Wealth Distribution in Islam by Adam Hamza

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COURSE UNIT 604:

ISLAMIC ECONOMIC ANALYSIS

TOPIC:

WEALTH AND WEALTH DISTRIBUTION IN ISLAM

TUTOR: Dr. JAMIL SERWANGA

PRESENTATION DATE: 3RDDECEMBER ,2013


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GROUP TWO MEMBERS:

1. Mr. ADAM H. MAKAME2. Mr. GODWIN OCHENG3. Mr. MOHAMMED A. MAKAME4. Mr. RASHID A. MUSSA5. Ms. TATU O. ABBAS6. Ms. NASSRA H. SALUM7. Ms. FATMA B. JUMA8. Mr. KHAMIS MW. PEMBE9. Mr. ALI R. SALUM10.Ms. MASHAVU S. SAID


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Introduction

The distribution of wealth is one of the most important and most controversial

subjects concerning the economic life of man, which have given birth to global

revolutions in the world of today, and have affected every sphere of human activity

from international politics down to the private life of the individual. For many, a

century now, the question has been the center not only of fervent debates, oral andwritten both, but even of armed conflicts. The fact, however, is that whatever has

been said on the subject without seeking guidance from Divine Revelation and

relying merely on human reason, has had the sole and inevitable result of making

the confusion worse confounded


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Wealth and wealth distribution in

Conventional economic perspective


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Definition of wealth.According to Investopedia: Wealth is a measure af

value of all the assets of worth owned by a person,

community, coy or country.

wealth= total market value of all physical and

intangible assets of the entity - all debts.


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Wealth: according to Oxford dictionary it is a state of

having abundance or profusion of something

desirable i.e asset.

Wealth of different countries is measured through

GDP per capita.

-this is a measure of the total output of a country

that takes the gross domestic product (GDP) and

divides it by the number of people in the country.


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Wealth distribution.

-Global Finance defines wealth distribution as: how the

ownership of assets in a given society is shared among its

members .-The distribution of wealth is a comparison of the wealth

of various members or groups in a society.

-Redistribution of wealth is the transfer of income, wealth

or property from some individuals to others caused by a

social mechanism such as taxation, monetary policies,

welfare charity, divorce, offense. The desirability and

effects of redistribution are actively debated on ethical

and economic grounds.


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The capitalist view of the distribution of wealth.

-theory states that wealth should be distributed over

those who have taken part in producing it i.e factors of

production.

Capital- interest

Labor- wages

Land- rent or revenue

Entrepreneurship- profit


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The socialist view of distribution of wealth

-This theory consider capital and land to be national

property and not private. So, the question of interest or

rent (or revenue) does not arise at all under thephilosophy of this system.

-Under socialist system the entrepreneurtoo is not an

individual but the state itself. So, profit too is not is out

of the question in this system. Now, there remains only

one factor-namely labor. And labor alone is considered

to have a right to wealth under the socialist system,

which it gets in the shape of wages.


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Conceptual and Theoretical Discourse of Wealth and

Wealth Distribution

Theories to develop this are:- GDP - per capita income

Pareto optimum

Lorenz curve


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Islamic Paradigm Shift

The concept of wealth maximization of conventional

economics in disregard to social economic justice has

failed to resonate with the people. In fact itssecularist approach gives it a number of inherent

drawbacks such as:

The Role of Moral Values Human brotherhood

The Hereafter is a concept


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Pareto Optimum

-This concept does not fit into Islamic economics

paradigm.

-Pareto does not recognize any solution as optimum, if it

requires a sacrifice on the part of a few (rich) to raise

the well-being of the many (poor).

-Such a position is in clear conflict with Islamic moral

values.


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Islamic foundation of the subject

matter


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Wealth Distributions in Islam

The wealth or property is meant by Mal (singular) and

Amwal (plural) in Arabic meaning.

-Definition of wealth: a material that is capable of

being possessed and protected and should be capable

of beneficial use according to the prevailing customs.

-In the Quran stated that : all wealth belongs to Allah

in the form of trust or Amanah. Human beings are

considered to be trustees who hold the property and

are conferred with the right to own property.


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The concept of Distribution of Wealth in Islam

-based on divine scripture with moral and ethical values

addressing humanity, sympathy, forgiveness, generosity

and charity.

Objectives of the Wealth Distribution

Establishment of practical system of economy.

Enabling everyone to get what is rightfully due to him.

Eradicating the concentration of wealth.


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Basic differences between the Islamic system and the

Capitalist system with regard to the distribution of

wealth

-Capitalist- Allows Interest.

-Islam- Forbids it.


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Right to Wealth

-Every rational human being requires some wealth.

The honest man requires some wealth at least to have

security and peace of mind. It is only the irrational man

who requires some wealth in order to have more wealth.


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Islamic economic

theory and

model

calibration


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Wealth Distribution Theory and Model

-Islam guarantees the equitable distribution of incomeand wealth by means of a realistic approach that

recognizes the coexistence of the rich and the poor.

-Several redistributed measures that transfer wealthfrom the rich to the poor are implemented to reduce

the gap of those who have and those who have not.


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Islam ensures distributional equality.

-first, at the level of natural resources allocation.

-second, at the level of functional distribution.-lastly, at the level of personal distribution.

There are two kinds of distribution of wealth in Islam

1. Primary heads- factors of productions.2. Secondary Heads.- this is because in the society, all

the people are not participates in the process of

production and do not meet their needs

themselves.


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Concernedpeople

orphans,

widows, and children,

wayfarer,

poor

and needy.


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Secondary Heads Includes:

Zakat

Inheritance

Charity(Sadaqqah)

Booty

Endowment

Poll Tax

Loan without interest

Borrowing etc


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Prohibiting Interest

-Elimination of interest from the economic system is a

revolutionary step with profound effects on all spheres

of economic activities. Unfortunately, the approach of

many Muslim countries to eliminate interest from the

system is not the way it should have been done. The

strong condemnations of interest in Islam is widely

documented in almost all the books related to this topic

besides very clear and unambiguous verses of Quran

and many Sayings of the Prophet Muhammad (Peace

Be Upon Him).


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Therefore, for the sake of brevity these have not been

produced here. In most case, it seems, the conventional

interest under an Islamic Title (e.g. Profit and Loss

Accounts, Markup, Mudharibah etc.) have been

introduced .As a result the desired results of eliminating

interest from the system could not be achieved (and

would never be achieved).


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Empiricism Concerning the Subject matter

(Case study Scenarios)


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Conclusion

-concludes that the Islamic system of redistribution of

wealth tries to facilitate and assist the non-participants

of economy.

-All things which have been discussed here related to the

distribution of wealth in Islam may be applied tofulfill

the requirement of poor segment of the society.Thesegment neither participates .

-Wealth distribution may be very useful to eliminate

poverty,concentration matters and various issues of the

society.


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-study shows this redistribution will be executed by

individual, family, society and state to make sure the

deprived segment of the society may get an opportunity to

fulfill its basic needs and live on the planet respectively.

-Islamic system of distribution of wealth solve all

deficiencies of other economics systems which are

contemporary and prevailed.


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Recommendation

-All Muslims countries should establish institutions on

wealth distributions to cater the challenge in the Islamiceconomics.

-Also Islamic banking and financial institutions should be

involved to make policies in well-organized manner for

collection and wealth distribution.-In additional to that, researchers, intellectuals and

policy makers should explores these issues and

awareness relating to the system.


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****THANK YOU****


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Documents

Wealth Distribution in Islam by Adam Hamza