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The Economic Law of Islam (3)
Economic Issues
Javed Ahmad Ghamidi
(Tr. by:Dr. Shehzad Saleem)

Regulations for an Economic Framework

Evidence And Documentation

The fourth regulation is that in transactions, especially those involving lending and borrowing for a certain period of time, the parties involved should write down a document and call in witnesses over it to avoid any dispute or damage in the future. Following is the detailed directive of the Qur’ān in this regard:

"O ye who believe! When you acquire a loan for a fixed period, record it in writing, and let a scribe write it down between you with fairness; the scribe should not refuse to write, and just as Allah has taught him to write, he should also write for others; the one who has incurred the debt should have [the document] written and fearing Allah his Lord, he should not make any reduction in it. If the debtor is indiscreet or feeble or unable to have it written, let his guardian do so with justice. And call in two male witnesses from among your men, but if two men cannot be found, then one man and two women1 from among your likable people so that if one of them gets confused, the other reminds her. And witnesses must not refuse when they are summoned. And whether the loan is big or small, be not negligent in documenting the deal upto its period. This is more just in the sight of Allah, it ensures accuracy in testifying and is the most appropriate way for you to safeguard against doubts. But if the transaction be a bargain concluded on the spot or an everyday loan, it does not matter if you do not write it down. And call in witnesses also if you sell or purchase anything. And let no harm be done to the scribe or the witness. If you do so, then this will be a transgression which shall cling to you. And fear Allah. Allah is teaching you. He has knowledge of all things." (2:282)


The fifth regulation is that since a person's way of using his wealth and property also influences the development and welfare of a society, the state has the right to deprive him from using them if he is proved to be incompetent. The Qur’ān says:

"Do not give to the feeble-minded the wealth and property which the Almighty has made a means for your support and development. But feed and clothe them with magnanimity, and speak to them with kindness." (4:5)

It is clear from the context of this verse that it pertains to orphans and their guardians, but the basis of the directive is their incompetence not their status as orphans. Therefore, by analogy, the right granted to the guardians with regard to the orphans should also be granted to a state with regard to its citizens. Consequently, if a person squanders away or ruins his wealth and resources, it is the duty of the state to strip him from their control and management and take charge of them. However, in this case, it must generously cater for his requirements from his wealth and whole-heartedly adjust all matters.

Curtailed Taxation

The sixth regulation is that a state cannot levy any tax upon its Muslim citizens2 other than zakat, whose various rates have been fixed by the Almighty Himself through His Prophet. The Qur’ān says:

"Then if they repent [from all un-Islamic beliefs], establish regular prayers and pay zakat, leave them alone." (9:5)

It is clear from the words `leave them alone' (fa khalloo sabeelahum) of the above verse that though, in times of need an Islamic State can make an appeal to its citizens for economic asssistance, it cannot force them to do so. The Prophet (sws) while explaining this Qur’ānic directive has said:

"I have been ordained to fight3 with these people until they testify to the oneness of Allah and the Prophethood of Mohammad, establish regular prayers and pay zakat. If they accept these conditions, their lives shall be given protection except if they are deprived of this protection on grounds of some offence they commit4. As far as their account is concerned, it rests with Allah." (Muslim, Kitab-ul-Iman)

If those in authority violate this directive, then this is a grave transgression on their part. The Prophet (sws) has warned:

"No tax-imposer shall enter Paradise." (Abu Daud, Kitab-ul-Kharāj)

It should also be borne in mind that according to the various heads mentioned in the Qur’ān, zakat is not merely for the poor, destitute, wayfarers and those inflicted with losses but under āmileen-a-alaihā, it can be used to pay the salaries of all government officials, under mu'allafat-ul-quloob, it can be spent to meet all political expenditures in the interest of Islam, under fee sabeelillāh, it can be expended on da`wah ventures and mosques, education and research, Haj and Umrah facilities, Jihād and Qitāl, public welfare projects like roads, bridges and hospitals etc. The Qur’ān says:

"Zakat is only for the poor and the needy, and for those who are `āmils over it5, and for those whose hearts are to be reconciled [to the truth]6, and for the emancipation of the slaves and for those who have been inflicted with losses and for the way of Allah7 and for the wayfarers. An obligation decreed by the Almighty, the All-Knowing and the Wise." (9:60)

The rates and nisāb of zakat which have been transferred to the Ummah as Sunnat-i-Thābitah8 and stated in various collecions of Ahādith are all fixed and determined. However, there are five more aspects which must remain clear in this regard:

(1) There is no basis in the Qur’ān and Sunnah for the condition of personal-possession (tamleek-i-zātee) imposed by our jurists. Therefore, in our consideration, just as zakat can be given in the personal possession of an individual, it can also be spent on projects of public welfare9.

(2) Nothing except means of production, personal items of daily use and a fixed quantity called nisāb are exempt from zakat. It shall be levied annually on all sorts of wealth, all types of animals and all forms of production of every Muslim citizen. However, if a need arises, an Islamic State can give a relaxation on any item.

(3) If the basis of the directive is kept in consideration, then all forms of industrial produce, all  forms  of  production  based  on various skills and all forms of rent of various items or buildings must be classified as produce and not as wealth, therefore, their rates and nisāb should be those specified by the Prophet (sws) for land produce.

(4) The rates of zakat in all forms of production should be fixed on the basis of the principle derived from the Prophet's directives. According to this principle zakat on all items which are produced both by the interaction of labour and capital is 5%, on items which are produced such that the major factor in producing them is either labour or capital, it is 10% and on items which are produced neither as a result of capital nor labour but are actually are a gift of God, it is 20%.

(5) According to the above principle, zakat on leased-out houses, properties and other rented items is 10% of the rent and if they are not rented out, it is 2 1/2 % of their net value.

(Translated from Ghamidi's "Meezān")







1. The context and style of the verse is such that it cannot relate to law or the judicial forums of the state. It is not that after addressing the courts that it has been said that if such a law suit is presented before them by a claimant then they should call in witnesses in the prescribed manner. On the contrary, the verse directly addresses the people who lend or borrow money over a fixed period. It admonishes them that if they are involved in such dealings, then an agreement between the two parties must be written down, and to avoid dispute and damage, only witnesses who are honest, reliable and morally sound should be appointed. At the same time their personal involvements and occupations should be suited to fulfil this responsibility in a befitting manner. The verse does not at all mean that a law suit shall stand proven in a court only if at least two men or one man and two women bear witness to it. We reiterate that the verse is merely a guidance for the general masses in their social affairs and counsels them to abide by it so that any future dispute can be avoided. It is for their own benefit that this procedure should be adopted.

2. On non-Muslims, however, who have become citizens of an Islamic state after being subdued through a war, Jizya and other taxes can be imposed.

3. As mentioned earlier, the opponents in this case were the Bani Ismael, the nation towards whom the Prophet (sws) was directly assigned. Since the truth had been unveiled to them in its ultimate form, the law for them was either to accept faith or face death.

4. For example, they shall be executed if they kill someone, or if Diyat is extracted from them.

5. āmileen-a-alaihā.

6. mu'allafat-u-quloobuhum.

7. fee sabeelillāh.

8. The established customs of the Prophet (sws) which were passed on as religion to the Muslim Ummah by a vast majority of the Companions of the Prophet (sws) through their practical consensus or perpetual adherence to such customs.

9. For details see "Taudheehāt", `Masala-i-Tamleek', Amin Ahsan Islahi.

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