Poverty Alleviation: An Intention Of Islamic Economics

Poverty is handled as WMD (weapon of mass destruction) of contemporary world. Eradication of it bears very significance. The financial techniques like capitalism and communism have offered variety of devices for the alleviation of the poverty from the world. However, these excessive ideologies did not fulfill the necessity of the folks. Non-public possession of property, laissez-faire coverage of capitalism and sophistication struggle, dialectical materialism, state possession of property of communism did not contact the true explanation for poverty. This case necessitates in search of the probabilities of Islamic economics in assuaging poverty. The goal of poverty alleviation may be attained, in an Islamic Financial system via lowering the inequality. It by no means means attaining equality however fairness and justice within the earnings and wealth distribution. Islam eliminates absolutely the inequality which arises from unequal distribution of earnings, however relative inequality emerges from equitable distribution of earnings and wealth.

First a part of this text has given a small introduction to each standard economics and Islamic economics. Then it gives an image of poverty of present world and Islamic perspective of poverty. Then Islamic economics devices to alleviate poverty reminiscent of zakat, sadaqa, qard hasan, ganima, khums, fay, jizya, mudaraba, musharaka, prohibition of curiosity, abolition of extravaganza, prohibition of hypothesis and hoarding have been talked about in briefly. Affect of Islamic financial devices on marginal propensity to devour, multiplier, worth funding and manufacturing have been handled.

The books and articles I referred for this text are Dr. Dr.Sabahuddin Azmi’s Islamic Economics, S. M. Hasanuzzaman’s Financial operate of an Islamic state (The early expertise), In direction of understanding the financial system of Islam written by Dr.P Ibrahim and Introduction to the financial system by Moulavi.M.V.Saleem.


No person can undermine the significance of economics which is a social science that research the manufacturing, distribution, commerce and consumption of products and companies. This very significance of economics resulted in emergence of various financial techniques on the planet and all of these financial techniques declare that they may fetch financial welfare. These dominating and distinguished financial system’s failure to perform financial justice, prosperity, the eradiation of the inequality and poverty make crucial another financial system which may efficiently make a hunger free and poverty free world.

Definition of Economics

Social scientists have developed numerous definitions of economics. Lionel Robinson’s shortage definition of economics is most accepted amongst them. In line with Robinson “economics is a science which research human conduct as a relationship between ends and scarce means which have different makes use of” This definition is predicated on two factors that are shortage of assets and the by no means ending wants. However in actuality former is a fantasy. The survey performed by UNO reveals which can be sufficient assets for 20000 million folks on earth we’ve solely 6000 million folks on earth residing now. Latter level ‘by no means ending wants’ can be incorrect as the will and greed of the person is limitless however the want is countable and controllable.

Definition of Islamic Economics

As a system of life Islam has not left any space of human life with out steerage. Whether or not it’s non secular, particular person, social, economical or political Islam provides clear lower pointers. By contemplating the financial pointers of Islamic sources, Islamic economists have developed plethora of definitions. Derivation of every definition of Islamic economics is predicated on steerage given within the fundamental sources of Islamic shariah that are Quran and hadith.

In line with Yusuf Ibrahim, professor of Islamic economics, Qatar College “Islamic economics is a science finding out the steerage of the human conduct in the direction of using assets to fulfill the wants”. This definition is predicated upon the next info.

1. The assets are sufficient for satisfying the wants.

2. However the assets must be shielded from the waste, and improper use.

three. The human conduct in the direction of the assets must be managed by divine injunctions.

four. Solely authorized wants, wants that construct life on the earth, must be glad.

5. Unlawful wants (wishes), which destroy life on earth, shouldn’t be glad; they’re by no means ending and by no means glad.

Islamic financial system, a normative financial system, has been constructed upon sure elementary Islamic philosophies. In line with Quranic teachings actual and absolute possession of the wealth belongs to the creator of the identical, Almighty God. Quran says “To Allah belongs to all the things within the sky and on the earth” (2:284).Function of the person is taken into account as trustee who’s to handle the belief, i.e. wealth in keeping with the directives of the true proprietor; God. Quran clearly states “And spend of that the place of hath made you trustees” (57:7). So man has been granted

conditioned and restricted possession.

