Islamic Economics: An Emphasis on Spending and Utilisation of Resources

by Dr. Khalid Zaheer

I) Saving

The Qur'an makes a significant departure from the common economic wisdom by completely ignoring any positive mention of saving as an act of virtue. Not only that, it goes further in emphasising the significance of infaq (spending to earn the pleasure of Allah) as one of the most significant acts of piety. A Muslim scholar has, after quoting a few verses of the Qur'an urging the believer to spend in the way of Allah, rightly concluded that 'the real spirit [of these verses] is that wealth is not meant for saving and accumulating but for spending...' (Sioharvi 1984, 53). Saving, in fact, is penalised by a levy of compulsory zakah (involuntary infaq) every year. In short Islam encourages the believer to spend and discourages them from saving.

It needs to be clarified, however, that extravagant spending on personal consumption is strongly condemned by the Qur'an . Qur'anic  encouragement for spending should, therefore, be understood within that context as meaning only a believer's spending on justifiable personal needs, needs of others -- whether close relatives,1 friends, neighbours, or the needy belonging to none of these categories -- and the important national needs of ddefence, public welfare, or projects of economic development.

The most forceful condemnation of saving despite the existence of genuine avenues of infaq is offered in the Qur'an  thus:

To those who accumulate gold and silver, and do not spend in the way of Allah, announce the news of painful punishment. On the day when heat will be produced out of that (wealth) in the fire of Hell, and with it will be branded their foreheads, their flanks, and their backs (and it will be said): 'This is the (treasure) which you stored up for yourselves, so now taste of what you had stored' (the Qur'an , 9:34-5)

Not all Muslims, however, believe that the above-mentioned verse and others carrying similar messages are condemning unnecessary accumulation of wealth. It is reported that when Ibn 'Umar (raa), the companion of the Prophet (sws), was asked about the meaning of the verse, he said that it referred to a person who accumulates wealth without paying zakah on it. According to him the verse was revealed before payment of zakah was made compulsory. After the introduction of zakah, wealth in possession of an individual is purified even if he accumulates it (Bukhari, Vol. 1, 651). Ibn 'Umar (raa) is also reported to have said that after an individual pays zakah, he cannot be blamed even if he keeps his wealth deep down in the soil. The same is the view of Jabir and Qurtubi, the interpretors of the Qur'an  (Qurtubi 1952, Vol. 8, 125).

The above view, however, does not seem to be consistent with the teachings of the Qur'an. The message these verses are conveying clearly suggests that wealth is not meant to be accumulated, but to be spent in Allah's way. By the expression 'in the way of Allah' the verses mean all those avenues of spending mentioned clearly in the Qur'an and Hadith or any other areas of expenditure falling within the ambit of those avenues directly or indirectly. The words of the Qur'an are not condemning those who do not pay zakah. Instead, those who accumulate wealth and do not spend in Allah's way have been made the target of the pronouncement of punishment. Spending in the way of Allah is distinct from payment of zakah. Allah demands two things from a wealthy believer. First, that he should pay zakah due on his wealth and, second, that instead of accumulating wealth, he should spend it in the way of Allah. The first demand is legal and an Islamic state has a right to take this by force, if it deems it necessary, from every citizen. As for the second demand, although it cannot be forced upon an individual and is left at the discretion of the owner of wealth, an individual's real status in the eyes of Allah is primarily dependent on it. If despite holding vast wealth a person ignores the plight of the orphans, the destitute, and the poor of his neighbourhood or overlooks all genuine demands on his wealth for promotion of the message of Islam, he will not be able to escape stern accountability, even if he has discharged the legal obligation of paying zakah. The same chapter (surah) in which the relevant verse appears later mentions the attitude of the hypocrites who used to consider spending in the way of Allah a burden on them.2  the Qur'an points out that this love of wealth is an indication of their hypocrisy and condemns them in strong words. Obviously that condemnation is not attributable to their inability to pay zakah.

They used to pay zakah, even if reluctantly, anyway. Had they refused, they would have been forced to do so. Their real crime was that despite being wealthy, they were not inclined to spend on avenues genuinely deserving infaq from the believer. Such an attitude, in some cases, is a clear indication of hypocrisy (nifaq) (Islahi, Amin Ahsan).

Some modern Muslim writers, however, insist that saving is to be encouraged in an Islamic society. For instance, one of them states that saving in an Islamic society should be regarded as positive behaviour because the Qur'an 'emphasises that the desire to save is a part of human nature' (Qureshi, D.M.). In order to prove his point, the author has quoted a few verses of the Qur'an, one of which can be translated thus:

Fair has been made in the eyes of men the love of things they covet: women and sons; heaped-up hoards of gold and silver; horses branded and cattle and well-tilled land. Such are the possessions of this world's life. But in nearness to Allah is the best of the goals (to return to) (the Qur'an, 3:14)

The reason why some of the writers have erroneously concluded from such verses a message very different from what they seek to convey is that the style adopted in these verses has not been properly appreciated. The Arabic word used in such verses -- al-nas (or sing. al-insan), generally translated as men (or man) -- draws some of those readers not properly aware of Qur'anic styles of presentation to conclude that what is being conveyed in these verses is some commonly observable aspect of human nature. However, although the words al-nas and al-insan are general, their connotation in the context of many of the Qur'anic verses is a certain category of people who are devoid of wisdom and godliness and are, therefore, drawn into the worldly temptations in a way that they are unable to appreciate the spiritually higher values presented to them by the Qur'an (Islahi, Amin A.). In other words, the mention of love for heaped-up hoards of gold and silver is not meant to convey the message that love of them (and saving them) is a part of human nature and therefore commendable; we have seen above that the Qur'an condemns those who accumulate gold and silver. On the contrary, love of these worldly possessions has been condemned as a human weakness worthy of being discarded. After all, if all Qur'anic verses using the words al-nas and al-insan were to be interpreted to convey the meaning of some legitimate aspect of human  nature, what aspect of that nature are the following verses referring to? 'Nay, but man (al-insan) does transgress all bounds' (the Qur'an, 96:6). 'Truly man (al-insan) is, to his Lord, ungrateful' (the Qur'an, 100:6). 'Verily man (al-insan) is in loss' (the Qur'an, 103:2).

It has been claimed that 'Muslim economists, [sic] agree that savings are a necessary, though not sufficient[,] condition for more growth and development' (Chachi). Chapra believes that savings should be positively encouraged in an Islamic society and that it would be desirable to inculcate saving and banking habits among the masses. Al-Naggar has expressed his conviction that the basis of dynamic economic growth is an increased volume of saving.

