History of the Islamic Economy from Time to Time

History of the Islamic Economy from Time to Time

History of the Islamic Economy from Time to Time - To build a great nation, an established economy is needed. Therefore, we need to re-read the previous history of the economy to be applied in the present and in the future. especially studying the history of the Islamic economy from time to time because Islam used to be famous for its well-established economy in the world.

The economy at the time of Rasulullah SAW (571-632 AD)
The life of the Prophet Muhammad and the Muslim community in his time are the best examples of the implementation of Islam, including in the economic field. Even though in the period before the prophethood of Muhammad SAW was a businessman, what is meant by the economy in the Prophet here is during the Medina period. During the Mecca period, the Muslim community had not yet had the opportunity to develop their economy, because that period was full of struggles to defend themselves from intimidation by the Quraysh. It was only during the Medina period that the Prophet himself led the way in building the Medina community so that it became a prosperous and civilized society. Even though the economy at his time was relatively simple, he had shown the basic principles for economic management. The common characteristics of the economy of that period were its high commitment to ethics and norms, as well as its great concern for justice and the distribution of wealth. Economic endeavors must be carried out ethically within the framework of Islamic sharia.

As in other Arab societies, the livelihood of the majority of the population of Medina is trading, some others are farming, raising livestock and gardening. In contrast to Mecca which is arid. Market economic activities were relatively prominent at that time, where to keep market mechanisms within the frame of Islamic ethics and morality the Prophet founded Al-Hisbah. Al-Hisbah is an institution whose job is to oversee the market. Rasulullah also formed the Baitul Maal, an institution that acts as the manager of state finances . This Baitul Maal plays a very important role for the economy, including in carrying out policies aimed at the welfare of the community.

To turn the wheels of the economy, Rasulullah SAW encouraged business cooperation among community members, for example Muzaraah, Mudharabah, Musaqah, and others. So there is an increase in productivity. However, in line with the development of the Muslim community, the sources of state revenue have also increased. Sources of state revenue come from several sources, but the most important are zakat and ushr. Broadly speaking, this state's income can be classified as originating from Muslims themselves, non-Muslims and the general public, as listed below

· From Muslims

Zakat, Ushr (5-10%), Ushr (2.5%), Zakat fitrah, waqf, Amwal Fadila, Nawaib, other Sadaqah, Khums

· From non-Muslims

Jizyah, Kharaj, Ushr (5%)

· From the public

Ghanimah, Fay, Redemption money, Loans from Muslims or non-Muslims, Gifts from leaders or governments of other countries. [1]

The spoils of war (ghanimah) are also state revenues, although their value is relatively insignificant when compared to the costs of the wars incurred. The value of booty in the early decades of Hijra (622-632 AD) was no more than 6 million dirhams. When estimated that the cost of living in Medina for an average family of six was 3,000 dirhams per year, this amount of wealth could only support a small proportion of the Muslim population and also as a result of the war, it is estimated that the cost of the war was over 60 million dirhams. ten times greater than the loot. The contribution of the spoils of war to the income of Muslims during the 10 years of the leadership of the Prophet Muhammad, was no more than 2 percent.

Zakat and Ushr are the main source of income, especially after the 9th year H where zakat is obligatory. In contrast to other sources of income, the utilization of which is determined by Rasulullah SAW. Zakat may only be given to certain parties outlined by the Qur'an (QS At Taubah: 60). For non-Muslims, the Prophet collected the jizya as a form of contribution in administering the state. At that time the jizyah was one dinar per year for adults who could afford it. Women, children, beggars, priests, old people, the sick and all who suffer from illness are exempt from this obligation.

Some sources of income that are not too large come from several sources, for example: ransoms from war captives, loans from Muslims, khumus based on treasure found in the pre-Islamic period, amwal fadhla (property of Muslims who died without heirs), waqf, nawaib (taxes for wealthy Muslims in order to cover the state's expenditure during times of emergency, zakat fitrah, kaffarat (fines for offenses committed by a Muslim at a religious event), as well as alms from Muslims.

After solving political and constitutional issues, the Prophet Muhammad changed the country's economic and financial system in accordance with the provisions of the Koran. The principles of economic policy explained in the Qur'an are as follows:Allah SWT is the supreme ruler and absolute owner of the entire universe.
Humans are only Allah's caliphs on earth, not the real owners.
Everything that is owned and obtained by humans is the permission of Allah SWT. Therefore, people who are less fortunate have the right to some of the wealth that belongs to other people who are more fortunate.
Wealth must revolve and cannot be hoarded.
Economic exploitation in all its forms, including usury, must be eliminated.
Implementing legacy systems as a medium for redistribution of wealth.
Establish obligations for all individuals, including the poor.[2]

History and Economic Development in the Khulafaurrasyidin Period

The khulafaurrasyidin are the successors to the leadership of the Prophet Muhammad. Because their policy regarding the economy is basically continuing the foundations that the Prophet built. The first caliph Abu Bakar Shiddiq (51 SH-13 H/537-634 AD) encountered many problems in collecting zakat, because at that time people began to appear who were reluctant to pay zakat. He rebuilt the Baitul Maal and continued the system of distributing wealth to the people as it was during the time of the Prophet. He also started to pioneer the payroll system for state apparatus, for example the caliph himself was paid very little, namely 2.5 or 2.75 dirhams per day only from the Baitul Maal. This allowance was insufficient so that it was set at 2,000 or 2,500 dirhams and according to other information, 6,000 dirhams per year.

