The Cycle of Wealth

In the Islamic economic system, the cycle of wealth is one of the most important elements in order  to simulate the economy in a productive way. Hoarding (Kanzul Mal) is an activity that is prohibited in Islam. Hoarding is defined as an activity of accumulating wealth without any specific purpose except but to accumulate wealth. From the economic perspective, hoarding is taking out wealth (money) from the market and causes economic activity to be disturbed or to slow down. Hoarding is different from saving. Saving is to save some amount of money to be spent for a specific purpose such as to build a house, for marriage, to finance the children’s education etc. The hukm of saving is mubah. Money saved will finally be spent in the economic cycle. At the same time, Islam allows saving in order to guarantee living needs (Nafkah) for one year.  The state must provide the guidelines on the amount of saving that is allowed for an individual to save based on their responsibilities and needs.

Islam teaches the ummah that whomever that has been granted by Allah SWT with wealth which is more than what he needs has to fulfill his own nafkah and that of the people under his responsibility. Two activities can be done - first, making investment in business, and secondly carry out amal jariah with sadaqah (voluntary charity). Both activities will ensure the wealth is always circulated in the economic cycle. The state has the authority to take over the wealth which is more than enough (a necessary amount of saving) to fulfill the nafkah in one year. This rule is to ensure that the wealth is always circulated in the economy whether through investment or spending through sadaqah.

The wealth can be invested through muamalat contracts according to Islamic teaching into halal and good sectors such as trading, industry, agriculture, services etc. which will create a productive economic cycle, based on the fact that in this way, wealth is always circulated in the economic cycle. Muamalat contracts in Islam implicitly manifest the rights and the responsibilities of those involved in the syirkah (investor and manager), making those involved in the syirkah play their roles productively. This method always encourage people to be productive in expanding their wealth which will directly stimulate the cycle of economy actively. This will consequently lead to encouraging innovations in business, creation of new products and consequently create jobs.

The political economy in Islam is very different from the political economy in capitalism, which is employed by our government today. In today’s economic system, to start or to expand a business, we are encouraged and driven by the debt industry which is based on riba (interest). At the same time, there is no rule to prevent the wealth from being taken out of the economic system, where anyone is free to slow down the economic cycle by hoarding. Hoarding from the economic perspective is a bad activity that can affect the economic cycle negatively. Spiritually, hoarding produces greedy people with the wealth of this temporary life to the point that they forget that all the wealth in this world will be useless when death comes.

Those who are not interested invest their wealth or have extra wealth after making investments, they can spend their wealth through sadaqah (voluntary charity). Islam encourages its ummah to do sadaqah and promises great rewards. Sadaqah to the poor, orphans, young people who wish to get married but don’t have enough money and other recipients, including wakaf, opens doors of righteousness. Sadaqah will not only help the needy but will also indirectly circulate wealth productively in the economy. MasyaAllah, this is the greatness of the political economy of the Islamic ruling system. It creates the true well being in this world and more importantly it teaches Muslims to prepare for akhirah (Hereafter).

If we relate to the current effort taken by the government to recover the economic situation affected by COVID-19, it can be concluded that it does not ensure the circulation of wealth manifested by the Islamic economy system. Instead, it is only an effort hoped to ensure that the Malaysian economy survives and recovers the shock due to COVID-19. And after all that, the economy will still be run by capitalism.