One other Islamic philosophy is common brotherhood and equality of males as their creator is one and oldsters are identical. Therefore distinction based mostly on colour, caste, creed, races don’t undergo at any value. This idea induces the folks for cooperation and participation of their all efforts as an alternative of dishonest, exploiting and making fraud one another. One other side of Islamic philosophy is the religion within the Day of Judgment after dying. Within the life after dying man is accountable for his deeds on earth. The implication of this religion is that financial selections one makes in world are to be judged in keeping with the norms Allah has laid down.

These are the revolutionary factors which differentiate Islamic economics from the liberal, capitalistic, imperialistic, mainstream, usurious financial system and communist, class struggle, state dictatorship financial system. Islam constructs a simply world on the spirit of eternal divine ideas.


Evil of any financial system is poverty. The presence of begging palms in an financial system pulls that financial system into many years again. Poverty midst lots is the problem confronted within the trendy world. Impression of the poverty can’t confine into hunger solely, however poor folks, aside from hunger, struggling restricted earnings which ends up in inaccessibility of excellent training it disables them for difficult careers which requires variety of years lengthy training. Absence of nutritious meals leads to extra baby morality amongst disadvantaged sections. Since restricted entry for info and data these are prevented from market and alternatives.

Each nation and worldwide organizations like World Commerce Group, World Financial institution and Asian Improvement Financial institution laborious work to assemble the international locations and world on the foots of self sufficiency respectively. Mission of the World Financial institution is described as international poverty discount and enchancment of residing requirements. Normal Council of UN has declared October 17 as Worldwide day for the eradication of poverty. It reveals how severely they took poverty as an issue

However, it’s questioning that out of 6.1 billion world inhabitants greater than 1 billion are discovering their livelihood in lower than $1 per day and virtually three billion on lower than $2 per day. You is likely to be provoked that 74% of complete earnings of world is shared by the 20% of the elite class of the world. It’s heartening you that there are international locations whose nationwide earnings is much less $800 and morality of under 5 years age youngsters is about 26%.It’s worrying that 110 million major college age youngsters are out of faculty and 60 p.c of them are ladies.


Poverty and Islamic Economics

Under Poverty Line (BPL) fixes in Islamic economics system on the idea of possession of nisab, which restrict makes one eligible for the cost of zakat Whosoever wealth on or over the nisab is accountable for the cost of zakat. These wealth is under nisab are zakat recipients and they’re handled as poor. Therefore, in Islamic economics, the scale of disadvantaged come below BPL might be massive. Hunger and inaccessibility of meals, shelter, cloths and training couldn’t undergo in an Islamic financial system which goals human falah, i.e. human welfare. It doesn’t assist any financial instrument that results in the deprivation of the person. Since poverty emerges in an financial system on account of numerous causes so wiping out of those causes is primarily necessary.

Restricted earnings, unequal distribution of earnings and wealth, misdistribution of assets, regional disparities, unemployment, social injustice, and decreased investments …and many others are a few of the obstacles in the best way of attainment of self-sufficiency and welfare. Islam considers the success of fundamental wants of each member of society is financial, ethical in addition to non secular obligation of the ruler. Listing of the essential items extends from conventional meals, clothes and shelter to seasonal clothes, private attendant to disabled particular person, and expenditure on marriage of poor and expenditure on whole household of poor, that are intensified by students occasionally and prone to prolong the checklist time to time for the welfare of the citizen. Islamic financial system introduces a bunch of divinely guided devices which convey to an finish of poverty and construct

poverty much less world.

Islamic Financial Devices to get rid of poverty

It’s suggested to Muslim residents in an Islamic county, because the a part of consider, to follow sure issues of their life, a few of them are obligatory nature and the remainder are voluntary nature. The follow of those can have huge financial implications aside from the reward of God. Non Muslim residents additionally should make sure obligatory funds, which have financial impacts, because the a part of their citizenship within the Islamic nation. Obligatory duties and agreements of residents are ruled by the Islamic nation and violation of any half wouldn’t undergo Islamic state. Along with these capabilities there are different issues the Islamic state has to hold out just like any nation does for the welfare of residents. Each constructive and adverse measures have really useful by Islam for wiping out the rationale of poverty.

Optimistic Measures

There are quite a few Islamic orders and injunction to carry out sure issues which have immense affect on economies justice, prosperity and progress. Vital divine injunctions amongst them and their affect upon the financial system are briefed under.


