evidence from Islamic and non-Islamic economies (2024)

FAQs

What is the difference between Islamic and non Islamic economic system? ›

Islamic economics also emphasizes values such as justice, balance, and monotheism, which aim to minimize moral hazards and promote social welfare. In contrast, conventional economics focuses on maximizing profits and often neglects social responsibilities.

The Islamic economic index reflects economic Sharia principles, such as the prohibition of money speculation (Riba), social equality, market transparency, and the prohibition of abusive risk taking (Gharar).

The main difference between Islamic economics and conventional economics is that Islamic economics is based on Islamic law and seeks to eliminate practices such as usury, maysir, and gharar.

We identify fives principles of Islamic economics system that can be derived from the original sources, i.e., Allah determines right and wrong, principles of uses, principle of moderation, principles of freedom, and principle of justice.

Conventional banks are in the business of lending & borrowing money based on interest. Islamic Banks are not money lending institutes but they work as a trading/ investment house.

Islamic finance does not seek to abolish private property, nor does it attempt to prevent the individual from serving his own self-interest. The emphasis of Islamic economics, however, is a concentration on human brotherhood and social economic justice.

Among the assertions made for an Islamic economic system by Islamic activists and revivalists are that the gap between the rich and the poor will be reduced and prosperity enhanced by such means as the discouraging of the hoarding of wealth, taxing wealth (through zakat) but not trade, exposing lenders to risk through ...

Social and Individual Norms that Boost Economic Growth

Religion affects economic decision-making by establishing social standards and shaping individual personalities. Firms located in communities with higher religiosity tend to adhere to ethical norms that are conducive to a stable economy.

Conclusions: It is concluded that an Islamic economic system does not differ fundamentally from mixed-economy non-Islamic ones and that there is little reason for non-Muslims to accord Islamic ethics special status.

The fundamental difference between capitalism and Islamic economics is that in a secular economy, profit motive and private property have unlimited power to make decisions. Their ability is not influenced by divinity [17].

What are the two principles of Islamic economics? ›

Prohibition of interest and alike fulfill regulatory function of economic life; while obligation of zakat and alike fulfill corrective function for economic imbalances and troubles. Islamic economics substituted interest for profit, wage and rent, and offered instead so many options not leaving any need for interest.

This study finds that there are several challenges faced by Islamic economics, including: legal rules are not yet complex, human resources are not optimal, transaction processing adjustments, lack of research, not optimal government support and low education and socialization of sharia economy.

DISADVANTAGES • Do not get the benefit of falling rates . According to some critics of the system , it is riddled with incoherence introduced by different interpretations of the Quran . Banking relies on an honour system , which often encourages fraud and non-payment .

Others see Islamic economics as neither completely capitalistic nor completely socialistic, but rather a balance between the two, emphasizing both "individual economic freedom and the need to serve the common good." Others point out that Islam has an inherently capitalist nature and argue this most through respect for ...

A fundamental belief of the Islamic economic system is that there is no scarcity of resources since Allah (SW) has provided sufficient sustenance for all living beings in the world. Thus, the science of economics is about the effective utilization of resources.

Islamic economic system allows individuals to operate in a free market but all the activities should be Sharia Compliant. 14. Socialism restrict the right of ownership, in communism no individual has the right to own property.

Profit motives are acceptable in the broadest sense, and private ownership is not eliminated. The fundamental difference between capitalism and Islamic economics is that in a secular economy, profit motive and private property have unlimited power to make decisions. Their ability is not influenced by divinity [17].

Islamic economics differs in general from socialism by accepting private property and profit, and from capitalism by rejecting interest. Dynamism of capitalism and equality of socialism are combined in Islamic economics. Private interests reconciled with the public ones.

In conventional term, production was limited as a process to make or create something, such as product, etc. It had placed profit over everything. On the other hand, in Islamic perspective, the production had been placed on the spirit of Islam itself. It contained fairness, benefit for either the producer or consumer.