However, the very appeal for saving in the modern society is contrary to the real spirit of the Qur'an. The basic theme of these appeals is security against unforeseen financial hazards of the future. The Qur'an declares that the advice of refraining from spending in the way of Allah is from Satan 'who scares you from poverty...' (the Qur'an, 2:268). Some writers might dispute the conclusion drawn from the above-mentioned and similar verses by pointing out that the message of verses such as the one quoted is relevant only in the context of a set of conditions where infaq is being ignored because of saving. The objection is valid only in a context where the necessity of infaq is non-existent. It is hard to imagine any such context.3

Some others might argue that in a situation where a Muslim nation needs rapid economic progress through large-scale investment, saving for investment should, for religious purposes, be regarded as equivalent to infaq because of its role in the economic advancement of Muslims. The argument, however, cannot be accepted. First, because if spending were ever to be declared equivalent to saving to allow Qur'anic teachings to appear more meaningful to the modern-day economists, then all other Qur'anic injunctions could also effectively be argued to be suggesting just the opposite of what they actually mean, to suit the point of view of some other modern thinkers. Second, because there is no unanimity even amongst the economists on the opinion that savings lead to investment. In fact, it has been argued that under some conditions 'the more people spend on consumption, the greater is the incentive for businessmen to build new factories and equipment' (Samuelson). Keynesian economists, in fact, view savings as a leakage out of the circular flow of money (Wilson) and consider it desirable for currency to circulate; on the contrary, accumulation of the means of exchange for its own sake is seen as undesirable (Baldwin and Wilson).4  There is, however, a strong belief that despite the fact that saving is a leakage from the income stream, it is still very essential to save in banks because in that way funds are channelled back into the expenditure stream as the borrowers of those funds use them in spending in the economy (Ranlett). Although this suggestion is quite valid, it is inconsistent with the Islamic teachings which emphasise spending. What is saved by a depositor in a bank is saving from his personal point of view whether it is actually channelled back into the economy or not.ry future need, should either be spent on others or invested directly in a project. The suggestion that financial intermediaries enable people to help others with the savings is again unacceptable from an Islamic point of view, since Islam wants, first and foremost, that spending on others should be done with true intentions of pleasing Allah by helping them. The help extended to others through financial intermediation, on the contrary, amounts to helping others by pleasing oneself in receiving interest or profit from banks.

Saving which is normally done by individuals to achieve personal gains can never be regarded as equivalent to infaq, which basically entails a personal sacrifice on the part of the one spending. The motive of the saver is just the opposite of the one doing infaq who, as mentioned above, spends to earn the pleasure of the Almighty, purify his soul, and ensure a place of success in the hereaf

From the Islamic point of view, funds available with an individual, if not required to be saved for a necessater.5Whereas infaq is an act of benevolence, saving is invariably done for selfish motives.

II) Optimum Utilisation of Resources

Islam calls for maximum exploitation of economic resources and, as a consequence, their minimum wastage. The only constraint to this general principle is a situation where it conflicts with the requirements of 'adl. In discussing the rights of orphans in an Islamic society the Qur'an asks the responsible members of society to look after their property and hand over their possession only when satisfied about their ability to handle them properly. It warns the guardians thus:

And do not hand over the possession to those weak of understanding your economic resources which Allah has made a means of support for you, but feed and clothe them therewith, and speak to them words of kindness (the Qur'an, 4:5)

The verse is an example of the sort of delicate balance Islam urges the believer to strike between economic efficiency and social justice. It is clear from the verse that whereas it is not permitted to allow the means of production to go waste because of the inability, for one reason or another, of the owners, it is also not permitted to  snatch away the ownership of those means from the legitimate owners, as has been done in case of socialist revolutions. The reason why the owners have to be deprived of possession of those resources is also clarified by the words 'which God has made a means of support for you', that is, since economic resources, if properly utilised, ultimately contribute to the welfare of all members of the society, they cannot be left at the mercy of their owners to go unattended. The owners, however, cannot be denied a share in the fruits of the output of the assets owned by them.

The following statement of the Prophet (sws) is in complete harmony with the spirit of the Qur'anic verse quoted above:

Every landlord should farm his land but if he cannot do that, he should let his brother farm it' (Muslim, Vol.4, 172)

The words 'he should let his brother farm it' imply that the user owes a rent to the owner unless the owner himself forgoes the rent which is better for him to do, if it is possible. The case of financial assets also falls within the scope of this guidance. If an individual has additional funds after he has spent on the legitimate avenues of  spending, then those funds should be invested for the larger interest of the community.6  However, if the owner chooses to invest them for his personal gain, he may do so provided he does not get involved in unIslamic financial deals, the most prominent of which is an interest-based arrangement.

III) Right of Ownership

Islam definitely allows individuals a right to own property. As we have seen in the sub-section above, ownership of property is not allowed to be taken away even if their masters are inefficient economic agents. The fact that the Qur'an mentions the Islamic law of inheritance in considerable detail7 is enough to refute the claim of those who believe that Islam is against ownership of private property.

Those who hold the view that Islam condemns private ownership of property fall into two categories: those who suggest that, much like socialism, Islam allows the ownership of those assets only which an individual earns himself,8  and those who believe that an 'individual's unlimited right to property has no warrant in an Islamic economic system ... because no economic programme, aiming at social justice, can succeed without substantially pruning the private property system' (Naqvi).  The former argument is sometimes seen to be based on the following Qur'anic verse:

'That man can have nothing but what he strives for'9 (the Qur'an 53:39)

It is argued that since, according to this verse, man is not allowed to have anything except what he earns, no one should be allowed to own anything other than what falls strictly into that category (Naqvi). The argument is unacceptable for two reasons: first, because if the interpretation of the verse is accepted, then the law of inheritance mentioned in the Qur'an would appear to be in conflict with it, since what one inherits is clearly not a reward for one's efforts. On the contrary, the Qur'anhas categorically stated that one of the important proofs of its divine origins is the fact that 'Had it [the Qur'an] originated from someone other than Allah, they would have found within it frequent contradictions' (the Qur'an, 4:82). Any one who believes the Qur'an to be a Word of God cannot, therefore, accept the above-mentioned meanings associated with the verse 53:39 of the Holy Book and the law of inheritance mentioned in it simultaneously. Second, the meaning attempted to be derived from the relevant verse has nothing to do with the real message it seeks to convey. If the context of the verse is properly considered before attempting to understand its meaning, then there appears to be no doubt that its message refers to the life hereafter alone.10  The message it is conveying is that every soul will get the due returns for its own endeavours from God; in no way will virtues of one individual benefit another or that the retributions for the sins of A, for instance, will have to be borne by B.

