Principles and Practices of Islamic Economics – In implementing the principles and practices of Islamic economics, certain principles must be adhered to and must not be violated. Every transaction made must be by Islamic law. There are many notions about the practice of Islamic economics that you need to know.
Understanding the Principles and Practices of Islamic Economics
Understanding the principles and practices of Islamic economics is everything related to the principles and rules of the Islamic law that must be obeyed in the practice of economic activity. Starting from buying and selling transactions, and exchanging goods, to the issue of debts.
Everything related to the transaction process is regulated in such a way that its implementation does not violate Islamic regulations so that it does not fall into the practice of usury. In practice, the principles and practices of Islamic economics rely heavily on what is called a contract.
The contract is the key and the main focus that determines whether the transactions carried out are in accordance with Islamic law or not. If it is proven that there is a violation in terms of the contract in the transaction, it could be that the transaction carried out contains elements of usury so it is forbidden to do so.
To better understand Islamic economics, Grameds can use the book Introduction to Islamic Economics as a reference that discusses the early emergence of Islamic Economics in the 1970s.
1.1. Understanding Muamalah
Muamalah is another term for transactions in the Islamic economic system. The definition of muamalah itself is an exchange activity that provides certain benefits for the goods or things that are exchanged. Many activities are included in muamalah.
Some of them are activities of buying and selling goods in which there is an exchange between money and goods, debts and receivables, borrowing, and renting. Even muamalah activities also cover all matters such as farming, trading, association, and others.
No exception in terms of business and capital, both are still included in muamalah activities. Every muamalah activity that is carried out is regulated in the Qur’an so as not to fall into the usury process which is declared haram.
Islamic economics is based on noble values from various sources of Islamic teachings such as verses of the Qur’an, and the Hadith of the Prophet.
1.2. Verses about Muamalah
Islam has strictly regulated its economic practices by the guidance of Allah Subhanahu Wa Ta’ala and the Prophet Muhammad Sallallahu ‘Alaihi Wasallam. Even the rules regarding economic practice in Islam are regulated in the Quran and hadith.
There are six main verses in the Qur’an which specifically regulate the practice of Islamic economics. The following are verses about muamalah that you need to know, including:
a. Prohibition of activities that contain elements of usury
Listed in Q.S. Al Imron (3) verse 130 reads:
Meaning: O you who have believed, do not eat usury doubled and fear Allah so that you will be successful.
In this verse, Allah clearly and firmly commands believers to stay away from various types of usury practices. One example of usury is giving debt by asking for more or interest from others when paying the debt. The law is illegal.
b. Prohibition of using vanity or wrong methods
It is stated in Q.S. An Nisa (4) verse 29, which reads:
O you who have believed, do not falsely eat each other’s wealth, except by way of commerce which is carried out with mutual consent between you. And do not kill yourselves; Verily Allah is Most Merciful to you.
In the verse, it is explained that for anyone who believes that wants to acquire wealth, it must be done based on mutual benefit, not one loss and one gain. Implementation by Islamic law will not cause harm to other parties.
So that harmony between others will be created because of the element of mutual help and help with others without any element of coercion. People’s lives will be more just, peaceful, and prosperous.
c. Prohibition of using unjust methods
It is stated in a Hadith of Muslim History, which reads:
The hadith quoted from Abu Hurairah radhiallahuanhu taken from the words of the Prophet sallallaahu ‘alaihi wasallam contains a prohibition so that fellow servants of Allah do not envy each other, deceive each other, and get angry with each other to break the relationship of brotherhood. tyranny or persecution among fellow Muslims. The hadith strictly forbids Muslims to insult and deny other people. It is forbidden for every Muslim to have blood over another Muslim.
d. Prohibition of playing with scales, measures, halal, and quality
Listed in Q.S. Al Muthaffifin verses 1 – 3, which reads
1. Woe to those who cheat (in measuring and weighing)!
2. (That is) people who when they receive a dose from someone else ask for it to be sufficient,
3. and when they measure or weigh (for others), they reduce.
