditure per year. The money which is a huge sum of money will be use to to solve many

of their religious, social and material problems. It is not only for the earned income only, it

also applies to all the earnings from under the land such as in mining of gold, extracted from

sea, buried treasure and also spoils of war.

Charity

Islam ask its followers to be generous, this is because Allah has been generous to them. As a

sense of gratitude to Allah, we need to contribute to the society willingly in terms of charity.

The charity could also be in terms of charity; an assets that could be used by the public. It

could be a mosque, a cemetery, public hall and et cetera. Distribution also could be given in

terms money to a well-organized institution to be used to build a place for the benefits of the

society.

2- Critically discuss the economizing problem from secular perspective and show how Islam

solves such problem. Provide some examples.

Secular is a principle and concept being put into practise. It is the act of dividing the worldly

matters from the religion or belief. It subscribed to the capitalist principle which is the profit

maximization. Based on this concept, we could see that United States could be the example to

discuss here. US is a capitalist economy which only belief in the profit maximization as we

speak. The nature of the concept does not instilled moral, thus it is exposed to the element of

oppression towards the society. This could be shown by at the current rate, 10 percent of the

total population of people living in US lives under the poverty. Apart from the economic

crisis that contribute to the total of poverty in US, the country itself does not provide enough

assistance to the poor. However they have a lot of non-profit organization and individuals

that help to reduce the gap of poverty.

The deceased Muhammad Baqir As Sadr, an Islamic jurist had given his opinion regarding

the matter of economizing problem. I would like to highlight his opinion that contains from

the book of Falsafatuna and Iqtisaduna that address the matter of economizing problem.

Islamic economy according to As Sadr being divided into 2 parts which is the individual

obligations and the ruler’s obligations to adhere to the laws of syariah. Economic assets on

the other hand are divided into 2 parts which is the private property and the public property.

However Islamic economic structure does not combine haram and halal as capitalism and

socialism. It is based on the law of syariah and belief that the uttermost importance of a

matter should always be in the side of the public. Not to the interest of the invidual.

Human’s behaviour consist of social, religious, economical. It stretch to the relationship

between men, to the environment, to the society and as well as obligation to God. Economic

relations are relations of oneself that wants to satisfy his basic, middle and wealth needs.

Relationship of men to the environment is that he shouldn’t do something that could cause

damage to the environment. This relates to the view of the majority, if a person did something

and causes the anger among the majority, the anger of the majority is the anger of Allah. The

ruler as holding the amanah of Allah, needs to develop and managing the resources of the

environment well to further utilize the resources. Examples that we could be seen is how

government from the entity of Petronas, TNB and other that controls the resources which in

the end profit of it will be contribute to the government in terms of tax. Thus resources could

not be handle by individual, it needs to be under the government as it will provide equal

treatment by the government

Besides that, law of syariah does not only covers the law of marriage, but it also a complete

law that caters from the appointment of leader to the matters about the poverty. if we were to

look upon the matters of economizing problem, as the needs are unlimited of men.

Government plays a very important role in the matter. Based on the syariah law, the wealth

should be divided equally thus the idea of monopoly of resources, cronyism and others are

forbidden in Islam. Example that we could see at the current moment is the bidding tender of

projects. Islam has address the matter that the government should carefully assess the

participant in the bidding before giving out the project. This is to avoid corruption, elements

of zalim and oppression in bidding the projects.

3- “Self interest maximization is not a relevant source of motivation in an Islamic economic

system”. Discuss the validity of this statement. 

With the falls of Soviet, the west had dominated the world with the practises of capitalism by

the way of colonization of other country. As they colonized, they enforce the law, the

economic structure and as well as colonizing the mind of the people of that country. In

today’s world shaped by Adam Smith, we are just let the system as we are in comfort by

dwelling in the capitalism. Self-interest drives the members of the society being the force of

the society, the supply and demand is indirectly being drives by self-interest which never

feels the sufficient. Even economist which used to support the Marxist block also makes a

statement that it is unable to support the society as a whole.

Islam believed in the humanity, equality among men in front of god, and also high moral

values. Islam divinely lead its followers to tranquillity and peace in every aspects of life. The

late Muhammad Baqir Sadr in his kitab Falsafatuna had contains the principles that should

replace the existing regimes in the muslim world which is corrupted. He believes that an

economy should be able to support its people with different socioeconomic, addressing the

human needs; and more importantly, has the capacity to develop and progress in accordance

with human potentials.