As for the argument against unlimited right of private ownership because of its threat to the ideals of social justice, a few clarifications need to be made. First, the expression 'unlimited right of private ownership' is exaggerated in the general context of Islamic teachings. The strong moral appeal in the Qur'an to spend for charitable purposes to earn Allah's pleasure, compulsory annual spending on the wealth saved every year (zakah), the right given to the community to take possession of the assets being wasted by the owners, strong condemnation of extravagance and luxurious living (the Qur'an, 17:26-7), compulsory distribution of property on the death of a person, and, above all, a strong appeal to believers to live in this life with the predominant objective of achieving a better one in the hereafter are some of the teachings which would always stand in the way of unlimited private ownership despite the apparent legal right to it.

Second, the Qur'an makes a clear distinction between natural economic differences and the artificially created ones. Whereas the former are considered a part of the trial of life, the latter differences are discouraged from being created and promoted. The natural differences are those which exist in a society because of the differences in the abilities and fortunes of people. The Qur'an declares them to be a part of Allah's scheme which was necessary, among other reasons, 'to enable to live by co-operating with each other and to enable some to employ others [for the common good of all]' (Islahi, Amin A.). As for artificially created differences, the Qur'an categorically condemns all arrangements leading to them.

References

1. According to one of the traditions of the Prophet (sws) the act of an individual to spend on himself and his family what he has earned through legitimate means is considered by God Almighty as a definite act of virtue (Muslim 1981, Vol.3, 33).
2. See Qur'an, 9:98.
3. The Protestant ethic, however, regarded saving as virtuous. Western capitalism has drawn heavily from the latter. Time is treated as a type of commodity which has a price of its own, and is justified as a trade-off between earnings and leisure, and wages are thought to be a reward for foregoing leisure (Baldwin and Wilson). Moreover, classical economists led by Adam Smith emphasised that capital was the critical factor of production which was created by sparing resources from consumption, and that shortage of savings, and hence capital, was
4. a critical constraint upon the growth of an economy.
5. In main stream classical economics the possible limits upon growth brought by failure of effective demand to rise was given much less prominence, although it was not completely absent from the debate.
6. See Qur'an 2:265 and 63:10.
7. It would be incorrect, however, to assume that the only effective way of doing that would be through financial intermediation. It may happen, for instance, that more real resources in finance may stimulate some people to acquire more financial assets in banks and to reduce their own real investment, and others to borrow more for consumption purposes. Thus the financial system may expand by attracting more savings and yet contribute to slowing down economic development (Gurley).
8. See Qur'an, 4:11-2.
9. By implication that also means that an asset thus earned can neither be gifted during the life of the owner nor passed on to someone else after his death.
10. Translation of Abdullah Yusuf Ali.
11. For another example of the incorrect understanding of the meaning of a Qur'anic verse which is referring to the reward of the life hereafter but has been construed to mean worldly reward see Hasan 1988, 46.

What is Riba?

by Dr. Khalid Zaheer Posted 13 July 2007

One of the most obvious reasons why modern banking is condemned conflicting with the Islamic teachings is “the unequivocal prohibition of riba by Quran, which the consensus of Muslim jurists has interpreted as covering all kinds of interest… “(Siddiqi 1983,9). The income of most of the banks comes predominantly from the difference between the interest they charge on loans to their borrowers and what they pay to their depositors.

The Quran prohibits interest primarily because it is unfair. In this article we will take up some of the more important questions concerning the nature of interest to show that the interest charged by the banks is very much within the scope of riba which has been prohibited in Islam.

Definition

As regards the definition of riba, Ahmad (S.M.) has rightly pointed out that if while reading Quran “lakum ru’us amwalikum [sic] (2:279) is read with zaroo ma baqiya min al-riba [sic] (2:278) we easily reach the definition of riba [sic]. Any excess above the borrowed sum [charged by the lender] is interest” (Ahmad, S.M 1989, 43). Abu Bakar Al-Jassas has defined riba-based arrangement thus: it is loan given for a certain duration with the condition of an increased obligation on the borrower [compared to the principal borrowed] (Al-Jassas n.d. Vol. 1,469).

The clarification offered by Pakistan’s Federal Shariah Court’s Judgement on Riba is quite unequivocal It also states that it makes no difference whether the loan is for consumption purposes or for commercial purposes. Similarly, it does not matter if the rate of interest is low or high, simple or compound, for short or’ long term, between two Muslims or between a Muslim and a non-Muslim or between a citizen and a state or between two states. Any excess which is pre-determined over the principal sum in a loan transaction will constitute riba all circumstances.

The above verdict is not the first of its kind to be presented by a group of Muslim legal experts on the subject in recent times. More than a quarter of a century ago in the Second Annual Conference of the College of’ Islamic Research in Cairo it was declared that “interest charged on the various kinds of loans constitutes unlawful usury, regardless of whether the loan is for what is called consumption or production [purposes]. ”It also affirmed that “much and little usury is unlawful”. Although ii has not been explicitly clarified in the above statement, the definition does seem to imply that in Islam riba does not recognize any distinction between interest agreed by the pasties and interest charged for de1ay in payment as penalty, as the laws of present-day states likes, for instance, Egypt and France do.

Interest and Rent

Many modern writers tend to confuse interest with rent because of the apparent similarity in the two arrangements of carrying a fixed charge. The distinction between the two, though, is quite clear. Whereas interest, in the context of the Islamic teachings. is the fixed return demanded from another party on borrowing something which by nature is such that It is exhausted when it is put to use, rent is associated with those assets which remain, by and large, intact while they are in the process of being used. Interest has been prohibited because, once exhausted, the remaking of the borrowed article itself is not guaranteed. The only fair way to lend such articles, therefore, is to do so on a sharing agreement for business purposes and an interest-free basis on loans for personal needs)’ In the case of rental agreements, since nothing normally happens to the asset borrowed, the borrower is not likely to be in serious trouble like his counterpart hi the interest-based arrangements and should, therefore, have no difficulty in paying the fixed charge. In a cue where something happens to the asset that destroy it completely or partially, it is the sole responsibility of the owner, unless it is proved flit the user damaged the asset deliberately or was guilty of willful neglect in protecting It. Indeed, the lender of Interest-based loans also undertakes the default risk, yet that risk is only in the event that the borrower disappears or somehow proves that he is unable to pay back the loan even from his personal wealth. Under normal circumstances the lender is able to recover his fixed charge from the borrower. Moreover, what is more important is the fact that the lender does not intend to forego his interest even in the case where the borrower loses the principal amount as well. The fact that the latter sometimes gets Say without paying interest or even the principal amount is not because of a kind-heisted disposition on the part of the lender, but rather in spite Of his firm resolve. In short, the only reason why Qur’an has prohibited interest is that the chargers of interest disregard the plight of the borrowers and not necessarily because they do not undertake any risk at all It is therefore, not quite correct to state that in Islam the “general principle which is beyond dispute as being the criterion for determining the permissibility or otherwise of any method of financing a that the financier cannot avert the taking of some risk if he wishes to derive an income” (Chapra 1985, 166).