The verse explicitly states that those who play with the scales by asking for the measure to be filled when receiving others and reducing the dose when giving to others then will be harmed. This verse is at the same time a threat.
e. Prohibition of gambling/speculating
The prohibition of buying and selling gharar or speculation is prohibited as followed by Abu Hurairah radhiallahuanhu in the hadiths of Muslim Turmudzi, Nasa ‘, Abi Daud, Ahmad, and Ibn Majah. The hadith explicitly reads, “The Prophet forbade the buying and selling of speculation (gharar).”
f. Prohibition of transacting illegal goods
From Aisha, she said: “When the end of Surah al-Baqarah came down, the Prophet read it to his companions in the mosque and then forbade the khomer trade.” (Other subjects: Muslim 2985, Nasa’i 4586, Abi Daud 3086, Ahmad 23063) 
As quoted from Aisyah radhiallahuanhu in the hadith of Muslims, Ahmad, Nasa’I, and Abi Daud, it is stated that the Prophet recited the last verse of Surah Al-Baqarah and announced to his companions in the mosque that the khomer trade was unlawful.
Knowing the verses and hadiths that explicitly regulate Islamic rules related to muamalah above, then the things that are prohibited and should not be done must not be done in practice.
1.3. Kinds of Muamalah
Muamalah activities include several transactions, including the following:
1.3.1 Buying and Selling
Buying and selling is an activity in which there is an agreement to exchange objects that the buyer wants to own at the appropriate price as offered by the seller. Buying and selling activities are permissible and lawful as stated in Q.S. Al Baqarah (2), paragraph 275 which reads:
Principles and Practices of Complete Islamic Economics 14 several conditions must be met and followed by buying and selling in Islam so that the practice is by the Shari’a, including:
There are money and goods that are used as transaction instruments, both of which must be lawful and pure, useful, goods can be handed over, and the condition of the goods is known by the perpetrators of buying and selling, and belongs to the seller himself.
The seller and the buyer must meet the requirements as reasonable, mature/adult persons, and carry out the transaction of their own volition without any element of coercion.
There is a contract or ijab qabul stated by the seller, “I am selling this object to you at a price…” Then the buyer answered, “OK, I will buy this object at the stated price.”
Khiyar is one of the muamalah transaction activities that gives freedom to the seller or buyer to decide whether to continue the sale and purchase transaction or cancel the transaction.
Khiyar may be done, but there must be conditions that must be followed and carried out on the basis of consensual feelings without any element of coercion. There are several types of khiyar that you need to know, including:
- a. Khiyar Terms is a khiyar process that is used as a condition in a buying and selling transaction. Where the seller himself immediately said, “I sell this item at that price and the khiyar condition is for one week.”
- b. Khiyar Assembly is a khiyar process in which the seller and the buyer are in the same place where the transaction or bargaining process takes place. Both the seller and the buyer both have the same right to cancel the transaction if something is not to their liking.
- c. Khiyar defect (aibi) means that the buyer is given the right to return the goods that have been purchased if a defect is found, thereby reducing the quality and function of the value of the goods. This means that buyers can complain if there are items that do not match the order.
Riba is forbidden in Islam and it is expressly regulated in the Quran. Why is usury illegal? This is because the notion of usury itself is the value of money interest that is more than exchanging goods or borrowing money.
For example like this, you borrow money from Fitri for IDR 100,000.00. However, Fitri asks you to return Rp. 110,000.00. So the Rp10,000.00 money that must be returned is usury and this is prohibited in Islam.
In sharia economic regulations, usury is further divided into several types as follows:
Riba Qordi is a process of borrowing money in which the borrower must return the value of the money borrowed plus the interest/excess.
Riba Fadli is the process of exchanging goods of the same type but different in scale.
Riba Nasi’ah is a sale-purchase contract procession in which the delivery of the purchased goods is carried out a few days later.
Riba Yadi is a contract of buying and selling goods of the same type and the same scale, but during the handover process, the seller and buyer are in separate positions.
