FOUNDATION OF ISLAMIC ECONOMICS (ECON 1710) ISLAMIC ECONOMIC SYSTEM VS CONVENTIONAL ECONOMIC SYSTEM SECTION: 06 LECTURER: ABDUL SALAM ABU BAKAR STUDENTS NAME MATRICS NO. (1) NURUL AFIFAH BINTI MD SAIRONI 1324286 (2) AFIFAH NABILAH BINTI MOHD SAFEI 1321976 (3) NUR HANIS AIDAH BINTI MOHD RAFI 1329426 (4) ASMA DIYANA BINTI AZMAN 1328376
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Islamic Economics System vs Conventional Economics System
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FOUNDATION OF ISLAMIC ECONOMICS
(ECON 1710)
ISLAMIC ECONOMIC SYSTEM VS
CONVENTIONAL ECONOMIC SYSTEM
SECTION: 06
LECTURER: ABDUL SALAM ABU BAKAR
STUDENTS NAME MATRICS NO.
(1) NURUL AFIFAH BINTI MD SAIRONI 1324286
(2) AFIFAH NABILAH BINTI MOHD SAFEI 1321976
(3) NUR HANIS AIDAH BINTI MOHD RAFI 1329426
(4) ASMA DIYANA BINTI AZMAN 1328376
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(5) SOUPHAPHONE CHUEANGMANIVONG 1119776
TABLE OF CONTENTS
NO CONTENTS PAGES
1 INTRODUCTION 3 - 4
2 ISLAMIC ECONOMY 4 - 5
3 CONVENTIONAL ECONOMY 5 - 7
4 DIFFERENCES BETWEEN ISLAMIC
ECONOMY SYSTEM AND CONVENTIONAL
ECONOMY SYSTEM
7 - 13
5 ISLAMIC ECONOMY SYSTEM VS
CONVENTIONAL ECONOMY SYSTEM
(QUESTION)
13 - 14
6 CONCLUSION 15
7 REFERENCES 16
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INTRODUCTION
Islamic world is a world or a place where the citizens are applying or practising the
islamic law. The Islamic Law or known as Shari’ah covers all aspects of life and not limit to
the worshipping activities only.
Religion and economics are attached to each other . They are related to each other. As
muslims, the statement is understandable and exactly the truth. However, what about to the
non – muslim? Do they accept this understanding? Actually in the early years before 1700,
the European economists were priests and theologians. The Scholastic economics, in the
middle ages of Europe, was presented and developed by the people of the Church such as
Thomas Aquinas, Augistine and others. The physiocrats also had a lots of religion in their
writings.
Meaning here, they also belief that religion is related to the Economics and other field
of life in this world.However, because of problems from church and Industrial Revolution,
there were Economist who tried to detach their realm of authority from religion.
Muslims must not be affected to the understanding. Effect in the next world acts as a
strong motivator for the muslim. “ As economist, there is always a religious, moral, and
humanistic frame of action to economics, which ought to be integrated back in the material
and objective study and that to deny the relationship between economics and moral values
was a failure or the mistake on the part of the older generations of economist.”
Islam is a way of life, and a very comprehensive religion. Thefore, it is cannot be
seperated between religious things and other daily activities such as economics.
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In the preeceding years, there are many Islamic Economist who involved in studying
economics such as Ibn Taymiyyah, Ibn Khaldun and many more. They actually had
contributed alot to the ummah.
One of the most important contributions of Islamic economics, is the adoption of
multidisciplinary dynamic approach. Muslim scholars did not focus their attention primarily
on economic variables. They considered overall human well – being to be the end product of
interaction over a long period of time between a number of economic, moral, social, political,
historical and demographic factors in such a way that none of them is able to make an
optimum contribution without support of others.
ISLAMIC ECONOMICS
What is Islamic economic?
As Islam is a perfect way of life, Islam is providing guideline and rule for every sphere
of life and society especially in economic. Economic in Islam or Islamic economic system is
based on the rule called shari’ah. And the fundamental of the shari’ah is Al-Quran and sunnah
of the prophet ( p.b.u.h) provide as guideline of economic and show how economic system
should be organized. Islam has set some standard based on justice and practicality for
economic system to be established, and this standard is to prevent the enmity which always
happens among different socioeconomic section.
In other economic system might consider money as the most powerful in the society.
They might run after money and forget everything, they forget about the real purpose of life
as the creation which is worshipping God. In the other hand, Islamic economic system is more
concern on justice. It prevent any kind of injustice such interest ( riba), uncertainty (gharar).
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Islamic economic is not always concern the precise amount of financial income and
expenditure, import and export even though it is important but Islamic economic is more
focus on the spirit of the economic system, which mean even though people have a lot of
money but if that money is not come from Halal way, that money is no longer valid in Islam1
CONVENTIONAL ECONOMICS
Economic system is an organized way in which a state or nationallocates its resources
and apportions goods and services in the national community.2 In other words, it is the
combination of entities that interact with one another according to a particular plan in order to
fulfill the economic objectives of a society. Conventional economic system is the economic
system that was derived from the theories developed by the western scholars such as Adam
Smith, Joseph Schumpeter, Jeremy Bentham and Max Weber. It is already been adopted and
applied in the society. It has been widely practiced in today’s societies all around the world.
Conventional economic system has some features including the concept of absolute
scarcity, self-interest based, absolute freedom, materialism and utilitarianism, and positivism
versus norms. The concept of absolute scarcity stated that all resources are limited and human
wants are unlimited. Therefore, not all human wants can be fulfilled. Humans need to make a
choice on what they will have and what they must forgo. Since there is no free lunch in this
world, the choice that humans made will involve the opportunity costs of the other choices
that were forgo in the process of making the choice.
Conventional economic system focused the priority on gaining self-interest rather than
public interest. An economist should focused on making decision that will gain an individual