Keynes made a distinction between interest charged on capital and the rent on land by suggesting that while there could be intrinsic reasons for scarcity of land, there west none in the case of capital, at teat in the long run. (Keynes 1973, 376) Indeed, there are reasons for criticism on charging interest from a purely economic point of view as well; however, the basic reason. Why it has been condemned by Islam is moral, i.e. interest exploits the need of individuals and stems from greedy and selfish motives of the owners of capital in complete disregard of benevolence, justice, and fairy play. Rent, under normal circumstances, if it is not unfairly exorbitant, cannot be subjected to the same criticism.

Interest on Consumption Loans

There are writers who believe that only that type of interest which is charged by rich money-lender on consumption loans to the poor is prohibited by Qurãn. The Advisory Council of Islamic Ideology of Pakistan too in its meeting on January 33, 1964 at Karachi decided “that ‘Riba’ is forbidden but [the Council] is in disagreement as to whether ‘Interest in the form in which it appears in public transactions’ which in the opinion of Council includes ‘institutional credit’ as well would also be covered by ‘Riba’ specified in the Holy Quran...” There are others who believe that there, was no direct evidence in the original teachings of Islam refuting that claim (Khan, W.M. 1985. 27).

There have been attempts to refute such claims and misgivings on the basis of Qur’an which, after declaring all interest-based borrowing and lending unlawful says “if a debtor is in want, give him time until his circumstances improve (Qur’an 2:280). It has been argued that Qur’an has, in this verse, directly refuted all such claims by mentioning that during the time of its revelation not all the borrowers were needy, otherwise the conditional statement “if a debtor is in want” would have appeared meaningless. Thus it is concluded that in those times too interest-based loans were taken out for commercial purposes as well and that interest is prohibited by Qur’an, whatever the purpose (lslahi, Amin A. 1976, 594-5) Islahi goes on to argue further from the wordings of Quran that in those days too most of the loans were needed for commercial purposes (ibid.). He has also quoted Hamiduddin Farahi’s (1863-1930) opinion about this verse. He quotes him thus:

It is quits evident from the wording of this verse [i.e. Qur’an 2:280] that the Arabs used to charge interest from the well-to-do as well. The people of Quraish, moreover, were traders and commercial interest was common amongst them. I, therefore, find not much of a difference between their conditions sad ours concerning interest and God knows, the truth (Ibid., 595).

The argument (mm Quran alone, however, does not appear to be as irrefutable as it has been made to look. In the absence of supportive historical evidence the verse cannot b claimed to be offering conclusive evidence to the effect that the borrowers at the time of revelation of Qur’an ware mostly well-to-do people who, ipso facto, ought to have borrowed for commercial purposes. What has been ignored in the argument is that the text is testifying to the fact that few borrowers were “in want” at the time of revelation of the relevant verses prohibiting and not necessarily at the time of borrowing. After all, is it not possible that the people who sit deprived at the time of borrowing remain no more deprived when the loans mature? Although It is not very likely that such a change of fortune can take place on a mass scale under normal circumstances, to assume that all borrowers were definitely well-to-do traders at that time is no more than a theoretical possibility, which makes the argument less than thoroughly convincing. However, there is enough historical evidence to show that the Arabs used to borrow funds purely for commercial purposes in the pro-Islamic period. Mecca, Taif, and Najran were well known commercial centres. In the absence of agriculture and industry, trading was the only source of earning and capitalists used to give loans on interest to merchants and entrepreneurs. Udovitch has firmly stated that “Any assertion that medieval credit was for consumption only and not for production is just untenable with reference to the medieval Near East“ (Udovitch 1970, 86). In the above mentioned quotation, Farahi has also supported his argument from Quran by presenting historical reference as well.

Simple Interest and Anatocism

There are again other writers -- like, for instance, Fazlur Rahman -- who think that only excessive compound interest is prohibited by Quran, and not the moderate, simple one.

Presumably ‘based on a similar opinion, interest exceeding 8 percent was prohibits in Egypt, prior to the introduction of the Civil Code of 1949. On the introduction of the code which was drafted under the supervision of ‘Abdar-Razzaq as-Sanhuri, some changes were introduced to the earlier law. One of the changes stipulated that interest on Interest was prohibited, Another stipulation of the act was that the totality of interest due should not be superior to the principal (Mallat 1988, 75-6). This latter stipulation seems to have had at least the qualified backing of Abu Zahrah (1898-1974), a prominent jurist from. the famous Islamic university of Azhar, Although he pleads that the bank; should operate on the principle of participation in the profits and losses (Abu Zahrah n.d., 57), he also offered his opinion about the stipulation referred to above thus: “The modern Civil Code of Egypt has established this Qur’anic principle (which prohibits charging of exploitative interest rates] and decided that [the totality] of interests cannot exceed the principal” (ibid., 56).

The opinion of most of the writers who are in agreement, with the above views stems to be based on a verse of Qur’an which says: “O you who believe, do not take riba charging [it] doubled and redoubled” (Qur’an, 3:1 30). They conclude that since Qur’an has condemned charging of compound interest in this verse, all other vents too should be understood in the tight of this clarification.

This conclusion, however, is as unacceptable as if one were to conclude from the Qur’anic verse “Do not kill your children out of fear of poverty’ (Qur’an, 17:3)) that killing one’s children for reasons other than fear of poverty is legitimate according to Qur’ân. The two verses, far from bearing the meaning given by the two above-mentioned interpretations, are suggesting that whereas charging interest and killing one’s children are criminal acts in any case, they are even more detestable if they are committed “doubled and redoubled” and “out of fear of poverty” respectively. These additional phrases in the text are meant to expose the extremely callous nature of the crimes rather than to provide essential qualifying expressions to define the crimes themselves.