Zakat is the yearly obligation of rich Muslims to poor and it’s the share of have-nots within the property and wealth of the wealthy. Quran commends “set up worship and pay the poor his due (zakat) and obey the messenger”. Technically we will name it as non secular tax. It’s imposed on these types of wealth which have the capability to develop in worth or in any other case produce additional, is having the custody of entire yr and have exceed a sure minimal worth referred to as ‘nisab’. Quran has acknowledged the eight particular heads for the distribution of zakat.

Because of the divine spirit for the efficiency of zakat, possibilities for evasion are much less. The imposition of zakat on idle wealth urges the house owners for the productive and worthwhile employment of idle wealth which will increase the wealth of financial system and once more the share of zakat.


Sadaqa is the one of many voluntary financial instrument. No restrict and eligibility standards for performing contributions to needy. It may be divert, aside from the eight heads talked about for the distribution of zakat, to any needy. and it’ll strengthen what financial implications emerged by zakat.

Qard hasan

It’s an association of curiosity free loans for unproductive functions or for the needy to satisfy the bills like hospital bills, residence bills and training bills and many others that are don’t make any earnings. So it’s not in a position to cost any materials profit, like revenue share, from qurd hasan. These are offered because the a part of kindness to human beings. In an Islamic financial system people and establishments like Islamic banks will provide any such loans anticipating the reward of Allah. Availability of qard hasan reduces the monetary burdens like curiosity, of disadvantaged.

Revenue and loss sharing

Islam formulates revenue and loss sharing because the instrument of commerce contracts instesd of curiosity. The motivation behind it’s the cooperation amongst the folks. In revenue sharing there are several types of financing reminiscent of mudaraba (revenue and loss sharing) and musharaka (participation) …and many others

Mudaraba is the settlement between each capital proprietor and entrepreneur to share the revenue arises from the enterprise and in case of loss capital proprietor’s capital reduces and entrepreneur’s effort and time unfastened. Musharaka is the settlement to share revenue and loss the place all contributors take part in administration of enterprise. Each mudaraba and musharaka assist the folks, who’ve inadequacy of capital, to interact in enterprise, manufacturing and contribute their share into the welfare nation and earn for their very own.

Ganima (struggle booty), Khums (one fifth) and Fay

Ganima is the property Muslims seize from the enemy. 4 fifth of the ganima is split among the many preventing military and one fifth (khums) of your entire ganima transfer to state fund, which is earmarked for the particular beneficiaries talked about in Quran. Fay is the property receives from the enemy with out precise preventing. This supply of state income is generalized for the frequent good of your entire inhabitants and public welfare.

Kharaj (Land- Tax)

Land-Tax, a income of state, is the levy imposed on land produce. That is really the lease for using worth of agricultural land. The speed of kharaj and methodology of assortment may be declared by state occasionally as there isn’t any course of Quran and custom of prophet on this regard.

Jizya (Ballot tax)

Jizya (poll-tax) imposed on the non-Muslim residents of Islamic nation for securing their wealth, property and lives from injury. It helps them to contribute their ability, expertise, well being, wealth and property for the prosperity of the nation

Waqf (Endowment)

Waqf (endowment) is common income which is earmarked and devoted fund of Muslim for supporting charitable and welfare actions

State possession on uncultivated land:

Any financial instrument that hinders productiveness is dangerous to economies affluent. In line with Islamic shariah, if a land is remained uncultivated three consecutive years result in transferring of possession of that land from present proprietor to different who is prepared for domesticate the land and produce. Prophet (pbuh) mentioned “The unique rights of possession in land are God’s and the prophets after which yours afterwards. However he who revives any lifeless land acquires the proper of possession to it”. There may be an one other establishment, iqta, enhance the circulation and tax income of the state by transferring the uncultivated/lifeless land to somebody in return for ushr or khraj.

Mixed possession of pure assets:

Particular person possession of pure assets like fireplace, water, pasture and salt are restricted by the Islamic shariah. Individuals have mixed possession in these pure assets which must be accessible to anybody. This rule enable anybody to make use of the profit derives from the pure items and be certain that no one is away from the pure items that are simple to get to with none laborious work.. Listing of pure items, along with talked about items, may be prolonged into extra items in time to time. Prophet (pbuh) mentioned “individuals are joint house owners in water, pasture and fireplace”.

