ISB 544 (ISLAMIC

ECONOMICS)
THE METHODOLOGY OF ISLAMIC
ECONOMICS

PREPARED FOR:
USTAZ ASYADI BIN REDZUAN
PREPARED BY:
FATIMAH AZ-ZAHRAH IZHAM
2008533961
SITI SURAINI ABU BAKAR
2008531871
 INTRODUCTION
• Methodology is the study of method.
• Economic methodology is the study of
method, usually scientific method, in
relation to economic, including principles
underlying economic reasoning.
• Methodology is theory of theories: in the
field of economics it refers to the process
economists use to validate the knowledge
about economic phenomena.
DEFINITION OF ISLAMIC
ECONOMIC
SOURCES OF ISLAMIC
ECONOMICS
• The Quran
 Is the book of God and contains general and broad
guidelines for the conduct of human beings.
• Sunnah
 The speech, action or tacit approval of the prophet
as recorded in the books of traditions.
• Islamic law and jurisprudence
 A vast legal literature developed by the Muslims
jurists who have been elaborating and deriving
inferences about the economics questions.
• History of the Muslims
 Contains much scattered materials
about the economic life of the people
and useful precedents for the present -
day economy.
• Data relating to economic life
 Muslim studies the real life condition
and behaviour of the people and uses
the available data for analysis and
formulation of policies.
• The basic function of methodology is
to help in reaching the truth
• The hard core of Islamic economics
consists if evidences of Quran and
Sunnah of the Prophet (S.A.W).
• Verses of the Quran and Hadith of the
Prophet (S.A.W) form the hard core of
the Islamic economics:
• “God takes away (gain) from usury
but adds (profit) to charity”
(al-baqarah 2:276)
 SIGNIFICANCE OF
ECONOMICS
Modern Economics Islamic Economics
• It is not true that man is
• The basic assumption selfish by nature.
is that man is selfish “....Muslims prefer others
over themselves although
by nature he behaves
they are in difficulty...”
rationally. (al-hasyr59:9)
• The material progress is not
a supreme objective in an
Islamic society.
“....the primary emphasis on
• Material progress is the well being of man is in
the ‘akhirah...”
supreme goal. (Ibrahim
14:3)
Modern Economics Islamic Economics

• Every person has an • Islam considers man

inherent tendency incapable of knowing
to maximize his what is best for him.
material welfare and Only God has perfect
he also has the knowledge.
knowledge and “....the human
ability and deciding knowledge is
what is good for imperfect and needs
him. guidance for various
decision in life....”
(an-Nisa’ 4:11)
 NATURE OF
METHODOLOGY
• In evaluating the performance of economics,
methodology is;
i. explain what economics are doing
ii. how well they are doing;
iii. suggests what they should be doing in view
of the priority objectives.
• Methodology helps explain the nature of the
theories behind economic behaviour and
human action.
• It also aims at prescribing acceptable method and
techniques of economic inquiry in order to
enlarge the stock of knowledge.
• Important issues methodology deals with are;
i. The purpose of economic inquiry
ii. The sources of knowledge relevance to it
iii. The subject matter and the scope of inquiry
iv. The limits of application of knowledge
v. The decision about the appropriate structure
for testing economic model
METHODOLOGY OF ISLAMIC
ECONOMIC
 NORMATIVE
• Meaning:
 The Muslim economists have the obligation to discharge the
Qur'an duty of enjoining what is proper and forbidding what
is improper.
 This is also studies and suggest ways and means for
achieving Falah.
 It suggest what particular policy actions should be
recommended to achieve a desirable goal.
• Example:
 It may be of interest to study the effect
of the prohibition of interest on the level
of saving and investment
 Study of the effect of zakah on the
consumption level of the society.
 DEDUCTIVE
• Meaning:
 The logical process of deriving a
conclusion from a known premises or
something known to be truth.
 From theory comes with the conclusion
 Explanations and predictions
• A deductive argument is valid if an
only if the truth of the conclusion
actually does follow necessarily the
premises
• Example:
All men are human being
Adam Smith is a man
Therefore Adam Smith is a human
being.
• Deductive reasoning is sometimes
contrasted with inductive reasoning.
 INDUCTIVE
• Meaning
 The logical process of establishing a general proposition
on the basis of observation of particular facts.
 From observation to theory
 Facts from observation
• Example:
 All man that have ever been seen are human beings;
 therefore all man are human beings.
 COMPARISON
METHODOLOGY OF ISLAMIC
AND MODERN ECONOMIC
ISLAMIC ECONOMIC
• Framework is derive from a
divine texts (Quran &
Sunnah) and no
changeable.
• Combination of inductive
method;
 Testifies assumption and
prediction on rationally
and empirical evidence
MODERN ECONOMIC
• Based on human
ideology, subject to
criticism and
changeable.
• Deductive method;
 Use assumption
which are not
always be realistic.
 ISLAMIC ECONOMIC MODERN ECONOMIC
• Builds on ethical value • No escape from value
such as justice and judgement, but
benevolence. economics must
 Islamic ethical value produce falsifiable
are part of economic hypothesis.
theories and would  Hypothesis testing
not be falsified by any eliminates personal,
hypotheses and actual social or political
data. prejudices and value
judgements.
• Normative explore ways
and means to change • Positive studies the
the existing economic existing economics
into truly Islamic phenomena without
economic
being overly concerned
with altering that
phenomena.
ISLAMIC ECONOMICS MODERN ECONOMICS
• Specific • No specific
question/aim criterion / aim
 Aim: Falah of man  It pursues research
an creating the for the sake of
social and research or
institutional knowledge for the
condition which sake of knowledge.
maximize Falah of a
society.
 All knowledge has a
purpose which
derived from
Islamic worldview .
 CONCLUSION
• Islamic economic need not be confined to
anyone method.
• It should remain open to all the methods
provided the enquiry remains within the
basic framework of Islam and its satisfy
rationally and empirical evidence.
• The main occupation of Muslim
economists should be to present and
analysis of the application of the Shari’ah
in the present day.