Is Indexation Allowed:

It has been explained above that Sunnah of the prophet has emphasized that in case of transactions involving credit, whether in the case of sale or financial debt, it is highly important that the returned article be absolutely identical to the one borrowed otherwise there is a danger of interest being involved in the exchange. This principle leads U5 to the question of return of financial loans in the inflationary or deflationary periods when the value of. the amount returned undergoes either depreciation or appreciation compared to what it was when borrowed. Obviously, if at the time of return of loan, for instance, the real value of the amount returned has eroded, then clearly the intent of the teaching of sunnsh is being violated. After all, money today has no intrinsic value of its own other than what it can buy (Ranlett. op. cit., 5). If the hundred pounds lent in 1991 by a person to another could buy x grams of gold and in 1992 when the amount was returned, it could buy y grams of gold (and x end y are unequal), clearly it would be a violation of the condition laid down in the hadith that “If you lend gold then receive back the same gold: the same weight and the same quality ...“ (Muslim. op. cit., Vol 4, 211). It also shows that giving interest to a lender in a period of high inflation at a rate less than the inflation rate, which is called negative rate of interest, is also unfair for the lender and, therefore, should be avoided. In other words, the prohibition of riba applies to real interest, not nominal interest, as with inflation a ban on the latter may result in negative real interest (Baldwin and Wilson 1988, 73). Moreover, in the case of deflation there is a possibility of positive real interest as well, even in the case a borrower is returning only the principal amount of’ the loan. Even though falling prices are practically seldom experienced, their occurrence is not impossible, as was experienced in the great depression of the 1930s.

The solution to the problem lies in indexing the loans with the price level of a basket of commodities, so that as the loan is returned it is the value of the amount borrowed which is paid back and not the face value of the currency which has nothing similar to what was lent except the meaningless figure of the loan expressed in a certain currency. The solution of indexation, however, is not acceptable to many present-day Muslim economists.

One reason presented against indexation is that such an arrangement would be ‘similar to interest [such] that it would be impossible to tell one from the other”.” I have already submitted that, contrary to the above claim, it is the very spirit of avoiding interest which compels one to suggest the solution of indexation. A somewhat similar stand was. earlier taken by the Council of Islamic Ideology (CII) or Pakistan against indexation whereby it was argued that it is a requirement of the shariah that the borrower should return to the lender the same quantity as borrowed, even though the price of the commodity may have changed.7~ That is, however, precisely the principle I am invoking, although to bring home just the opposite conclusion. Indeed, if money is to be accepted as a commodity with its own intrinsic value then the council’s view would have been correct. But if that is not the case -- and indeed modern-day money is not desired for its own sake but for the sake of the commodities it can fetch” •- then it can be safely concluded that the council has incorrectly concluded from a correct principle just the opposite of what it requires.

The second argument against the idea presented is that since inflation is the result of circumstances beyond the control of the borrower hence he cannot be held responsible for loss of purchasing power to the lender (Siddiqi 1992, 407). In response to that it could be argued that the erosion in value of the loans has not been caused by the either, so why should he suffer? In fact, the spirit of justice of the economic teachings of Nan demands that neither of the panics should suffer unreasonably. Interestingly, only a few lines later the author shows a complete reversal of opinion thus: “The extreme case in which very high rate of inflation renders a currency almost worthless is however, a case apart. In such cases it can be considered that now the worthless currency is a money different from the one in ‘which the loan was contracted. A formula establishing the ‘rate of exchange’ between the ‘new’ and old currency can be devised and all earlier loans converted to the ‘new currency accordingly” (ibid., 408). it is difficult to appreciate how a principle which under normal circumstances is rejected because it is seems to be unfair to the borrowers can be argued to be acceptable in extreme cases? Either the principle is fair or unfair. How can it be fair under one Set of circumstances and unfair under others? Moreover, who is going to decide if the inflation rate has gone high enough to be declared extreme?

A thin criticism on the idea of indention is that it “gives a privileged position to capital as compared to other factors of production which are also affected by inflation in one way or the other.” It certainly seems to be a valid criticism if the proposal confines the application of indexation to loans alone. We have seen in this chapter that (he economic teachings of Islam emphasize, more than anything else; implementation of justice in all areas of economic dealings. It is in that very spirit that the case of indexation of loans: is being pleaded. How is it possible that the proposal can overlook the equally unfair treatment of wages, salaries, and other contracts which arc confronted with similar difficulties due to inflation? Instead of arguing against the idea of indexation of loans, it should be urged that all other areas of payment affected by inflation should be covered by the proposal as well. One way of going about it in the case of wages and salaries is to ensure that alt public and private sector organizations should increase wages and salaries of, their employees every year at least by the percentage of inflation of that particular year.

A fourth criticism raised against indexation is that when the risk-taking investors are not assured of a stable real value of their investments, there appears no reason for savers and cash holders to be assured when they do not even take any risk (Chapra, op. cit., 40). The logic behind this criticism is that since risk-taken are not immune from losses, why should those who choose to avoid risk be saved against erosion in the value of their money? The obvious answer lies within the statement of this question: Since risk shirkers choose not to participate in the profits of business ventures, they have a right to get back exactly what they have lent and the risk-taking investors should face losses in difficult periods because in good periods they also take profits and, moreover, that is the principle they have chosen their capital to be dealt with in the real world the profit margins do normally take into consideration the risk element attributable to inflation involved in the investment. The same author admits a couple of pages earlier that Inflation undoubtedly does injustice to the interest-free lender by eroding the real value of his loan (ibid., 38). When it comes to the solution of the problem, however, he chooses to oppose the only workable remedy.

A fifth objection to the idea of indexation is that sometimes borrowers are unable to earn enough to return the real value of the principal to their lenders. In that case, it would be unfair to require the indexed-value of the loans to be returned (Khan, A.J., op. cit.). However, this objection can also be raised against the condition of returning the nominal value of a loan if the borrower has been unable to earn enough to do so. In fact, as mentioned elsewhere, Quraan urges the believer to forego the condition o demanding the principal amount as well if the borrower is in difficulty. Doing so, however, would be an optional act of benevolence on the part of the lender in exceptional cases. Under normal circumstances, a borrower is bound to return to his lender the principal amount. What’ is being argued here is that the principal amount which the borrower is obliged to return is the real value of the loan taken and not its nominal value.

The justification of indexation can also be viewed from the point of view of’ credit sales. Whereas pre-determined higher prices for; credit sates is undoubtedly riba if the deferred prices of commodities are forced to remain equal to spot prices in inflationary periods, it would be unfair to sellers and they would understandably stop making credit sales. After all, why should they sell at a lower real price on credit, when they can get a higher one on cash? If the answer is that the sellers should be allowed to charge the prevailing price rather than. the one which stood at the lime the possession of the commodity was transferred to the buyer, then it will be a solution based on the same broad principle which is applied in the case of indexation Why should that principle be allowed in one area of the economy (i.e. credit sales) and disregarded in others (financial credit)?