There are different sources of revenues like property of deceased with no authorized inheritor, misplaced and located with no claimants and extra taxations.

Unfavourable Measures

There are some prohibitions of God which has affect on the economies prosperity and welfare of each males of nation.

Prohibition of curiosity

Curiosity, no matter type, has been contemned by Allah and His messenger. Quran says “Allah has permitted commerce and hath prohibited riba” (curiosity). Islam would not assist curiosity however revenue and loss sharing. Each monetary transactions of Islamic financial system must be freed from Curiosity. However absence of curiosity in an Islamic financial system would not create any hindrance to prosperity however flourish the prosperity.

Prohibition of speculative devices

Devices which haven’t any benefit to actual financial system reminiscent of futures and possibility will not be permitted in Islamic financial system. Inventory market devices like day buying and selling, marginal buying and selling are prohibited, both. Absence of those devices within the financial system reduces hypothesis which is hurt to your entire financial system.


The implementation of shariah pointers we mentioned above in an financial system result in variety of constructive fruits which make the state free from each type of poverty.

Elevated redistribution of earnings and wealth will end in, when the folks carry out the non secular obligations like zakat, donation, waqf, inheritances, fithr zakat and kaffarath and many others… It results in circulate of wealth and cash from wealthy to poor. Thus the focus and accumulation of wealth in a couple of palms come down. Poor and needy spend roughly eighty p.c of their earnings to satisfy their fundamental wants. Economically Marginal Propensity to Eat (MPC) of the poor is bigger than center and excessive class. A big portion of no matter comes into helpful of poor will circulate to financial system for consumption of fundamental items; it result in extra demand for major items after which it end result within the elevated manufacturing of fundamental items. It’s troublesome to limit luxurious consumption and manufacturing fully by regulation and pressure. However the elevated charge of redistribution of wealth and earnings enhance the demand for fundamental items and reduce the demand for luxurious items. Mechanically it reduces the utilization of assets for the manufacturing of luxuries. Consequently, pure assets use for the manufacturing of fundamental items and for the good thing about public welfare

This elevated redistribution of wealth to poor permits them to get the accessibility of excellent training and nutritious meals. Elevated data and abilities assist the poor to get good jobs and earn. This raises your entire poor household and dependence to heights. In flip, enhance of earnings greater than a sure restrict make them succesful for performing zakat and different voluntary donations for the sake of the good thing about have-nots. Rise within the redistribution assist to scale back the hole between haves and have-nots and convey financial justice to all residents.

Elevated MPC of poor because the redistribution of earnings leads to extra multiplier impact in financial system that fuels extra earnings to the general earnings of financial system that assist the poor part of individuals to lift their per capita earnings and residing requirements.

In line with Professor Keynes, funding relies on two variables that are present uncommon of curiosity and the marginal effectivity of capital or anticipated revenue charge. Funding would happen provided that the anticipated charge of revenue exceeds of curiosity. Because of the absence of curiosity, in an Islamic financial system, solely the scale of anticipated charge of revenue of revenue would be the determinant of funding.

Speculative motive of cash and liquidity idea of cash can have no place in an curiosity free financial system which reduces funding. However the presence of solely anticipated charge of revenue will end in investments, even in low charge of anticipated charge of revenue to extend their precept quantity and to keep away from the deterioration of principal via zakat. The elevated funding raises the manufacturing, employment, wages and general nationwide earnings of financial system. It flows wealth to poor and raises their financial standing.

Fisher’s amount idea which states that amount of cash impacts the value and worth of cash. It implies that enhance within the provide of cash will proportionately enhance the value in financial system however the output won’t enhance. However within the case of Islamic financial system cash shouldn’t be equipped with out making enhance within the output. The central financial institution and industrial banks of Islamic state enhance the cash provide via making funding contracts on the idea of revenue and loss sharing. So each circulate of cash into financial system leads to output progress with out making proportionate hike in worth. It’s useful to the poor to get want issues at affordable worth


Means of eliminating poverty in Islamic financial system is easy. Religion within the oneness of God (tawheed) motivates to the efficiency of zakat and revenue and loss sharing and avoiding curiosity and extravaganza. Elevated redistribution and productiveness are the result of those devices which helps lastly to achieve alleviation of poverty.

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Source by Nabeel Kattakath

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