Islamic Capitalism and Finance

Islamic Capitalism and Finance

Origins, Evolution and the Future

Studies in Islamic Finance, Accounting and Governance series

Murat Çizakça

This illuminating and thought-provoking book questions whether classical Islamic capitalism, which has served Muslims so well for centuries, can provide a viable alternative world economic system. In the current recession – the worst since 1929 – this is surely a provocative question. But if Islamic capitalism is to emerge as a viable alternative, its nature and systems must be well understood.

Chapter 7: Voluntary Redistribution of Wealth (The Waqf)

Murat Çizakça

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation, history of economic thought, islamic economics and finance, money and banking

Extract

Some regard it as a proof that moral considerations can never guide business enterprise, that the opposing pulls and pressures of God and Mammon can never be reconciled.1 Once again the challenge is whether the walls of separation between profit motivated activities and charitable or welfare oriented activities can be demolished. If it is the same people who make profits in business as well as make charitable endowments and give away part of their wealth to the needy, can we envisage institutions that accommodate profit motive and serving social goals within the same framework? Does history offer any clue? Do we have contemporary examples?2 (Prof. Dr Nejatullah Siddiqi) I intend to answer the challenging questions asked by Professor Siddiqi in this and the next chapter. In this chapter I will focus on ‘does history offer any clue?’ and in the next one, ‘do we have contemporary examples?’. Meanwhile I might add that the answer to all three questions is a resounding and definitive ‘yes’! Islamic capitalism encourages accumulation of wealth with low taxes and by imposing no upper limit on profits. But at the same time, Muslims are ordained to acquire only the legitimate, not the maximum profit. Thus, while there is no upper limit on profits, it is essential that these profits are earned through legitimate means.3 Once wealth is accumulated with the instruments described in the previous chapters, Muslims are ordained to redistribute this wealth voluntarily. It is believed that those who redistribute their wealth...

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