Chapter 1

1. What is the difference between Islamic worldview and western worldview.

Islam gives a complete vision that encompasses all aspects of community interaction: political,
economic, social, and so on. The individual is enshrined in the West, which isolates the fields of
knowledge and activity.

 Based on religious worldview which is Qur’an and Sunnah.

 It promotes what is required by the foundation of Islam (Qur’an & Sunnah).
 The worldview of Islam encompasses both al-dunya and al-akhirah, in which the dunya
aspect must be related in a profThe dunya aspect is seen as a preparation for the akhirah-
aspect, and hence the akhirah-aspect has ultimate and final significance, without implying
any attitude of neglect or being unmindful of the dunya aspect.ound and inseparable way
to the akhirah aspect.
 Islamic worldview covers physical as well as metaphysical worlds or visible and invisible
worlds. In fact, the metaphysical world is greater than the physical world.

Western worldview

 Western worldview put emphasize more to the material aspect of human well being.
 Ignores the importance of religion or spiritual
 Not recognize any role for divine guidance in human life.
 Little room for the roles & government intervention due to their own worldview.
 More on human reasoning.
 Self interest & market system drive the western worldview.

2. Analyse concept of din in both Islamic worldview and western worldview.

Din in Islamic worldview

i) Economics and its related activities are potentially ibadah or acts of worship.

ii) In Islam, religion is not human creation, but it represents a “way of life” – Din.

iii) It is a comprehensive one and includes worldly activities.

iv) A way of life.

V) Willing and conscious submission to Allah S.W.T in all aspects of life.

Din in Western worldview

i) No equivalent to religion (din) as understood by the west.

ii) Religion reduced to a private matter between and individual and his/her God(s)

iii) No role to play in determining public affairs.

iv) “God is Dead”

v) Religion is not necessarily applicable to all societies and civilizations.

3. Compare and contrast between Islamic economics and conventional economics.

Islamic economics:

 Economic pursuit must be derived from Islamic worldview.

 Economic goals do not contradict the Shari’ah.
 Shari’ah constraints to be observed in making choices.
 Resources are unlimited and no scarcity.

Conventional economics:

 Unlimited wants.
 Limited resources.
 Achieving the highest utility.

4. Examine purpose of Man’s creation in this world.

For a believing Muslim, this life is immensely meaningful and purposeful since he understands
that it will determine his fate and permanent position in the next life. In preparation for his final
return to Him, he lives to win the approval of his Creator.We're all aware that people create things
to serve them by performing specified functions for them. God created us to serve Him, but with
one key difference: it is for the benefit of us, His creation, rather than the Creator himself. The
purpose of our existence is thus stated in the Qur’an:

"I did not create the jinn and mankind except to worship Me." [51:56]

 To achieve happiness (falah).

 Ultimate success and pleasure of Allah S.W.T.

5. How can one achieve falah in this world.

Falah refers to a situation in which an individual is adequately provided for in terms of his basic
needs, and has the necessary freedom and leisure to work for his spiritual and material
advancement,it aims to establish a happy society with a clean environment, freedom from want, and
opportunities for its members to advance in socio-political aspects. The concept of falah, in strictly
economic field, refers to material well-being of the citizens of an Islamic state. The economic system
of Islam, therefore, aims to achieve economic well-being and betterment of the people through
equitable distribution of material resources and through establishment of social justice. Yet the basic
objective of Islamic system remains the same which has been clearly laid down by the Qur’an thus :
“But seek with (the wealth) which God has bestowed on thee, the home of the Hereafter, nor neglect
thy portion in this world, but do thou good as God has been good to thee and seek not mischief in the
land, for God loves not those who do mischief.”(28 : 77). Primary means of achieving falah are
virtues of the soul, that can be acquired with help of bodily and external virtues, if they are given
divine grace.
 Chapter 2

1. Discuss Islamic Economics and Western one.

Islamic economic

 Islamic economics is the knowledge and application of injunctions and rules of the Shari'ah
that prevent injustice in the acquisition and disposal of material resources in order to provide
satisfaction to human beings and enable them to perform their obligations to Allah and the
society.

Western economic

 Western economics is the name given by Chinese scholars to the economic theories that have
emerged and prevailed in developed western countries with a capitalist market economy. It is a
concept with rich connotations and somewhat vague extensions

2. Examine building model in Islamic Economics.

1.Understand Islamic worldview.