The rationale for indention can also be viewed from another angle. It has been pointed out in defence of the Islamic proscription of interest that money represents the monetized claim of its possessor to the property rights created by assets that were obtained through work or transfer. Lending money is virtually a transfer of this right, and all that can be claimed in return is its equivalent and no more. Interest on money represents unjustified creation of property rights because it represents a right claimed outside the legitimate framework of recognized property rights (Khan and Mirakhor 1987, 4). In case borrowed money is returned on the basis of the principle of indention, it represents neither the creation of any extra property rights for the lender nor the expropriation of some of those rights for him, as happens when some one lends interest-free Loan in an inflationary period, in fact, it would be an effort to enable the lender to receive back the equivalent of what he had lent. Thus the proposal of extending index-based loans appears to be the most acceptable to the spirit of the Islamic teachings of economic justice.

On the question of how to implement the principle of indention1 the suggestion of Khan (M.A) is worth looking into. He has proposed the floating of a new currency which can be used for all contracts involving deferred payment by one party to another. The value of that currency should be equal to a basket of commodities and it should be readjusted daily on the basis of the prevailing market price of (he commodities. Thus all borrowers should borrow and likewise return in that currency whatever may be its value in relation to the other currency. Likewise, all agreements of salaries, wages, and contracts involving payments over a period of time could also be agreed upon in that currency. He also proposes that the currency should have a single buying and selling rate to avoid speculation (Khan, M.A., op. cit., 6).

Despite the fact that the proposal seems quite promising, it appears to have at least one potential flaw which might wreck the whole idea: There appears to be no way suggested in the proposal to prevent the proposed second currency - which would assume the role of the store of value and, perhaps, legal tender as well -- from driving the official market currency from the economy. When two currencies are simultaneously allowed to operate, the more stable one will be preferred by all in every transaction and this would lead it to be virtually the commonly used currency at the expense of the official one. Thus a reversal of Gresham’s Law is likely to be experienced: ‘good money’ will drive out ‘bad money’. If any limitations on the supply of that currency were to be imposed, such a move would restrict its effectiveness in discharging the function for which it was proposed. If it is suggested that such currency notes would only be supplied to those who genuinely need them, then an unnecessarily large task of distinguishing the genuine demands from the non-genuine ones would have to be undertaken.

The proposal has, however, paved the way for further discussions and proposal for introducing proper indexation to protect asymmetry in the exchange of values in credit arrangements at different points of time. It is surprising that the writer who has presented the above proposal formally to introduce indexation is himself a supporter of the “arguments against indexation, both from the shariah and economic point of view.“ (ibid.). His subsequent attempt to introduce indexation is enough to undermine that statement.

There are other proposals as well to index loans. The proposal of Javed to give “Purchase Value Loans” in place of money loans by linking the purchase value with certain basic commodities, is one of them,” Indeed, if the principle of fair treatment for both panics is accepted, there should not be a dearth of proposals, It should, however, be pointed out that even if the best of indexation instruments are applied meticulously, there ‘will stilt be some variation in the actual value of the amounts borrowed and returned. Complete and total parity in the values borrowed and returned is neither possible nor should it be expected. What needs to be done is to secure as much fairness for both panics as is possible Allah does not expect from believers a behavior that is beyond their ability. Qur’an says: “And give in full measure, and weigh justly on the balance; no burden do We place on a soul beyond capacity” (Qur’än, 6:152),

ft also needs to be clarified that indexation should be employed only when money is borrowed either for business or consumption purposes, It cannot be used in. case money is given in trust for the purpose of safe-keeping alone, The reason is that while in the former case the borrower has made use of the current value of the money he obtained and should, therefore, be obliged to return the same value, in the latter the funds have remained unused, accruing no benefit to the possessor and, for that reason, should not oblige him to return anything to the owner except the face value of the funds entrusted to him.

The decision of Sindh High Court in Pakistan in the early 1990s to allow repayment of a loan on the basis of indexation rather than interest is a judicial recognition of the validity of indention at the judicial level as an acceptable principle for repayments of loans.

Receiving Favours from Debtors

Another important clarification made by sunnah with regard to interest is that the creditors are required to refrain not just from accepting back any value more than the principal extended to the debtor, but should avoid all other favours ‘n the form of gifts or services which cannot be attributable to any other reason but the fact that they are creditors.

For instance, Anas Ibn Malik reports that the prophet, peace be upon him, said: “When one of you grants a loan and the borrower offers him a dish, he should not accept it; and if the borrower often a ride on an animal, he should not ride, unless the two of them have been previously accustomed to exchanging such favours mutually” (Al-Bayhaqi n.d., Vol. 5, 350). Likewise, the same narrator reports that the prophet said this: “If a man extends a loan to someone he should not accept a gift.”3 It has been rightly pointed out that this prohibition is not restricted to the few examples of favours mentioned in the above narrations but extend to any kind of favours which a tender receives from his borrower, even if it is apparently as insignificant as taking advantage of the shade of his walls (Saleh, op. cit. ,414).

Can Bank Lending be Islamically Fair?

by Dr. Khalid Zaheer

The most significant feature of a truly Islamic economic system should be that it ought to be fair. Interest has been condemned by the Qur'an because it jeopardises that ideal. The practice of demanding security from borrowers while lending is also viewed by many Muslim scholars as unacceptable. However, even if modern banks are somehow able to get rid of these important -- though not vital -- tools of operation, banking would still survive and yet remain almost as unjust as ever before because, as we shall see, unfair lending is in-built in the nature of its operations.

The following is one of the most unequivocal, though honest, statements on the lending policy of banks:

...it would be irrational for lenders to be willing to lend as much to the impecunious as to the rich members of society, or to lend the same amounts on the same terms to each. (Mishan, E. 1972)

Such an apparently unethical policy statement has not necessarily been initiated by an unscrupulous mind. It has been prompted by the fact that banks, like other business enterprises, are more concerned with their commercial interests and they lay no claim to be regarded as substitutes 'for charity houses' (Ahmad S.M. 1989, 141). An important reason why banks are mostly prepared to lend to the already prosperous business concerns is that they believe that it is not their function as lending institutions to find capital for the customer's business; they believe that the major stake should be that of the proprietor himself (Mather 1979, 21). Therefore, it is no exaggeration that it 'seems to be easier to borrow $5 million from a bank than $50,000' (Clarke 1980, 46)

Aleem, in his attempt to study the rural credit markets in Pakistan, reports the following:

The chances of getting a loan in [the findings of] our study were directly related to the amount of land owned... Thus a farmer owning more than 100 acres was virtually certain of getting a loan if he wanted one. At the other end of the scale the chances of a farmer owning less than 12.5 acres ever being able to get a bank loan was less than 50%. (Landless tenant farmers were not eligible for institutional loans at all). (Aleem 1985, 224)

The criticism on the banking practice that the banks are hesitant to extend loans to applicants who are unable to present collateral security is often dismissed by a claim that banks do sometimes lend even without requiring security. However, even when that is done banks make sure that they are charging more interest for the higher risk they are taking up. The general banking principle is:

Where the safety of any advance is unquestioned because the borrower and/or the security is undoubted, the rate of interest will often be somewhat lower than that charged for accepting a higher risk  or perhaps for advancing for a less acceptable purpose. (Mather 1979, 18)

This, in other words, means that the more wealthy people are required to pay lower rate of interest and the less-privileged have to -- because they are not wealthy -- pay more for borrowing from the banks!

