1. Chapter 3: Islamic Economic
Sstem and Conventional
Islamic Business School (IBS), UUM
2013
BPMS1013 Theor & Practice of Islamic Business1

2. INTRODUCTION
 Conventional economy is an economy that already been
adopted and applied in an economic society
 So, when it linked with the economy the conventional system
can be considered as an economic system that has been
widely practiced.
 Does not have absolute standard but nature flexible and can
change according to a conditions in a society.
 Islamic economic system is based on the proceedings of Al-
Quran and Al- Sunnah.
 The Direction of economic systems is to bring Al-Falah
concept of success in this world and hereafter.
 Prohibition of usury , gambling and many more.
BPMS1013 Theor & Practice of Islamic Business2

3. Definition and Concepts of
Economics
 Definition of Economics
“Study of how societies use scarce resources to produce valuable
commodities and distribute them among different people.“
 Concepts of Economics
 Wants
 Scale of preference
 Opportunity cost
 Choice
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4. Capitalism Economic System
 An economic system based on a free market, open competition,
profit motive and private ownership of the means of production.
 Capitalism encourages private investment and business, compared
to a government-controlled economy. Investors in these private
companies also own the firms and are known as capitalists.
 Principle of Capitalism
 Belief in economic freedom
 Private property
 Individual decisions
 Competition or economic rivalry in the market place
BPMS1013 Theor & Practice of Islamic Business4

5. Problems of Capitalism
 Irrational behaviour
 Inequality
 Monopoly behaviour
 Immobilities
 Equity
 Unemployment
BPMS1013 Theor & Practice of Islamic Business5

6. The command economic system
(Communism & socialism)
Meaning /definition
 A command economy is where economic decisions are planned out
in detail by a central government authority.
 Also known as planned economic.
 Example: North Korea, Soviet Union , China ,Cuba
The principle of Communism & socialism
 Nationalization of property
 Economic equality
 Regimentation
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7. Advantages and Disadvantages
Communism & Socialism
Advantages
 Services and goods provided are for the benefit of community and not to make
profit
 Profit in not the main objective, instead the government aims to provide goods
and services to everybody
 Less inequality of wealth
 Low level of unemployment
 No duplication as the allocation of resources is centrally planned
Disadvantages
 Lack of innovation
 Limited consumer choice
 Lack of efficiency
 Overstaffing
 Neglect of moral education
BPMS1013 Theor & Practice of Islamic Business7

8. The Mixed Economic System
(Welfare state)
Meaning /definition
 Mixed economic is an economy system that combine or mixture of
capitalism and socialism
 Industries are privately owned and others are publicly owned or
nationalized
 Malaysia, England, Germany, Sweden
Objective
 Stability prices
 Economic growth
 Full employment
 Efficient use of resources to produce goods and services.
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9. Advantages and Disadvantages
Mixed Economic
Advantages
 Less income inequality
 Helping Producers and Consumers
 Protecting the Economy
 Free Enterprise
 Benefits of taxes for social program
Disadvantages
 Harming Competition
 Bureaucratic Decisions
 Unsuccessful regulations may paralyze features of production
 Economic problem
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10. Islamic Economic System
 Definition and philosophy of Islamic economic system
 Social Science that studies human behavior in terms of use and management of natural
resources for the benefit of themselves and the community’s interest to seek the blessing
of Allah s.w.t. (Hailani Muji Tahir, 1991)
 Philosophy of Islamic Economic System
- Concept of faith - Equality and brotherhood of man
- Concept of authority (Rububiyah) - The Day of Judgement
- Concept of property rights - Human as khalifah
- Concept of moral purification (Tazkiyyah)
 Principles of Islamic Economic System
1) Individual freedom 2) The right to own property
3) Controlled economic inequality 4) Social justice and equality
5) Social Security 6) Widespread distribution of wealth
7) Wealth accumulation uncertain ban 8) The ban on the anti – social institutions
9) Individual and social welfare
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11. Structure and implementation
(Government, Private Sector, NGO)
1) Government
- Implemented by the government directly
2) Private sector
- Performed by individuals who seek to use the energy, ability and property in various
fields
3) NGO
- Implemented by using private property, public @ baitulmal.
 Implementation islamic economic system
 Maqasid syari’ah concepts and goals
Three principles :
1) Tauhid
2) Khalifah
3) Justice
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12. Maqasid Sharia
(Purposes of Sharia)
 Maintain and preserve religious
 Keep and preserve sanit sense
 Care and look after their own safety and lives
 Protect and safeguard the security of property
 Care and maintaining dignity
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13. Conclusions
 Generally both forms of business wants to generates profit but the
differ between them is Islamic economy look more on human
behaviour in manage natural resources for the benefit of
themselves and community.
 While a freedom in conventional economy will eventually create a
different economic system and policy basis.
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14. Q & A
Thanks…
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