2.Establish Islamic economic vision.

3.Refer to primary sources of Shari’ah, i.e. Quran and Sunnah.

4.Refer to works of past and present scholars of Islam and Islamic economics.

5.Refer to contemporary economics and finance.

6.Establish principles, laws, assumptions, hypothesis models based on (1)-(5), i.e. tentative theory
(what should be).

7.Test hypotheses and models, i.e. empirical studies (what is) if what is ≠ what should be

8.Recheck (1) – (7) if still what is ≠ what should be.

9.Put forward policies to change the what is to conform with what should be.

3. Compare and contrast between Methodology of Islamic economics and secular economics.

The primary premise of Islamic economists on methodology is that the subject is not strictly positive
in the way that a pure science should be. They also argue against neoclassical economics' basic
assumptions, such as rationality, utility, profit maximisation, and self-interest.

Secular economics considered all knowledge originated from human research and exploration. It
makes a distinction between reason and revelation derived from the generic western thought and
relies on reason alone as the sources of knowledge.
4. What is the importance of Knowledge in Islam.

The Quran encourages people to think, contemplate, reflect, and learn in order to become closer to
God and his creation. The Quran employs repetition to instil certain vital principles in the minds of
those who listen to it.

 To seek knowledge is a holy duty; it is obligatory on every Muslim, male and female.

 The first revealed word in the Qur’an was "IQRA" READ i.e. it encourages man to seek
knowledge, to be educated.

5. Describe epistemology in Islamic perspective and western perspective.

Islamic perspective

 Process of systematizing the worldview into economic vision, then to economic theory based
on epistemology.

 Epistemology: theory of knowledge is the branch of philosophy concerned with nature and
scope (limitations) of knowledge.

 Process of developing Islamic economics differs from conventional economics.

 Evaluation of knowledge based on sources of knowledge in Islam.

Western perspective

 Central position of scientific method.

 The only valid method.

6. Discuss nature of Man on this earth.

 Man as a seeker of knowledge should know very well what actually his real nature, then he
will be able to seek the right and the true knowledge which is suitable for his nature.

 First and foremost he should realize that he has dual nature, i.e. physical and spiritual.

 Secondly, he has been assigned by Allah to become His Khalifah.

 Man has basically agreed to obey Allah and has made a covenant or contract with Him
during his spiritual stage but has forgotten the contract.
7. Analyse types and purpose of knowledge in Islam.

In the Western world, knowledge refers to information about anything, whether divine or material,
however in Islam, 'ilm is a broad term that encompasses theory, action, and education. It is not
limited to the acquisition of knowledge alone, but also includes sociopolitical and moral
components. It necessitates understanding, devotion to the ideals of Islam, and believers acting on
their faith. Purpose of seeking knowledge in Islam is to inculcate goodness in man as man and
individual self, recognizing and acknowledging Allah as his Lord (7:172), and to remind him on
the sealed agreement with Allah when he was in the state of spirit prior to his manifestation as
physical man.
 Chapter 3

1. Define Islamic and conventional systems.

Three main concepts of Islamic economy, according to Mohammed B. Sadr, are multifaceted
ownership, economic freedom within a specific extent, and social justice (Es-Sadr, 1980: pp. 291-
303). These are the three fundamental elements of Islamic economic doctrine, which constitute its
theoretical content.

The Free Market's Belief System. The path to human advancement is sustained economic growth
as measured by the gross national product. Without government intervention, free markets produce
the most efficient and socially optimal resource distribution.

2. Examine components of Islamic and conventional economics systems.

Islamic economics system:

 Adl/Ihsan: adl means giving to each what is due, Ihsan giving more than what is due
(benevolence)
 Takaful/Taawun: cooperation (among economic agents more than competing towards
harmful ends)
 Responsibility/accountability: As a person gains more economic power, he becomes more
responsible for others in the society. Hence, individual is responsible to society, but
ultimately accountable to Allah.
 Moderation: in Islam maintains the principles in consumption, production, distribution to
maintain the correct balance in life.
Conventional Economics System

 Concept of scarcity: nature is niggardly and human wants unlimited (scarcity exists
because nature under provides resources while human wants are unlimited)
 Self-interest: priority to individual goals (the purpose of the individual is to achieve his own
personal goals. He is not naturally obliged to service society. Instead, society exists to serve
him).
 Absolute freedom: survival of the fittest (Man is free to use his economic rights and the
market is the place for him to do so)
 Materialism and utilitarianism (utility or satisfaction can only be achieve through material
pursuits rather than ethical, moral or spiritual pursuits)
3. Compare and contrast between Islamic and conventional economics philosophical foundations.