The second caliph, Umar bin khattab (40 SH-23 H/584-644 M), was seen as having made many innovations in the economy. Umar bin Khattab realized the importance of the agricultural sector for the economy, so he took big steps to develop this field. For example, he gave agricultural land to people who were willing to work on it. However, anyone who fails to manage it for 3 years will lose their ownership rights to the land. During Umar's time, commercial law underwent improvements in order to create a healthy economy. Umar reduced the tax burden on several goods, as well as built markets, in order to expedite the flow of food imports to the cities.

Umar built a regular and permanent Baitul Maal in the capital, then branches were built in provincial capitals. Aside from being state treasurer, Baitul Maal also served as executor of fiscal policy and the caliph was in full control of the funds. Simultaneously with the reorganization of the Baitul Maal, Umar founded the first Islamic Diwan, which was called al-Diwan. In fact al-Diwan is an office designated to pay military and pension benefits and other benefits on a regular and proper basis. The Caliph also appointed a committee consisting of well-known Nassabs to make a census report on the population of Medina according to their level of importance and class.

Economic problems during the caliphate of Usman bin Affan (47 SH-35 H/577-656 AD) were increasingly complicated, in line with the expanding territory of the Islamic state. State income from zakat, jizya, and also the spoils of war is getting bigger. In the first six years of his rule, Balkh, Kabul, Ghazni Kerman and Sistan were conquered. To organize new revenues, Umar's policies were followed. Not long ago, Islam recognized four trading contracts after these countries were conquered, then effective measures were implemented in the framework of developing natural resources. Watercourses were dug, roads constructed, trees and fruits planted and trade security provided by means of the establishment of a permanent police organisation.

Ali bin Abi Talib (23 SH-40 H/600-661 AD), the fourth Caliph, was known to be very simple. Inheriting control of the government with a large area, but many potential conflicts from the previous caliph, Ali had to manage the economy carefully. He voluntarily withdrew himself from the list of recipients of Baitul Maal grants, even according to others he gave 5,000 dirhams annually. Ali was very strict in running state finances. One of his monumental efforts was printing his own currency on behalf of the Islamic government, where previously the Islamic caliphate used Roman dinars and Persian dirhams.[3]

Islamic Economic Thought

Overview of Characters and Thoughts

The thoughts of Muslim scholars in the following period basically tried to develop Islamic concepts in accordance with the situations and conditions they faced, while still relying on the Koran and Hadith. It must be admitted honestly that Muslim scholars after the Prophet read a lot of works by Greco-Roman thinkers, as well as Syrian-Alexandrian, Zoroastrian, and Indian works. However, they did not plagiarize the writings of these Greco-Roman thinkers but deepened, developed, enriched and modified them according to Islamic teachings.

a. Abu Hanifa (80-150 H/699-767 AD)
Abu Hanifah Al-Nu'man ibn Sabit bin Zauti, was born during the reign of Abdul Malik bin Marwan. He left many written works, including Al-Makharif fi Al-Fiqh, Al-Musnad, and Al-Fiqh Al-Akbar. Abu hanifa contributed several economic concepts, one of which is salam, which is a form of transaction in which the seller and buyer agree if the goods purchased are delivered after being paid in cash at the time the contract is agreed.

One of its policies is to eliminate ambiguity and disputes in transaction matters, this is one of the goals of sharia in buying and selling relationships. He mentioned an example, murabaha. In murabaha, the percentage increase in price (mark up) is based on an agreement between the seller and the buyer on the purchase price for which the payment is made in installments. Abu hanifa's attention is very concerned about weak people. He does not exempt jewelry from zakat and will waive the obligation to pay zakat for property owners who are indebted. He did not allow the sharing of the harvest (muzara'ah) from cultivators to landowners in the case of land that did not produce anything. This was done to protect the cultivators who were generally weaklings.

b. Abu Yusuf (113-182 H/731-798 AD)
Abu Yusuf is perhaps the first fuqoha who has a book (book) that specifically addresses economic issues. His book entitled Al-Kharaj, discusses a lot about public economics , especially about taxation and the role of the state in economic development. In the reign of Abu Yusuf compiled a very popular rule of fiqh, namely Tasarruf al-Imam 'ala Ra'iyyah Manutun bi al-Mashlahah (every government action related to the people is always related to their benefit). He stressed the importance of trustworthiness in managing state finances, state money does not belong to the caliph, but is a mandate from Allah and his people which must be guarded with full responsibility.

He strongly opposed taxes on agricultural land and proposed replacing the fixed tax system on land with a proportional tax system on agricultural products, this proportional system was felt to better reflect a sense of justice. In the micro-economic aspect, Abu Yusuf has also studied how the price mechanism works in the market, price control, and what the effects of various taxation are on it.

c. Muhammad bin Al-Hasan Al-Shaybani (132-189 H / 750-804 M)
Muhammad bin Al-Hasan has written several books, including the book al-Iktisab fiil Rizq al-Mustahab (Book on Earning a Clean Living) and the book al Asl. The first book discusses various Shari'a rules regarding ijarah, tijarah, ziraah, and sinaah. According to him, the ideal consumption behavior of a Muslim is simple, likes to give donations, but does not like to beg. The second book discusses various forms of business transactions/cooperation in business, for example greetings, sharikah, and mudharabah. The books written by Muhammad bin al-Hasan contain both normative and positive reviews, like the works of most Muslim scholars.

Center for Islamic Economic Studies and Development (P3EI), Islamic Economics, Jakarta: Rajawali Press, 2012, p. 97-99
Azyumardi Azra, History of Islamic Economic Thought; (From Classical to Contemporary Period), Depok: Gramatama Publishing, page 77
Center for Islamic Economic Studies and Development (P3EI), Islamic Economics, Jakarta: Rajawali Press, 2012, p. 101-104