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An Islamic economy is a market economy
guided by moral values. Economic activities are based on principles of
cooperation and responsibility. Cooperation means that an economic exchange
shall be beneficial to both parties involved. Transactions in which one party
wins at the expense of the other are not permissible in Islam. Thus,
monopolistic dealings, usury, and exploitation are prohibited. Transactions that
allow both parties to win are permissible, and these include most types of
activities needed for economic prosperity. Performance-based arrangements, like
profit sharing or partnership, represent the most cooperative form of beneficial
agreements, and thus are highly encouraged in Islam. Responsibility means that
each individual is entitled for reward or return based on his effort and
contribution. Thus gambling and lotteries are not permissible. Gambling allows
an individual to gain based on pure luck, not on merit or effort. It shifts
wealth blindly among participants leading to improper distribution of wealth.
Gambling is a clear form of a zero-sum game where one party wins only if the
other loses, and thus causes hatred and enmity among participants. A society
where lotteries or gambling-like activities prevail is a zero-sum society, where
the winner takes all, and the rest is doomed to fail.
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Islamic economics is a framework for
studying economic activities that allow mutual benefit of exchange to be
realized. It provides proper tools and techniques for evaluating economic
decisions, showing when and how to achieve win/win outcomes and avoid win/lose
or lose/lose ones. Islamic economics is based on the principle that Allah the
Almighty created this world with plenty of resources that satisfy the needs of
everyone. Thus one person's success is not necessarily achieved at the expense
or exclusion of the success of others. This "win/win" framework leads to better
economic behavior and performance, and thus promises better future for mankind.
Islamic Banks are financial institutions established according to principles of
Islamic Economics. They provide finance and financial services in a manner
leading to mutual benefit. Although finance activities are deeply rooted in
Islamic history, formal Islamic banking is a recent phenomenon, whereby the
first Islamic bank was established around 1963. Since then Islamic banks have
developed and proliferated, reaching total assets of around $137 billions, held
by more than 160 financial institutions distributed throughout the world.
*From a magazine article written by Colin Willis, Treasurer, Al Rajhi Banking &
Investment Corporation.
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