Islamic systems

 Tawhid: Recognizing and accepting Allah as the only sovereign power.

 Ibadah: Any act must be within Shari’ah boundaries to seek Allah’s pleasure
 Khilafah: Vicegerency, man recognizes his duty as servant of Allah s.w.t. his role is to
manage the resources at his disposal in a manner that would pleases Allah s.w.t
 Tazkiyyah: Process of economic activity must be seen as a process that purifies soul. This
should occur if the rules of the Shari’ah are followed when consuming goods and services.
Economic systems
Derived from theories developed by western scholars.
Main philosophical foundation of CES can be summarized below:

 Concept of scarcity: nature is niggardly and human wants unlimited (scarcity exists
because nature under provides resources while human wants are unlimited)
 Self-interest: priority to individual goals (the purpose of the individual is to achieve his own
personal goals. He is not naturally obliged to service society. Instead, society exists to serve
him)

4. Describe both Islamic and conventional economics operational principles.

Islamic economics
Specific operational principles

 Adl/Ihsan: adl means giving to each what is due, Ihsan giving more than what is due
(benevolence)
 Takaful/Taawun: cooperation (among economic agents more than competing towards
harmful ends)
 Responsibility/accountability: As a person gains more economic power, he becomes more
responsible for others in the society. Hence, individual is responsible to society, but ultimately
accountable to Allah.
 Moderation: in Islam maintains the principles in consumption, production, distribution to
maintain the correct balance in life.
Conventional Economics
Derived from theories developed by western scholars
Main philosophical foundation of CES can be summarized below

 Concept of scarcity: nature is niggardly and human wants unlimited (scarcity exists because
nature under provides resources while human wants are unlimited)
 Self-interest: priority to individual goals (the purpose of the individual is to achieve his own
personal goals. He is not naturally obliged to service society. Instead, society exists to serve
him).
 Absolute freedom: survival of the fittest (Man is free to use his economic rights and the
market is the place for him to do so)
 Materialism and utilitarianism (utility or satisfaction can only be achieve through material
pursuits rather than ethical, moral or spiritual pursuits)
 Positivism (science) versus norms (religion): the value system of any society is shaped by its
observable and actual practices without the need to question those practices.
5. Describe characteristics of Islamic economics

 Property ownership
 Motivation
 Decision making
 Coordination mechanisms
 Role of government

6. Analyse concept of ownership in Islam.

Islamic perspective on property ownership:

 Absolute owner of property is Allah: the creator of everything

 Man as khalifah and abd has relative and conditional ownership: Utilization for
betterment of mankind; there are shares of others
 Man is responsible to society and accountable to Allah (s.w.t) for his property: property are
trials and man will be rewarded
 Labor and need are both legitimate bases for ownership
 Both private and public properties are legitimate kinds of property in Islam

7. Examine public and private ownership in Islam

Public ownership:

 Access to and control of property is determined directly by reference to public interest

 Public interest is a major objective of Shari’ah, defined by Allah s.w.t but interpreted and
applied by man/state
Private ownership:

 No Quranic ayat or hadith prohibiting it, thus permissible.

 Complete or incomplete ownership rights.
 Rights to own, possess, utilize, priority, right to exclude others, income from property,
security of property, compensation if damaged/purchased, dispose.
 Completely responsible to give a share to society/state and accountable to Allah (s.w.t).

8. Describe role of government in the market.

 The role of government in Islamic market is a necessary one.

 It is not only to supervise the free market system.
 It is required to ensure the achievement of the long term goals of an economy.
 The main basis for it to intervene in the economy is to uphold justice in the economic and
market system.
9. Compare and contrast between incentives in Islamic economics and conventional one.

Conventional Economics

 Market economy focuses on material incentives, while planned economy concentrates on

moral incentives
 Material versus moral; cash versus medal
 Discusses how to make subordinates act in the way required
Islamic economics

 In IES, incentives are derived from shari’ah; both moral and material
 Discusses how to make / encourage subordinates follow Qur’an and Sunnah:
 Motivation mechanism for an Islamic economic system avoids extreme motivation and
requires a balance or moderate approach.
 The Islamic worldview requires some attention: extended time horizon (beyond this world)
referred as the Hereafter. This implies that believers have to weigh their personal interests
in both the current world and the Hereafter in order to be successful in both worlds.

