Chapter# 4
Islam and Distribution of
Wealth
Prepared by
Kokab Manzoor
Chapter`s outlines
Rent
Definition, & Islamic Doctrine
Profit
Justification of profit, limits, Definition and
Islamic principle of fixation of profit
Wages
Definition, theories & Islamic view point of wage
determination.
Measure to stop concentration of wealth
1) Legal Measures
2) Optional Measures
Meaning and importance
N.I is produced by cooperative efforts of F.O.P,
and then is distributed among the same factors.
Eco system of Islam makes utmost efforts to
maintain the distribution wealth on just and
benevolent basis and to provide means of
sustenance to every member of the society in a
dignified manner
RENT
Islam recognizes the right of private
ownership of property.
One of the lawful form of profitable
use of property is to let it out on rent.
Those goods which are Lawful and
durables i.e land, house machinery etc
Definition of Rent)
Rent is the surplus produce of the
land which is given to the owner of
the land due to permanent and
durables qualities of the land.
(David Ricardo)
Islamic Doctrine of Rent
The Islamic doctrine of rent is so
framed that the wealth flows in the
direction of the poor rather than the
rich.
Fixing the rate of Rent
Justice
Benevolence
No injustice
Fixing the rate of Rent & the
State
1 Nature of Land
 Higher rates of Rent from more
fertile and productive lands and vice
versa.
“Allah does not place more burden upon a
person than he can bear” [Al-buqra ;286]
Cont`d….
2 Nature of Crops

Higher rate of Rent on good crop and low
on bad or inferior quality crop.
Cont`d….
3 Nature of irrigation
 The nature of irrigation shall be
taken into consideration while fixing
the rate of Lagan.
 10% on rain fed land and 5% on that
land which is irrigated through
artificial means.
Cont`d….
4 Allowance for cultivator`s Labor

A low rate of rent shall be levied
in the land which require heavier
labor and which are difficult to
irrigate, and vice versa.
PROFIT
Justification of Profit
Limits of profitable business
Definition of profit
Principles of fixing the Profit
Rate
Justification of Profit
Justification of profit is established
by the Quran and the Sunnah.
The Holy Prophet (sws) himself was
engaged in trade and his companions
also carried out various business
activities and earned profit.
2
Limits of Profitable Business
Islam forbids adoption of unethical
behavior in business.
 Fraud,
deception, misinterpretation
 Unjust weights and measures
 Adulteration in foods,
 Hoarding and creation of artificial shortage
 To buy or sell at higher or lower price by
taking undue advantage of the dire need of
other party
Limits of profitable business….
Undue influence to carry through
transaction
To sell defective goods without
informing the buyer
Monopolies, Cartel etc are forbidden
To buy goods from the farmer midway
to market on lower than the prevailing
market rates.
3
Definition of Profit
“The share of the National Income
which is given to risk capital for its
services in the process of production
is called profit.”
4
Principles of fixing the
Profit Rate
Islam has not established any fixed
rule for fixing the rate of profit,
however Profit should be fixed on the
basis of;
Justice
Equality
Prevailing circumstances
Custom and conditions of work
WAGES
Definition of Wages
Theories of Wages
Determination of Wage-Rate The Islamic Viewpoint
1
Definition of Wages
In economic terms, wages means the
compensation, which a person
receives for his mental and physical
work.
Wages are of two kinds
Nominal Wages
Real Wages
2
Theories of Wages
1 Marginal Productivity theory
2 Subsistence theory of wages
3 Modern theory or demand and supply
theory
Islamic viewpoint of
Determination of wages
1 Just Wage
And Allah created the heavens and the
earth with (a strategy based on) Truth in
order that every soul is rewarded for the
deeds that it earns and they will not be
wronged. [Al-Jashiya: 22]
Cont`d….
2 Standard of wages
And he will talk to the people (alike)
both in the cradle and in ripe years,
and he will be one of the pious
servants (of Allah).’[Al-Imran: 161]
Cont`d…
3 Minimum wage Rate
There is no living being in earth but
its sustenance is the responsibility
of Allah [Al-Hood: 6]
Rights and Duties of Labor
Rights of worker
Fraternal rights
Settling the wage rate
Prompt payment of wages
Adherence to settled Terms
Workload according to his
capacity
Kind treatment
The right to withdraw
from work
Assignment of Lawful
work
Duties of worker
Loyalty
Capability
Trust
Honesty
Abiding by the contract
Avoiding negligence
Avoiding carelessness
Measures to stop
concentration of wealth
Legal Measures
1 Zakat
2 The law of
Inheritance
Optional Measures
1 Sadaqat and
Alms
2 Charity of
surplus
3 Auqaf
LEGAL MEASURES
1 ZAKAT
1
2
3
4
5
6
Meaning of Zakat
Purpose of zakat
Nisab and the Rate of zakat
Eight Heads of Expenditure of Zakat
Difference between Zakat and tax
Importance of Zakat
The meaning of Zakat
The word “Zakat” is derived from the word
Zaka which means “ increase or growth”. In
addition it also implies purification,
enlargements etc
In Fiqh terminology Zakat means “financial
devotion” every Muslim who own a certain
amount of wealth, should give away a specific
amount of wealth to those who are entitled to
receive that amount, in the eyes of Shariah.
Purpose of Zakat
The purpose of Zakat is not only to
support the poor and to effect a
division of wealth, but as an
obligatory act of worship.
It also purifies heart and soul.
Its an expression of gratitude for
the bounties of Allah.
Kinds of wealth on which
Zakat is levied….
a) Animals
b) Gold and silver
c) Trade Goods
d) Cash
e) Mines and Treasures
Eight Heads of Expenditure of Zakat
1
2
3
4
5
6
7
8
The poor
The indigent (‫)تنگدست‬
Functionaries of the Zakat Department
Reconciliation of Hearts
Ransom for Slaves
Debtor
In the way of Allah
Ibn Al-Sabeel or Traveler
Economic Importance of the
Zakat System
Circulation of wealth
Just distribution of wealth
A remedy for unemployment
National Assistance
Eradication of poverty
Economic expansion
Difference between Zakat & Tax
ZAKAT
Religious obligation
Levied only on Muslims
Payment is must
Rate is fixed
Heads of expenditure is
fixed
Collected from rich and
spent on poor
TAX
An economic need of state
Imposed on All
It can be remitted
Rates are changed subject
to conditions
Tax revenue are spent for
the benefit of all, rich and
poor
2
Islamic Law of Inheritance
The Islamic law which contains the details of
distribution of a deceased`s property among
his/her heirs is known as Law of Inheritance.
The purpose of this law is to break the estate of
deceased into prescribed shares and distribute
them among near or distant relatives.
Economic Importance of the Law
of Inheritance
Elimination of concentration of wealth
Growth in circulation of wealth
Elimination of Feudal system
Growth in agriculture production
Equitable distribution of wealth
Means of better economic conditions
of the survivors.
OPTIONAL MEASURES
Sadaqat & Alms
Charity of surplus
Auqaf
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