Conceptualization of his theory shows that he disagrees about the current political economy

as he disregard the labour and capital as part of the economic resources. This is because

Islamic finance does not treat capital should work by itself to gain as it teaches about the

profit sharing and also forbid riba. He said that the capital is a fact that mainly producing

profit but it is not the primary source of production. it just a representation economically

wealth that are being produced and generated through the human resources through labour

which could be reinvest to generate more development.

Nature consist of 4 types of resources which are land, raw material, water and other resources

which includes electricity. Although common law allows the public corporation that extract

these resources to be listed and owned by individual, Islam forbid such action. Islam forbid

the ownership of natural resources as it could be manipulated and element of oppression will

be available. Thus there will not be no self-interest involved in the public resources thus will

make the available price of goods, services and resources in a stable manner.

As the owner of a state should be under the Islamic state or government, however people may

have the right on the ownership if they invest their manpower to develop the resources. As

such the development in the natural energy such as the solar. It is permissible for them to get

the right of the portion of the natural resources as they have invested their labour time for the

benefits of the masses. People that utilize the resources also needs to pay for the resources

and taxes should be impose by the state to them as a commission rendering the services, the

cost of production, maintenance as well as the margin.

4-As we discussed in the 1st question and other question which has an overlap answers, if we

take US as the benchmark of everything, we could see that there are a lot of flaws in the way

that the conventional approaches are concern. As we could see the current rate of poverty is

very high in the US which is nearly 10 percent. If the system is good enough, as being the

biggest economy in the world, they should be able to address the matter easily as the

resources is huge to eradicate the poverty. however since the nature of the economy which

follows the capitalist system, it does not care about the the poor. What matters is the self

interest maximization. Due to this, the matter of poverty couldn’t be address. Unlike Islam

which makes the payment of zakat as wajib, because some portion of our earning is said to be

belong to the poor.

Narrated from the Kitab Al Wasail, Prophet Muhammad saw said that;

“If the people had paid their Zakat there would have not been even one poor Muslim and

through the compulsory share specified from God, he would have become self-sufficient and

the poor, needy, hungry and naked are in problem because of the sins of the rich”.

Based on the ayat above, Rasulullah saw was sure that if the zakat is being utilized correctly,

there shouldn’t be any more poor people in Malaysia or in any other Muslim countries. There

are too many things that could be question on how the funds are being managed. In the above

ayat, Rasulullah states that the if there are still people who still lives under the poverty it is

due to the sin of the rich which does not pay zakat. However, the matter does not lie on the

matter of the rich; it is the matter of the Amil who manages the funds. A hadith is not just a

mere saying by the prophets, instead prophets foresee things a lot better than us.

The problem had long being discussed but a proper an effective ways to handle zakat is yet to

come out. The Amil are in the comfort zone as being the government servant. So there aren’t

much development or creative ideas to enhance the operation of the Baitul Mal. As we were

saying earlier, Baitul Mal should hire an independent body to access the PLI more precisely

and the method of determining the eligibility to receive the zakat money should be made

thoroughly. Saidina Ali a.s said in a letter2 to Malik Ashtar, a governor whom he appointed;

“Fear Allah and keep Allah in view in respect of the lowest class, consisting of those

who have few means: the poor, the needy, the penniless and the disabled, ……….. and

fix for them a share from the public funds and a share from the crops of the land taken

over as booty for Islam in every area. It is because of the fact that the right of the

remote ones in this wealth is just like the share of the near ones”.

Based on the letter sent to Malik Ashtar above, Saidina Ali a.s told to Malik Ashtar to take

some of the public money and some share from the earnings of the farmers as zakat

money. He said that the share of the people that lives in the remote area is as important as

the ones that live in the urban area. Even though some matters should be address

accordingly, the matter of zakat needs to be distributed equally. This is because the hak of

people living in the city and in the remote area is equally the same.

Saidina Musa Ibn Jaafar states3 that; “Muslim ruler receives the zakat and allocates it to the

eight sections, as God has ordered, for the poor, needy,…….., he determines them for a

period of one year in a way that there is no hardness and anxiety. If there was an extra

amount left, it would be returned to the ruler and if the amount received was not enough to

fulfill the needs of the needy then it is on the shoulders of ruler to pay them enough from the

other resources available, so that they become self-sufficient”. Saidina Musa mentioned the

role of government as to be the sole to back the zakat money if the collection does not suffice

to accommodate and attend to all the matters of the poor.

2 Nahjul Balaghah, letter no 53, “Letter of Saidina Ali to Malik Ashtar”.3 Kitab Al Wasail, volume 6.