10. Compare and contrast both Islamic and conventional economics mechanism of coordination.

Islamic economis

 In Islam, the market must fairly reflect the norms and values of both consumers and
producers' behaviour.
 Different rules of the market govern supply and demand
 The central role of the state/government is to ensure that market rules are not breached.
Conventional economics

 Market versus Plan ( Decentralized vs centralized)

 How decisions made are implemented, i.e. signal sent to all levels of society
 Real world always have some degree of planning: central planning versus indicative
planning

11. Discuss organization of market decision in Islamic and western economics.

Western economics

 Decentralized vs centralized (democracy versus dictatorial)

 Where decisions are made; upper level or lower level of hierarchy
How decisions are made

 Principles (sources, derivation)

 How they are implemented?
 To solve the problems in economics of what, how and for whom?
Islamic economics

 Islam talk of Shura - mutual consultation between higher and lower level
 People voice their views before decision makings are made
 Decision must be within limits of Shari’ah
 Eg. Prophet asked for opinions
 People participation in decision making, no bias towards extreme
 Chapter 4

1. Discuss scarcity and choice in conventional and Islamic economics.

Scarcity

 Absolute: when there are shortage in absolute terms (non-renewable resources)

 Relative: resources available to satisfy the unlimited wants; resources can be used for
different alternatives; need to make choices

Islamic perspectives

 Do not support the concept of absolute scarcity

 All resources from Allah; has promised sustenance for His creation. There are alternatives
(gases instead of coal)
 Accept relative scarcity

Western perspective

 The path to human advancement is sustained economic growth as measured by the gross
national product.
 Without government intervention, free markets produce the most efficient and socially
optimal resource distribution.
 Economic globalisation, which is done by removing obstacles to the free flow of goods and
money everywhere in the world, boosts competition, boosts economic efficiency, boosts job
creation, lowers consumer prices, expands consumer choice, boosts economic growth, and
benefits practically everyone.

2. Describe allocation of resource in Islamic economics.

Location of resources depends on ideals of the a society. In other words, resources allocation is
based on societal values. These values are based on the philosophical foundations and operational
principles of the system which are derived from primary sources of Islam. Therefore. The
allocation of resources is normative concept which is solved by applying Islamic norms or ideals.
There are three fundamental questions that determine resources allocation in any economic
system. All these three questions deal with choice. The answer to these questions depend on the
values or beliefs of society.
3. Analyze normative technical aspects of resource allocation in islam.

Normative aspects

The normative point of view analyzes the principles of values that underpin the choices made. In a
socialist economy, for example, a person may be required to refrain from the luxurious forms of
consumption while poverty exists, because of the ideals of equality. Thus, the worldview of that
society affects normative aspects.

Similarly, in an Islamic economic system, decision making or choices are to be made based on the
normative values of Islam.

Technical aspects

From the perspective of Islamic economics, the technical aspects of resource distribution aid in the
facilitation and upholding of normative principles. As a result, a Muslim consumer's normative
aspect is to avoid extravagance. Using a mixture of constraint and restraint mechanisms is the
technological technique to attain this normative ideal. For example, the government could enact
legislation prohibiting people from purchasing particular things in excess of a specific quantity
(constraint mechanism). Furthermore, for the sake of Allah, the consumer can apply self-control to
avoid extravagance (restraint mechanism).

Equally, if the goal is to maximise profit in an Islamic economy, the producer must guarantee that
his price is not too high to provide him an exploitative advantage, and that his product and
manufacturing procedures are good to society rather than harmful.

4. Examine role of government in allocation of resource.

Government intervention is thought to improve resource allocation by broadening the market and
encouraging increased specialisation in land, labour, capital, and entrepreneurial resources.
Specialization encourages more effective resource allocation.
Basic needs fulfillment through minimum wage or through government subsidy.

5. Duties of consumer and producer in allocation of resource in IES.

Consumer

 consumer is to avoid absurdity

 consumer can impose self control to avoid extravagance for the sake of Allah.

Producer

 the producer must ensure that his price is not high enough to give him an exploitative
advantage and his product and production processes are beneficial to society and not
harmful.
6. Discuss important role of hisbah in Islamic economic system.

