Islam provides a complete and simple economic system which is the best alternative for both capitalism and socialism. It has the good things of both without sharing the evils. Islamic economic laws are divine and better in all aspects form man made economic systems.
The revenues of Islamic state comes form Zakat and Usher. These funds used for the welfare and defense of the state. Islamic economic system strictly disallows the existence of interest, the philosophy behind is this makes society inactive as rich start lending their money for certain interest and would avoid productive activities due to risk factor which slowed the economic and trade cycle.
Merits of Islamic Economic System
Democratic In Nature
Islam is more diversified and dynamic religion and offers a complete economic system with giving the authority to individuals to get reward of their productive efforts. In Islam powers are exercised through the democratic process. Quran Says. “And they conduct their affairs by mutual consultation.” So the head of Islamic state is bound to consult with Shura Assembly about the affairs of state.
Provision of Basic Necessities of Life
This economic system speaks about the common interest of society like socialism without the rigid philosophy of common ownership. This is the primary duty of the Islamic state that it should provide the basic necessities of life like food, clothing, shelter and education to every citizen living in the country.
Enforcement of Islamic Law
It is the duty of the state that it should enforce the laws of shariah in the country and taken care of economic activity and justice in daily life, so that the citizens can lead their lives with peace and financial stability.
It is the duty of the Islamic state that it should provide equal chances of employment and economic development to all the people irrespective of color and caste.
All the citizens, rich or poor should be equal before the eyes of law. Courts should work honestly to provide justice to the people.
Utilization of Resources
It is the duty of the state to make full utilization of economic resources for the economic welfare of the people.
Stability in the Price Level: The state is responsible to maintain stable prices in the country. In this regard a government can frame a fiscal and monetary policy.
In Islamic state everybody is allowed to adopt any profession or business within the law and it is the duty of the state that it should give them full protection.
Islamic economics advocate developing good relations with Muslim world in particular and other in general. It should always cooperate with those who are right and serving for humanity.
Establishment of Baitulmal
The revenue and expenditure of the Islamic state is through baitulmal which is just like central bank of the country. The items of revenue and expenditure of baitulmal are fixed in Islam.
Collection of Zakat and Usher
In replacement of Tax system Islam gives The concept of Zakat. An Islamic State can collect the zakat and usher from the citizens. It can also impose tax and borrow the money form inside and outside the country.
Fare distribution of Wealth
It is also the duty of Islamic state that it should enforce the fair distribution or wealth. Islam is against the concentration of wealth in few hands.
Demerits of Islamic Economic System
Other economic systems in the world are interest based, around which whole economic system is revolving. This is totally absent and forbidden in Islamic economic system and to collaboration with other system is not possible and also it is difficult to implement it on non-Muslim societies.