1.3.4 Accounts Payable
Debit transactions are carried out by handing over assets or objects to someone with an agreement that the assets or objects will be returned within a certain period. In this transaction, three pillars must be fulfilled, namely:
Some actors do debt and those who give credit
There are goods or assets as objects of debts
There is an agreement between the creditor and the debtor
In its implementation, to stay away from usury, the goods or assets returned must be by what was borrowed. If there is an excess given by the debtor of his own free will, then the property or item is lawful.
On the other hand, if the person giving the receivables asks for additional when the property or goods are returned, then the addition is unlawful. This is because there was no mutually agreed agreement beforehand.
In Islam, the term lease is called ijarah.
This transaction is carried out by giving certain rewards to someone who rents out goods or objects to other people. There are several conditions and pillars of ijarah that must be met, including:
The rental transaction process must be carried out because it is at the will of each one
Both the one who rents and the one who rents must both be of common sense and mature
The condition and nature of the goods must be determined from the start
The leased goods will become the full rights of the lessee or tenant’s guardian for a period that has been mutually agreed upon
It must be clearly stated how long the tenant will use the item.
There was an agreement from the start regarding the rental price and how to pay it
Both parties must know the benefits that will be taken from the goods
Leases are not only in terms of goods but also labor contracts. There is a collective agreement that must be fulfilled in the employment contract. The agreement relates to the type of work, hours worked, length of work, salary, payment system, and benefits.
Syirkah means a contract made by two or more parties who both agree to build a business to make a profit.
The pillars that must be fulfilled in the syirkah contract include the following:
Two parties carry out the contract or ‘aqidani’
The object of the contract or ma’qud ‘alaihi is clearly mentioned which includes capital and work
The existence of management activities or tasharruf as a valid condition for the syirkah contract.
Syirkah consists of several types, namely:
Syirkah ‘abdan is a type of syirkah in which two or more parties do not contribute capital (charity) and only work contributions
Syirkah ‘inan is a syirkah in which both parties contribute to each other both in terms of capital and work
Syirkah wujuh is a collaboration carried out based on one’s position, expertise, and character
Mufawadhah syirkah is a syirkah carried out between the two parties by combining all the previously mentioned types of syrah.
Mudharabah contract is also known as a cooperation contract in which the first party is the provider of capital or shahibul mal, and the other party is the manager or mudarrib.
Mudharabah is divided into two types based on the benefits obtained, namely:
Mudharabah muqayyadah means that the business carried out will be limited by time, type of business, and place of business.
Mudharabah mutlaqah means that the form of cooperation carried out between the capital owner and the capital manager is broad in scope and has no limitations in terms of time, type of business, or place of business.
1.3.8 Musaqah, Muzara’ah, and Mukhabarah
The definition of musaqah is a collaboration between farmers and garden owners.
The type of deal is the owner of the garden handed over the land to the farmer to be managed and later the harvest would be divided according to mutual agreement.
Muzara’ah is a collaboration carried out in the agricultural sector between farmers who work on rice fields that provide plant seeds and the landowner himself.
While Mukhabarah is a collaboration between the landowner and the farmer, the seeds are provided by the landowner.
The bank is identified as a place to store money. The definition of a bank itself is a financial institution that has the task of collecting funds from the public and then channeling it using an interesting system. There are two types of banks currently in the community, namely:
Sharia/Islamic Banks are financial institutions that carry out their operations with the Islamic sharia system and meet the requirements that are clean from usury.
Conventional banks are financial institutions that have the function to collect funds and distribute them to those in need with an interesting system.
1.4 Sharia Insurance
Sharia insurance is also known as at-Ta’min which means protection, coverage, tranquility, and security. Insurance is also part of muamalah transactions where the legal basis is that it is permissible (jaiz) with certain terms and conditions.
Guidelines regarding sharia insurance are regulated directly and guided by the Fatwa of the Sharia Council.
All transaction processes and products offered must comply with the provisions of Islamic law. What is regulated in Islamic Shari’a law is nothing but the interests of the Muslims themselves. So as a devout and obedient Muslim, you must fully support the implementation of the principles and practices of Islamic economics as a whole.