The duty of the hisbah is to maintain public law and order while also overseeing the behaviour of
buyers and sellers in the market to ensure proper conduct of buying and selling products and
services.

 Checking of weights and measures: stop widespread fraud/deep-rooted malaise in society

 Ensuring availability of essential goods and services
 Correcting market imperfections and ensuring just prices
 Checking illegal and fraudulent practices
 Public utilities: muhtasib could compel the rich to contribute; open to all
 Chapter 5

1. Define distribution in Islamic economic system.

In the Qur'an, the Arabic word qismat best describes the word distribution. Qismat literally
translates to fortune and comes from the root word qasama, which is divided or distributed. Qismat,
on the other hand, refers to Allah's s.w.t. Hence, qasama is understood to signify that Allah, S.w.t,
has divided and distributed. As a result, the meaning of the word distribution refers to what Allah
has allotted to people based on factors that best suit each individual.

2. Describe briefly five principles of distribution in Islamic economic system.

1. Vicegerency of man and his relationship with resources in form of amanah/trust

 Allah is absolute owner, he has distributed according to his will, man remains his slave
and should spend whatever has been given to him according to Allah’s will
 Rights and responsibilities of ownership
2. Man endowed with different skills and abilities

 Result in inequality in return

 Quran: Inequality as a test
 Rich: grateful to Allah; spend according to acceptable way
 Poor: be patient (sabr), not to develop envy, keep faith and work hard to improve
 Some people given more power; power means greater responsibility.
3. Return is based on one’s effort

 Surat al-nisa’: “to men a share of what they have earned and to women a share of what
they have earned..”
 Those who worked harder should be rewarded more
 Equal opportunity, but not equal outcome

4. Everyone is entitled to a basic standard of living

 Maqasid al shariah
 If one does not have means to fulfill his basic needs, responsibilities be taken by others to
provide for him-his family or state
5. Income and wealth should not be concentrated in the hands of the few

 ‘…in one’s wealth there is a share of others”

 Islam supports equitable distribution of income and wealth, entitlement to basic standard of
living
3. There are three main objectives in distribution of resources in Islamic economics,mention briefly.

 Positive measures (zakat, fara’id)

 Voluntary measures (sadaqah, awqaf)
 Prohibitive measures (riba, ihtikar)

Objective: to eliminate extreme inequalities

4. Analyse pre-distribution and post-distribution of production in Islamic economic system.

Stage 1: Pre-distribution

 Takes into account condition of economy before it engages itself in production process

Considers who owns the resources

 Two types: public utilities (streams, streets, bridges) and natural resources (water etc)
 Anything that do not involve much human effort/cost to make it useful to the society
 Should be publicly owned, shared equally or equitably
 Ownership of the ummah in general
 All people participate in the utilization of these benefits-one way to reduce disparity of income

Stage 2: Post-Production Distribution

 Functional distribution: allocating the product among factors of production

 Production is result of cooperation among factors of production - each factor has a share
in the product
 Mechanisms (market and state intervention) in product and factor markets to determine
share of factor and to whom should this be paid
 Al-Hisbah can play a role in manipulation of free markets
 Chapter 6

1. In theory of economic what are the roles of people in the market.

In economic theory, people play two main roles in the market. They are consumers and producers
which are responsible for the buying and selling process in the market to allow the flow of money
and items.

2. Describe both conventional and Islamic consumers and producers behaviours

Islamic consumer and producer

 In Islam consumer is aware of Islamic norms and his behavior is governed by them. His
choice is how much of the income is to be spend on worldly needs and how much to spend
in the way of Allah (infaq fi sabil Allah). Muslims are motivated to spend in the way of
Allah though many Quranic verses and Ahadith which highlight the rewards in the
hereafter.

