The Holy Prophet Muhammad (SAW) warned us that every nation undergoes a fitnah or trial and the trial for the Muslim nation is wealth, “Verily, there is a Fitnah (trial) for every nation and the trial for my nation (or Ummah) is wealth.” (At- Tirmidhi, Riyad as-Salihin 480). Islam recognizes humans are not Homo economicus, rational people who pursue wealth for their self-interest, which is the fundamental principle of many economic theories.
However, Islam knows that humans often make suboptimal decisions based on personal biases. Therefore, the Quran and Sunnah introduced economic principles designed to improve society and explain the psychological mechanisms that influence economic behavior.
The obligation of paying zakah is an economic pillar of worship that illustrates that Islam doesn’t separate wealth from worship. Many hadiths and ayats of the Quran guide us in how to gain, spend and invest wealth. Besides legal directives, the Quran and Sunnah focus on the psychology of wealth, which is a criterion for making appropriate economic choices.
However, neoclassical economics dominates the current economic worldview, including the Islamic world, and serves as the foundation of modern capitalism. Neoclassical economics is very individualistic that emphasizes self-interest as the key driver of economic behavior.
Also, neoclassical economics rests on three idealistic assumptions that human beings possess: (1) limitless rationality; (2) limitless willpower; (3) limitless selfishness. We need to examine the mindset of capitalism and the Islamic financial approach to understand the differences between them.
As mentioned earlier, neoclassical economics and capitalism are all about ‘me.’ Capitalism programs us to believe that acquisition of wealth is solely because of individual effort and thus belongs to the individual that makes it. Subsequently, the individual decides what they want to do with their wealth.
Also, the capitalistic mindset is based on the notion that the economy gives if the individual will engage in ruthless competition to get what they want. Capitalism creates a scarcity mindset with the individual never being satisfied and always needing more.
Contrast the above with the Islamic financial mindset. Capitalism advocates that the individual is the owner of wealth whereas Islam teaches us that Allah (SWT) is the true owner of wealth and the individual is just a trustee whose prime responsibility is to use the wealth and assets in a manner pleasing to Allah (SWT), as directed in the Quran, “Believe in Allah and His Messenger, and donate from what He has entrusted you with. So those of you who believe and donate will have a mighty reward.” (Surah Al-Hadid Ayat 7). Therefore, wealth becomes a test for us in how we invest and spend it.
The Islamic financial mindset also teaches that Allah (SWT) gives with unlimited wisdom and so, we feel contentment with what Allah (SWT) has given us. Opposite to the capitalist mindset influenced by fear of scarcity, Islam has an abundance mindset, where one sees that there is enough for themselves and others.
Having an abundance mindset should curtail or end our sense of personal relative deprivation, as Allah (SWT) teaches us in the Quran, “The Devil threatens you with ˹the prospect of˺ poverty and bids you to the shameful deed ˹of stinginess˺, while Allah promises you forgiveness and ˹great˺ bounties from Him. And Allah is All-Bountiful, All-Knowing.” (Surah Al-Baqarah Ayat 268).
We have highlighted the differences between the capitalistic and Islamic financial mindsets, and now let’s look at how we can change our behavior to carry out the Islamic financial mindset. We must be moderate and not be extreme in either stinginess or excessive spending on ourselves.
The Prophet (SAW) advised the following, “Eat, drink, and give in charity. Wear nice clothing, but without pride and extravagance. Verily, Allah loves for his blessings to be seen upon his servants.” (Musnad Aḥmad 6656). Most of our life’s spending entails expenditure on our families that Islam considers a charity when done to please Allah (SWT). Our Nabi (SAW) reinforces this belief, “When a Muslim spends something on his family intending to receive Allah’s reward, it is regarded as Sadaqa for him.” (Sahih al-Bukhari 5351).
On the matter of investing, Islam promotes ethical investment or investments conforming to Islamic law. By putting our wealth in halal investments, we raise the probability of growing our wealth and finally giving more. The Prophet (SAW) redefines investing in the ensuing hadith: “The son of Adam claims: My wealth, my wealth. And he (the Holy Prophet) said: O son of Adam. is there anything as your belonging except that which you consumed, which you utilized, or which you wore and then it was worn out or you gave as charity and sent it forward?” (Sahih Muslim 2958a).
This is truly instructing us that the only wealth we keep is the wealth given out in charity. In another hadith, our Nabi (SAW) re-affirms that genuine wealth is what we give in charity during our life, and so, it develops into a process to build our spiritual net worth for the Hereafter. If we describe investing as an act of apportioning wealth into assets that one hopes to profit from in the future, there can be a no grander investment in one’s future, in this world and the Hereafter, than philanthropy and charitable giving.
Neoclassical economics and the capitalist ethos have made many of us selfish to the detriment of our society and nation. As Muslims, we must come back to the Prophetic wisdom of separating our hearts from desiring wealth and inspiring charitable investments to cleanse the hearts and reform society.
In this regard, let the words of our Nabi (SAW) be our encouragement: “Generosity is close to Allah, close to Paradise, close to the people and far from the Fire. Stinginess is far from Allah, far from Paradise, far from the people, and close to the Fire. The ignorant, generous person is more beloved to Allah than the worshiping stingy person.” (Jami` at-Tirmidhi 1961).