The bankers, moreover, do not make any secret of the principle that even if, on occasions, a wealthy customer requires loan for a purpose deemed unsuitable by them, it is better to avoid disturbing the valuable connection 'or incurring the wrath of a wealthy if turbulent customer, whose security margin commands respect' (ibid, 23)

As a natural consequence of the policy of favour for the rich, the less rich and the poor are ignored and avoided. The same institutions which offer millions of dollars to the rich are, as a matter of strategy, extremely weary of those less wealthy salaried officers with slender resources, for example, who are short at the end of each month and who, therefore, may start relying upon the bank regularly to make up the deficiencies if no objections are raised to their excess drawings in the previous months (ibid, 33). Ironically, however, it is these small depositors, at least in case of commercial banks, whose 'slender resources' together accumulate in the bank vaults to make the huge pool of funds that are later diverted towards the rich.

We now turn to a question which is crucial to the future of banking in the Islamic societies: If relative richness is not an acceptable criterion for the disbursement of bank funds, what else is? Most Muslim economists and bankers devoted to the cause of interest-free banking are quite convinced that the most predominant, if not the only, principle banks should follow while lending should be the possibility of efficient employment of funds (Ahmad, Z. 1991, 46 ) i.e. banks , at the time of lending, instead of looking at the wealth and security of the applicant, should consider 'the profit potential of the concern' (ibid)

Despite the fact that the efficiency criterion seems to be much more rational, two questions still remain to be answered before it is approved as Islamically acceptable as well: Is it possible to apply that criterion objectively and, even if that is possible, is that principle fair from the point of view of Islamic teachings?

As regards the first question, it could be claimed that it is not impossible to devise fairly accurate project evaluation techniques based on the information supplied by the applicants for funds to find out which of the projects deserve to be helped by the limited funds available with the banks. In fact many modern financial institutions do already undergo some form of objective project evaluation process before finally responding to the applications.

The vital question is whether the most objective of those criteria could be fair as well from the Islamic point of view. We have to get clear answers to three important questions before the efficiency criterion is considered Islamically acceptable:

1. What is the nature of the financial resources made available by the process of pooling the depositor's funds?
2. On what principle of social justice should the more efficient be privileged with additional funds?
3. If the principle of helping the efficient is followed, what are the possibilities for the slightly less efficient to get funds?

1. What is the nature of the financial resources made available by the process of pooling the depositor's funds?

Banks are able to pool huge funds as a result of the fact that people have an inclination to deposit their funds with them for various reasons. It is quite certain that the depositors are not directly involved in deciding the avenues their own funds should flow into. The decision is left in the hands of the bankers. Had the funds belonged to the bankers or had the depositors been involved in deciding the fate of their funds, few objections could be raised.

The reality is that the huge banking resources, the way they are, seem to bear some similarity to the natural resources like water, fire and grass which belong to the entire community rather than any particular individual. The Prophet (sws) is reported to have said: 'All Muslims are partners in grass, water, and fire' (See Ahmad Z., 55). He is reported to have decided the disputes of water distribution on the basis of proximity of land to the source of water (See Khan, M.A. 1989, 59-61) i.e. the one whose land was the nearest to it was given the right to use it first and then the second nearest and so on.

Indeed water is needed for crops like funds for business projects. In fact, water has never been an abundant resource in the significantly parched soil of Arabia. But the Prophet (sws) did not distribute this scarce resource on the basis of efficiency or the area of landholdings of the farmers. If the analogy of the bank funds with natural resources is to any degree reasonable, neither the principle of credit-worthiness nor efficiency would appear acceptable to Islam.

The other analogy suggested to decide the status of bank funds is that they are like Fay' i.e. wealth attained by Muslims without effort. If the analogy is correct -- and indeed it seems to be highly relevant -- then bank funds should be distributed to the poor and the needy rather than the wealthy or the efficient because neither of these groups is mentioned by Qur'an as deserving any share in the wealth of Fay (See 59:7)

2. On what principle of social justice should the more efficient be privileged with additional funds?

If the principle of efficiency is to be implemented strictly as the sole criterion for distributing funds, it would promote the most efficient economic agents in the society; they will get abundantly rich while all others would lag behind. To halt that tendency then would be as difficult as it is now to narrow the rich-poor gap when the more privileged receive the lion's share of the finances. It appears to be equally unfair. A few more attempts to analogise financial funds with some other facilities would facilitate the understanding of the point I am attempting to make. If the availability of extra funds is equated with the availability of educational opportunities, the case for efficiency criteria appears weak insofar as the weaker students may arguably deserve more attention than those who are better. If the good students continue to receive better education that would certainly widen the literacy gap, as would the decision to fund the more efficient economic agents increase the income disparity. In case of higher education, however, better students deserve and do normally get more attention. But can the availability of funds be reasonably equated with higher education?

If a justifiable comparison can be made between bank finances to borrowers and training to workers in plants, then, in the latter case, quite clearly the less capable appear to deserve more attention. Likewise, they have to learn significantly more to be able to achieve the minimum level of skills to work effectively. If we compare financial assistance with medical assistance then, again, the less efficient borrowers deserve more assistance just as the less healthy and the sick have a stronger claim on the medical facilities.

No matter how much we may stretch our imagination in the pursuit of discovering a comparable case in the real life examples to justify the efficiency criterion of distributing bank funds, it appears, we will always encounter difficulties in our attempts.

3. If the principle of helping the efficient is followed, what are the possibilities for the slightly less efficient to get funds?

Even if, by some inconceivable way, it is established that efficiency criterion is a fair principle of distributing bank funds, there would still remain the unsolved problem of distributing funds strictly in accordance with that principle. Justice demands that if efficiency is a fair principle of distributing bank funds, the most efficient borrowers should get as much more funds as they are efficient and the slightly less efficient should also receive funds commensurate with their ability and so on. However, this principle would never be able to be applied because of the enormous complications involved in the whole operation of finding the respective levels of abilities of the applicants and distributing funds accordingly. The reason for such apprehension is that the funds available to financial institutions are always limited and it is not humanly possible, nor commercially viable, to divide the available funds into the number of applicants, with each getting according to ability.