Conventional consumer and producer

 From secular point of view the theory of consumer behavior uses the law of diminishing
marginal utility to explain how consumers allocate their income.
 For producers, the economic problem is to maximize profits. The key decisions are which
outputs to produce, how much of each output to produce, and which inputs to use to
produce the outputs.
3. Examine of principle of consumption loan in Islam.

 principle of genuineness
 Taken consumption loan for meeting the crucial minimum wants.
 Taken loan without any valid reason is discouraged by the Prophet (S.A.W)
 principle to contract
 The Holy Qur’an mentioned in Surat al-Baqarah verse 282, that every act of lending
and borrowing should be written down clearly.
 The creditor should see that no injustice is being done to the debtor
 To keep out of doubts and avoid future disputes.
 principle of payment
 Debtor has been directed to make every sincere effort to pay back his loan.
 The Prophet (S.A.W) said: whoever contracts a debt intending to repay it , Allah
S.W.T will pay it on his behalf, and whoever contracts a debt intending to waste it ,
Allah S.W.T will bring him ruin.
 principle of help
 All types of loan in Islam are free of interest
 Allah S.W.T has allowed trading and forbidden usury (ii. 275)
 Taking voluntary payment in excess of the principals sum of loan is recommended
 Jabir ibn. Abd Allah said, “ I came to the Prophet (S.W.T) while he was in the
mosque, so he said: “Say two rek’ahs of prayer’ and he owned me a debt, so he paid it
to me and gave me more (than was due)

4. Analyze Islamic and conventional consumers behaviours in the market place.

While traditional consumer behaviour is based on a person's utility function, Islamic consumer
behaviour is based on Allah's pleasure in terms of spending to benefit others (alms)

Traditional consumer behaviour focuses solely on consumption for worldly necessities, whereas
consumer behaviour in Islam considers both the worldly and the hereafter.

In the traditional system, consumers are free to consume any product according to their desires or
whims, however in the Islamic system, consumer behaviour is governed by Islamic morals and
ethics.

Profit maximisation is sought by producers, whereas profit sharing is sought by Islamic producers.
5. Discuss principle of moderation in consumption with examples fron Qur’an and Sunnah.

 Producers to seek profit sharing.

 Consumers and producers must not consume or produce unlawful products or activities.
 Consumers and producers must spent part of their wealth to the less fortunate members in
the Islamic society.
 Consumers are required to show moderation in their consumption.
 Chapter 8

1. Discuss importance of sadaqah in development of Islamic economic system.

Sadaqah is an act that is purely voluntary in the aim of ‘fisabilillah’ (for the cause of Allah) by
muslims who wants to contribute more then their Obligatory Zakat payment.The prophet said
“Charity is a necessity for every muslim”.

2. Describe significance of Takaful/Ta’uwan in development of social welfare.

i) Enables financial assistance for the unfortunate and people in dire times.

ii) To promote moral values,ethical dealings and full disclosure in all business activities and
operations.

ii) Protection of lifestyle.

iv) Security for the family and the group against misfortune.

v) Fulfills the social obligations towards the community and family.

3. Describe classification of Waqf.

Waqf Khayri,(Waqf ‘Am)(Public Waqf)

An endowment made by the founder to support the general good and welfare of society,the poor
and the people in dire needs etc.Surrounding lands such as cemeteries and weapons for
preparation if war is about to happen.

Waqf Ahl,(Waqf Khas)(Family Waqh)

The founder endows their property to his whole family or people they specified.If the beneficiaries
specified by the founder are no longer alive,then only in this case will the waqf property be given
over for public welfare purpose.

Waqf Mushtarak (combined public and family waqf)

A waqf created by a founder to help both the public and their family.

Waqh Ghair Manqul (Immovable Waqf)

Land,fields,farms or buildings such as mosques,schools hospitals etc.

Waqf Manqul (Movable Waqf)

Animals,books,crops,instruments,cash,etc..
Waqf Sahih (sound or valid waqf)

Founded upon mulk (full ownership) land.Upon privately owned freehold property over which the
owner helds complete rights of alienation.

Direct Waqf

Created directly to save beneficiaries in the form of mosques,schools,hospitals,etc in order to serve

people for numerous things such as praying and treat poor patients free of charge.

Indirect Waqf

Required to provide the running expenses for such waqf.From these waqfs will be channelled to
support the direct waqf.

4. Discuss conditions of creation of Cash Waqf.

i) Irrevocability : This means that once the founder that created the cash waqf he cannot revoke it
back,however,they can benefit from its investment/revenue.

ii) Perpetually : once the cash waqf is created it must be perpetual.This will ensure regular and
continual support from the cash waqf financing areas in the muslim society that are in need of
help.

iii) Inalienability : This means that once cash is created into waqf,no one can ever become the
owner to alternate it.It will become a “frozen asset” which cannot be subject to be given as
gift,inheritance or any alienation.

5. Analyse benficaries of Cash Waqf.

Waqf Khayri

A cash endowment made by the founder to support the general good and welfare and society for the
poor and the people in need.

