Economic System of Islam
Islam is an entire way of life, and Allah's Guidance extends into all areas of our lives. Islam has given detailed regulations for our economic life, which is balanced and fair. Muslims are to recognize that wealth, earnings, and material goods are the property of God, and that we are merely His trustees. The principles of Islam aim at establishing a just society wherein everyone will behave responsibly and honestly. The fundamental principles of the Islamic economic system are as follows:
Muslims are not to deal in interest. "Those who devour usury will not stand....Allah has permitted trade and forbidden usury.... Allah will deprive usury of all blessing, but will give increase for deeds of charity..." (Qur'an 2:275-6). "O you who believe! Devour not usury, doubled and multiplied. But fear Allah that you may really prosper" (Qur'an 3:130) this prohibition is for all interest-based transactions, whether giving or receiving, whether dealing with Muslims or non-Muslims. It is reported that the Prophet Muhammad (peace be upon him) cursed those who pay interest, those who receive it, those who write a contract based on it, and those who witness such a contract.
It is forbidden to gain property or wealth by fraud, deceit, theft, or other falsehoods. "...Give just measure and weight, and do not withhold from people the things that are their due. And do not do mischief on the earth after it has been set in order. That will be best for you, if you have faith" (Qur'an 7:85).
It is particularly hateful for a guardian to take from an orphan's property. "To orphans restore their property (when they reach their age). Do not substitute your worthless things for their good ones, and do not devour their property by mixing it up with your own. For this is indeed a great sin" (Qur'an 4:2).
Forbidden are earnings from gambling, lotteries, and the production, sale, and distribution of alcohol. "O you who believe! Intoxicants and gambling, sacrificing to stones, and divination by arrows are an abomination of Satan's handiwork. Eschew such abomination, that you may prosper" (Qur'an 5:90).
It is unlawful to hoard food and other basic necessities. Everyone should take what they need and no more. "And let those who covetously withhold of the gifts which Allah has given them of His Grace, think that it is good for them. No, it will be the worse for them. Soon it will tied to their necks like a twisted collar, on the Day of Judgment. To Allah belongs the heritage of the heavens and the earth, and Allah is well-acquainted with all that you do" (Qur'an 3:180).
A Muslim should be responsible in spending money. Extravagance and waste are strongly discouraged. "[The Servants of Allah are] Those who, when they spend, are not extravagant and not stingy, but hold a just balance between those extremes" (Qur'an 25:67). "O Children of Adam! Wear your beautiful apparel at every time and place of prayer. Eat and drink, but waste not by excess, for Allah loves not the wasters" (Qur'an 7:31).
Muslims must pay Zakat (alms). "And they have been commanded no more than this: to worship Allah, offering Him sincere devotion, being true in faith. To establish regular prayer, and to give zakat. And that is the religion right and straight" (Qur'an 98:5). Every Muslim who owns wealth, more than a certain amount to meet his or her needs, must pay a fixed rate of Zakat to those in need. Zakat is a means of narrowing the gap between the rich and the poor, and to make sure that everyone's needs are met.
Muslims are encouraged to give constantly in charity. "Your riches and your children may be but a trial. Whereas Allah, with Him is the highest reward. So fear Allah as much as you can, listen and obey, and spend in charity for the benefit of your own souls. And those saved from the selfishness of their own souls, they are the ones that achieve prosperity" (Qur'an 64:15-16).

As a complete way of life, Islam has provided guidelines and rules for ever sphere of society. Naturally, a functioning economic system is vital of a healthy society, as the consumption of goods and services and the facilitation of this by a common medium of exchange play a major role in allowing people to realize their material and other goals in life.
Islam has set some standards, based on justice and practicality, for such economic systems to be established. These standards aim to prevent the enmity that often occurs between different socioeconomic strata, and while they consider money to be among the most important elements in society, the gathering of which concerns almost every human being who participates in transactions with others, they do not lose sight of the fact that its position is secondary to the real purpose of human existence, the worship of Allah.
There are three foundational principles that comprise the economic system in Islam: personal property, freedom of activity, and the right of money.
An Islamic economic system is not necessarily concerned with the precise amount of fiscal income and expenditure, imports and exports, and other economic statistics. While such matters are no doubt important, Islam is concerned with the spirit of the economic system.
A society that implements Islamic laws and promotes Islamic manners will find that it infuses all the systems – social, economic, and so forth – that it deals with. Islam teaches that Allah has created provision for every person who He has brought to life. Therefore, the competition for natural resources that is presumed to exist among the nations of the world is an illusion. While the earth has sufficient bounty to satisfy the needs of mankind, the challenge for humans lies in discovering, extracting, processing, and distributing these resources to those who need them
Debt, with its increasing amount of interest compounded upon it, is dangerous for any nation because it means loss of sovereignty and control
Today's modern world suffers from the near absence of social justice, which has become a rare feature of most national economies. We are also witnessing a deep recession affecting most countries mainly due to a major crisis in the world's banking and financial system.

Major public unrests, demonstrations, protests and revolutions have been spreading from one country to the next in the past few years, especially in Europe, America and the Middle East.

Experts are searching for an alternative system that offers the best of two worlds: the efficiency of production of the capitalist system, and the fairness of distribution of the socialist system. Does such a system exist?

We believe that Islam offers this delicate balance through the divine guidelines that encourage investors to invest in the real economy to make real profits that benefit all people while creating new jobs needed in society, and taking good care of the less-privileged and the weak through a comprehensive social security safety net centered around Islam's third pillar: Zakat.

This folder, Islamic Economy & Social Justice, sheds light on some of the main Islamic guidelines on finance and wealth distribution, and presents some of the problems associated with interest-based finance, while describing the functioning of an ideal banking system in an Islamic economy, in addition to answers to a selection of questions on alternative investment and consumption loans, and different aspects of Zakat for an ideal social structure that is sound, fair and that leads to sustainable social relations.

Zakat and Social Justice

Zakat, the third pillar of Islam, is the social pillar which protects society and aims at establishing social justice. An act of worship like prayer, Zakat reflects compassion with the less fortunate and mercy in the heart of a believer that leads to the love of God. We must ask whether Zakat is a ritual, pure and simple, or a stipulation which involves aspects of human relationships that must be taken fully into account, one of the most important acts of worship that cleanses material and spiritual dirt, enables man to discipline his souls is to spend in God's way for benevolent causes.

Foundations of Islamic Economics & Finance
What does a religion (Islam) have to do with economics, finance and monetary dealings? How and why does Islam control human behavior in economics and how is it related to the overall foundation of faith? The Islamic state is required to guarantee a minimum level of living for those whose own earnings fall short of fulfilling their basic needs.
Why is Usury Prohibited in Islam?
Debt, with its increasing amount of interest compounded upon it, is dangerous for any nation because it means loss of sovereignty and control. Many may think that lending money at a high interest is unjust, but in Islam, lending money on interest at any rate is unacceptable
Islamic Solutions for the Global Financial Crisis
One of the most important objectives of Islam is to realize greater justice in human society. This is not possible unless all human institutions, including the financial system, contribute positively towards this end.