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.5 Whereas 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.


  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.

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