Waqh Ahl

Al-waqf al-dhurri and waqf ‘al awlad are all the same and refer to family waqf/specific waqf.

Waqf Mushtarak

A cash waqf created by a founder to support both the public and his family or certain people or
people in need of help.
6. Examine creation of Cash Waqf by non Muslim.

The Shafi’I school permitted the creation of waqf from non-muslim even if it is for the benefit of a
mosque.He based an opinion on the following hadith;
The prophet said “ Allah will not oppress any Muslim from his good deeds,as he gives it in this
world and he will be rewarded in this world only and in the hereafter.But for the non-muslim he
will be rewarded for all his good deed only in this world.”

7. Explain briefly investment of Cash Waqf.

Mudarabah (partnership) has beem recommended by Muslim Jurist.

The latest fatwa issue by Fiqh Academy Islam,agrred that cash waqf,can be invested in any
shari’ah compliant mode of investment,such as Mudarabah,Murabahah,BBA,Musharakah,Istisna
and other more.

8. Examine role and benefits of Waqf in development of economy of a country.

The waqf system is an important aspect for development of economy of a country due to;

i) Reduces unemployment

ii) Builds cities and commercial activities.

iii) Balances government expenditure.

iv) Raises financial instituitions.

v) Improves development of all sectors in muslim countries such as social,industrial,agricultural

and service sectors.

9. Analyse modern application of Cash Waqf management in business companies.Such as,cash waqf
shares,mobile cash waqf,compulsory cash waqf,cooperative cash waqf etc.

Waqf shares model

The founders which are also known as shareholders contributes in buying waqf shares from their
chosen religious instituition non-profit organization,they are known as trustees.The purchased
shares will be given as waqf to the trustee and the founders and will be receiving cash waqf
certificates.After that,the trustee will manage the collected funds and will distribute it to the people
that are in need of help or charities purposed places.
Waqf takaful model

This model was created by Syarikat Takaful Malaysia which are also known as the Waqf Takaful
Plan.Under that plan,the founder contributes a minimum of RM 10 monthly as an instalment over
a certain period of time.The contribution amount will then be invested in shari’ah compliant funds
and any profit on investment shall be distributed between the trustee and the Participants Account
on a profit sharing ratio.The contribution will be divided into 2 separate accounts based on a pre-
agreed ratio.The participants account (PA) and the participants special account (PSA).Upon death
of the founder or the maturity of the plan,the amount accumulated in the (PA) will be paid to the
beneficiaries specified by the founder in the Waqf Deed.

Direct cash-waqf model (Public Waqf)

Under this model,the founder will contribute the religious authority or non profit organization
(trustees) by depositing money to a specific bank account.The bank will then invest the
money.Anye revenue generated from the investment shall be channelled to the trustees who will
then use it for charity purpose.

Cash waqf mobile phone model (Waqf Mushtarak)

Under this model,contributions are made by sending coded sms to be designated server ordering for
deduction of an amount from his/her airtime to a religious authority or non-profit organization as
a trustee.The amount collected will be shared between the telecommunication companyto cover
operating costs and the trustee who will be managing the funds for the beneficiaries through a
revenue sharing arrangement.

Corporate cash waqf model (Public Waqf)

In this situation,a mother corporation will establish an associated instituition as the Mutawalli to
collect the cash waqf from different corporations in terms of cash,jewelry and etc.To manage and
distribute the waqf fund for specific areas,whose main role is to increase economic growth in the
state of Johor.Under this model,Johor Corporation established Kumpulan An-Nur Berhad as an
associated waqf instituition.

Compulsory model (Public Waqf)

Compulsory monthly constributions are made by muslim employee in a Muslim minority country
depending on their monthly gross income.A certain amount will be deducted from their salaries
and will be channelled through the CPF,to Singapore Islamic Council.Amount collected finance
will be beneficiaries for charitable purpose.
Deposit product model (Public Waqf)

The depositer deposits money into the cash waqf-based account.After that,the bank will manage the
capital on behalf of the waqf.The capital will then be invested.The cash waqf accounr earns profit
through a mudharabah contract.The proceed will be used for a charitable purpose or purposes
specified by the waqf.

Co-operative model (Public waqf)

Citizens provide cash to the cash waqf funds specific for their district.The capital will then be
invested.