To conclude, it appears that the criterion of efficient employment of funds proposed by some Muslim economists to be used for distribution of bank funds cannot be accepted as fair.

It may well be asked that if neither the credit-worthiness criterion nor the efficiency one is relevant in the context of Islamic teaching, what else is? The answer to that question is that criteria for distribution of society's funds are needed in economies where huge funds are allowed to accumulate unnecessarily, as is done in modern societies by courtesy of banks. In a society, where the savings of the people are arranged to be related to the productive enterprise directly, no criterion will be needed to guide the economy; the savers will decide for themselves where to invest on the basis of not just the efficiency criterion, but also such factors as personal contacts with entrepreneurs, their reputation and popularity, the nature of business enterprise, its contribution to the ideals of the society etc. In other words, the task of deciding how resources should be allocated ought to be fulfilled by the market and not, as Robinson pointed out, 'by the great corporations who are in charge of the finance for development' (Robinson 1977, 1337) in the existing set up.

Bibliography:

1. Ahmad, Shaikh Mahmud (1989); Towards Interest -Free Banking; Lahore : Institute of Islamic Culture.
2. Ahmad, Ziauddin (1991); Islam, Poverty and Income Distribution ; Leicester : The Islamic Foundation.
3. Aleem, Irfan (1985); Information, Uncertainty and rural Credit Markets in Pakistan; Oxford University; Ph.D.
4. Clarke, William M. (1980); Inside the City: A guide to London as a financial centre; London: George Allen & Unwin.
5. Galbraith, J.K. (1975); Economics and the Public Purpose; New York: New American Library.
6. Khan, Muhammad Akram (1989); Economic Teachings of Prophet Mohammed; Islamabad: International Institute of Islamic Economics.
7. Mather, L.C. (1979); The Lending Banker; London: Waterlow (London) Limited.
8. Mishan, E.J. (1972); Cost-Benefit Analysis: An Introduction; Londo : George Allen & Unwin Ltd.

Why Economics? by Dr. Khalid Zaheer

by Dr. Khalid Zaheer

The basic purpose of this life is 'ibadat (51:56), ie humbly serving Allah, and not the achievement of material benefits. Why then are we supposed to be concerned about such 'mundane' matters in Islam as economics? The reason is that 'ibadat also entails acknowledging Allah's blessings and showing Him gratefulness on receiving those blessings. It is, therefore, important that believers should not only indulge in the material affairs of life but also excel in them as much as their potential and Allah's guidance allows. However, indulgence in economic affairs should not cause an individual to be unmindful of Allah's remembrance, the impending accountability on the Day of Judgement, and Allah's commands. The Qur'an says while describing the correct attitude of the God-fearing believers  that they are:

Men who are not distracted from the remembrance of Allah by trade and commerce and buying and selling, who stand by their devotional obligations and pay Zakah, who fear the day when hearts and eyes would flutter in trepidation. (24:37)

That approach in life can only be adopted if economic matters are conducted, like all other human affairs, according to the guidance provided by the Divine Revelation. In other words, Islam does not require its followers to shun worldly life in favour of asceticism; instead it urges them to play a full, meaningful role in the worldly matters within the guidelines of the Shari#'ah. There is nothing intrinsically evil about the worldly matters according to the teachings of Islam; it is only the imprudent overindulgence in them which creates evil. In fact, to a God-fearing believer, according to a statement of the Prophet (sws): 'this world is a cultivating field for the hereafter'. Thus, an individual who cares for the concerns of his life-after-death cannot be unconcerned about worldly matters.

Some Important Clarifications

Aside from the above-mentioned basic premise, Islamic teachings also give some other important guiding rules in the conduct of economic life which help in achieving the real purpose of life mentioned above.

The real status of an individual is not to be gauged from his economic condition or contribution towards economic progress of the society but from his level of God-consciousness. Thus although each individual is expected to play a role in the society according to his nature and abilities, achievement of the higher economic  results by individuals do not in any manner confer upon him a higher social status. In an Islamic society, nobility is to be gauged from the level of God-consciousness (taqwa) of an individual and not from his material possession. The Qur'an says:

Indeed, the most honourable amongst you in the sight of Allah is he who is the most God-conscious. Indeed Allah is All-knowing, All-Aware. (49:13)

Thus, a society where money and better economic conditions are considered an undisputed status symbol is most certainly not an ideal Islamic society. The best understanding of this concept is indicated by the fact that the Prophet Muhammad (sws) voluntarily opted to lead a life of an extremely poor man despite having better material alternatives.

Another guiding principle that emerges from the above-mentioned understanding is that everyone has been created in this world to play an important role. Allah has created human beings unequal in their physical and mental abilities. That arrangement is by design and not accidental. The diverse needs of our worldly life demanded that individuals expected to play roles to satisfy those needs should have different abilities. There is thus nothing inferior about an individual possessing different abilities from others. An individual is expected that he correctly identifies the area of his contribution to the society and concentrates in excelling in that area rather than envying unnecessarily the achievements of others who have been purposely bestowed with different abilities than his. The Qur'an says:

Do not covet what Allah has favoured some with more than He has some others. (4:32)

If an individual with limited abilities and opportunities has achieved what he could given his constraints, he should be considered a high-achiever, while if the one with superior abilities and better opportunities does not perform to his optimum, although achieves in relative terms much more than the former, he will still be considered a low-achiever in the eyes of Allah. The Qur'an says:

We never burden a soul beyond capacity. (7:42)

An additional purpose of the diversity in abilities of humans in the design of Allah was that He wanted people to be placed in a trial where different individuals are playing different roles, some at higher levels of the worldly ladder and others at lower levels. Thus if a lower-level worker of an organisation, for instance, discharges his organisational obligations to the best of his abilities and is also a grateful servant of his Allah, His real success in the hereafter is guaranteed. If on the other hand the chief executive of the same organisation is not discharging his worldly and religious obligations properly, his success in the hereafter will be in serious jeopardy.

The Qur'an keeps reminding the believers that their material achievements are in fact the bounties of Allah. According to the correct understanding of the Qur'anic guidance when we engage in economic activity, we do not earn a living; in fact we just 'look for the bounty of Allah'. (62:10). As far as the expression 'earning' is concerned, it is used by the Qur'an to describe the good or bad deeds we perform intentionally in this world, which will ultimately be rewarded or punished in the life to come. For instance, the Qur'an says:

Those were the people, and they have passed away. Theirs the reward for what they earned, as yours will be for what you earn. You will not be questioned about their deeds. (2:134)