The fundamentals of the Islamic economic system start with the differences it has with the capitalistic, communistic, socialistic, and other mixed types of economic engines that have existed over the past centuries. There are seven major principles and characteristics of Islamic economic system, that in some ways mirror their capitalistic and socialistic counterparts, but are still unique and vibrant only to the Islamic economics.
Principles and Characteristics of Islamic Economic System:
Islamic economics consists of organizations, institutions, and social values that exemplify the production, exchange, and consumption of goods and services. Those who follow Islam are encouraged to lead a life of material gain in a way that it shows respect for others, makes their place secure in the world, and provides a source of happiness for their families.
Basic consumption is a fundamental part of all economies, including the Islamic economic system. People have needs and businesses exist to fulfill them either through goods or services.
2. Government Services:
The government serves to keep down activities that are considered non-Islamic in nature such as the black market, gambling, smuggling, and similar activities. In addition, the poor have their basic needs fulfilled in terms of basic life necessities such as food, health, and clothing. Also, there is a requirement for equal opportunity employment and security so that everyone has a chance to work and prosper.
3. No Riba:
According to the Islamic economic system, the Islamic state should run without interest, which means that the financial system does not use interest as part of the lending procedures when running their banks and financial institutions. It is one of the key characteristics of Islamic economic system, and also a fundamental element of an Islamic banking system.
4. Private Property:
This is encouraged, although the property itself cannot be used against the interest of the public. The payment of Zakat for the ownership of the property is mandatory.
As with capitalistic systems, production is an essential element as it not only addresses the needs of consumers, but also provides employment and opportunity. Under the principles of Islamic economic system, production is part of the social fabric which makes it vital to society and includes a price system.
The acquisition of wealth is not discouraged, although it does include a payment of Zakat. It should be noted that the purchase of luxuries is not encouraged either, so the focus of the wealth is more along the lines of the greater good for the family and community.
Payment of Zakath is once of the major characteristics of Islamic economic system, as well as a major resource for the stability of poor in the Islamic society. It regards as a type of worship, in which a proportion of wealth collected from the rich and given to the poor on an annual basis. This also provides support to the state by reducing number of needy people.
The Islamic Economic System is markedly different to capitalistic, socialistic, communistic, and mixed economic systems. Basic principles of capitalism must be changed considerably to fit Islamic economics, but it must be said that some of the foundations are similar in terms of acquisition of wealth. However, it is the application of the wealth and how it ties into production that makes the economic system of Islam unique in the world. Professionals willing to join Islamic banking industry and fully understand what is Islamic banking? should join a globally recognized CIFE (best Islamic finance certification), which is a part of diploma in Islamic banking and finance program.