Waqf mutual fund model (Waqf Mushtarak)

The Dompet Dhuafa- Batasa Syariah Mutual Fund was establish in July 2004 as a Shariah-
compliant mutual fund,which invests hugely in fixed income returns financial instruments.This
mutual fund is managed by the Batasa Capital Asset Management.
 Chapter 9

1. Define riba in Islam.

Riba is an Islamic notion that roughly refers to the concepts of growth, rising, or exceeding, and so
prohibits interest on loans or deposits. The term "riba" has also been loosely interpreted as the
unlawful, exploitative gains obtained in business or trade under Islamic law, which is similar to
extortion.

2. Examine rational behind prohibition of riba.

Except for declaring that charging interest is an act of injustice, the basic sources of Shariah (the
Qur'an and the Sunnah) do not offer advanced logical explanations on the prohibition of riba.
Contemporary Muslim scholars, particularly economists, have written extensively about the
rationales for riba prohibition, addressing the economic and social consequences of the interest-
based financial model, or claiming that modern economic theories have not justified the existence
of interest rates as a necessity.

3. Analyse argument of jurists on charging riba on consumption loan and commercial loan.

Some argue that riba means the addition of money on a capital. Since the addition of capital is not
prohibited by Islam, then there are certainly certain forms of addition that should be prohibited. the
decline of usury or riba’, there is no evidence to prove the existence of commercial loans among the
arab people. On the other hand, all financing is done on the basis of syirkah and mudarabah. Next,
usury or riba’ is prohibited based on the meaning of oppression because oppression is the 'god of
the prohibition. Consumption loans are oppressive because the debtor is desperate to cover his daily
requirements, while the creditor takes advantage of the situation by demanding excessive interest
rates. The debtor is being oppressed in this way. Riba' is the term for this feature. In contrast, in
the event of a productive loan (Productive Loan), the debtor benefits significantly from the loan
money's investment. It is not prohibited since it contradicts the riba' idea.

4. what is a contract and its elements in Islam.

Contract in Islam is known as ‘aqd

necessary elements in contract formation

 Contracting parties: individual/group/organization/state

 Medium/channel of communication: verbally/letter/telephone/sign/electronically
 Subject matter: physical goods/products/services
 Primary objective: al-bay (exchange and benefits of counter-value) or hibah (gift).
Secondary objective (motive) must not conflict with primary objective
 Trading-based arrangements

 Murabahah
 Bai-bithaman ajil

Leasing-based arrangements

 Operating lease
 Financial lease

Equity-based arrangements

 Mudharabah
 Musyarakah

5. Describe gharar and maysir in Islamic commercial transactions.

Gharar means deception, fraud, uncertainty, risk, peril, or hazard that can result in devastation or
loss.

In a contract of exchange, confusion is induced by a lack of clarity about the topic matter or
pricing.

• examples of gharar

Sale of fish still in the sea

Sale of birds in the air

Sale of unborn animals

• Types of gharar

Gharar yasir (minor or slight)

• Tolerated and will not invalidate a contract

Gharar fahish (major or excessive)

• Not tolerated and may result in contract voidability of a contract

Maysir

• Definition: easily available wealth; acquisition of wealth by chance

• A form of gambling

• references in the Qur’an prohibiting gambling, for example:

“Shaitan intends to excite enmity and hatred among you with intoxicants and
gambling, and hinder you from remembrance of Allah, and from prayer…” (5:90)

“They ask the concerning wine and gambling. Say: ‘In them is great sin and some
benefits for people; but the sin is greater than the benefits’” (4:219)
6. Highlight elements of gharar and maysir in our contemporary transaction.

Gharar

All business dealings that lead to exploitation or injustice in any manner to any of the contracting
parties are expressly forbidden in Islam. It aims to protect the various parties from deception and
ignorance by prohibiting Gharar from being used in any commercial exchange contracts that are
not free of risk, risk, or speculation about the essential elements of the transaction to either party,
or uncertainty about one party's ability to honour its rights and obligations. All Islamic financial
and economic transactions must be conducted in a transparent, accurate, and complete manner,
with all necessary information disclosed, so that no one party gains an advantage over the other

Maysir

All forms of gambling are likewise completely prohibited in Islam. Maysir is a term used in Islam to
describe some types of gambling transactions that are regarded completely unequal. Maysir refers
to the easy obtaining of wealth through chance, regardless of whether it deprives others of their
right..