What is Sharia Economics? Definition, Principles, Characteristics, and Purpose

Islamic economics is an economic system that follows the basis of Islamic sharia. Of course, there are also clear differences in the economic principles applied compared to conventional economics.

The government has recently accelerated the growth of the sharia economy, citing the increasing public interest in the sharia economy. So how does the Islamic economy work? And what's the difference with conventional? Let's see!

The Meaning of Sharia Economics

According to the official website of the Indonesia Stock Exchange, sharia economics is a branch of the economy that applies sharia values ​​and basic principles based on the Qur'an, As-Sunnah, Ijma and Qiyas. This system is generally applicable in all areas of life, including financial activities and banking sector finance.

In the business world, sharia economics is also known as Islamic economics. In essence, the Islamic economy is a middle way between the capitalist economic system and the socialist economic system, for this reason the Islamic economic system applies the good principles of both economic systems.

Sharia Economic Principles

According to Bank Indonesia, the following are some of the basic principles of Islamic economics:

• Paying zakat to the community is necessary to keep the wheels of the economy moving, because the available funds are channeled to the community to produce productive economic activities.

• Riba is prohibited in all financial activities. For example, Islamic banks do not charge interest when doing business because Islamic economics considers that money can only be obtained from real sector activities.

• Make productive transactions and share the results. Islamic economics strongly defends justice and emphasizes the sharing of profits and risks between customers and banks. Financial transactions are only related to the real sector to avoid financial bubbles that often occur in the traditional financial system.

• The existence of social participation for the benefit of the wider community. This is in accordance with Islamic economic values, where social goals are maximized by directing part of the finances for the common good.

• Transactions are based on cooperation and fairness for both parties. Every transaction, especially trade and exchange, must follow the rules of Islamic law.

Characteristics of Islamic Economics

Compared to the conventional economic system, Islamic economic principles are more in line with the provisions of Islamic teachings. For better understanding, following are the characteristics of Islamic finance:

• God's Economy

The purpose of these features is for all kinds of rules and principles of sharia commercial law to be implemented according to Islamic law. This branch of science focuses on divine values ​​in economic transactions and seeks to create unity in the social environment.

2. The Economy of Justice

Islamic economics emphasizes that justice is accepted by everyone without the interference of certain classifications, one of which is social class. Apart from that, the following method provides opportunity and freedom to every entrepreneur to conduct his business according to Islamic standards.

3. Middle Economy

Basically, Islamic economics is an economic system that reconciles individual rights with the world and the hereafter. This is how the financial balance (Equilibrium) and responsibility (Responsibility) of the entrepreneur is created.

Islamic Economic Objectives

As previously mentioned, the sharia economic system or Islamic economics prioritizes goodness which is based on Islamic values. Therefore, the purpose of this economic system is in line with the objectives of implementing Islamic religious law, namely to achieve a good and honorable order to create happiness in this world and in the hereafter.

In practice, Islamic economics has 4 main objectives that must be considered, including:

• Achieving prosperity in accordance with Islamic values ​​and norms.

• Forming a tight-knit community based on the principles of justice and brotherhood.

• Achieve a fair and equitable distribution of income and wealth.

• Support individual freedom to strive to improve their standard of living according to Islamic values.

This is an explanation of what Islamic economics is and what its characteristics, principles and objectives are. In practice, Islamic economics always seeks to balance aspects of the world and the hereafter and does not deviate from Islamic religious law.