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Islamic Incentive and Reward in Consumption

Posted on 14th July 2012 by Camille Paldi,

Snowy mountains above Beirut

Excerpt from Iraj Toutounchian’s Islamic Money & Banking: Integrating Money in Capital Theory 

“Suffice to mention here, the Qu’ranic basis of Muslims’ concern for each other’s well-being:

The Believers are but

A Single Brotherhood.  (Qu’ran 49:10)

As we will see later, the technical interpretation in Islamic economics is to assume interdependent utility functions in dealing with brotherhood.  Qu’ranic teachings play the most important role of all in setting out how Muslims are to act to make their brotherhood become a reality.  The Qur’an has much to say about Infaq; charity and philanthropic contributions.  For example:

So fear Allah

As much as ye can

Listen and obey

And spend in charity

For the benefit of

Your own souls

And those saved from

The covetousness of their own

Souls – they are the ones

That achieve prosperity.  (Qu’ran 64:16)

It has much to say, too, about the relationship between individual Muslims and their society, and it is clear that they should not be divided, but act as one unit or one nation, as the following exemplifies:

And hold fast,

All together, by the Rope

Which Allah (stretches out

For you) and be not divided;

Among yourselves.  (Qu’ran 3:103)

The utility functions of Muslims have been elevated not only toward their own pleasure but to please Allah (SWT) as is reflected in the following:

Those who spend

Their substance in the cause of Allah and follow not up

Their gifts with reminders

Of their generosity

Or with injury – for them

Their reward is with their Lord;

On them shall be no fear;

Nor shall they grieve.  (Qu’ran 2:265)

And:

In most of their secret talks

There is no good, but if

One exhorts to a deed

Of charity or justice

Or conciliation between men

(Secrecy is permissible)

To him who does this

Seeking the good pleasure

Of Allah, we shall soon give

A reward of highest (value).  (Qu’ran 4:114)

What then is gained by making charitable contributions (Infaq?) Clearly, it is aimed at pleasing Allah (SWT), but as the following makes clear, the rewards to be reaped in the world hereafter for doing so are immense:

The parable of those

Who spend their substance

In the way of Allah is that

Of a grain of corn; It groweth

Seven ears, and each ear

Hath a hundred grains,

Allah giveth manifold increase

To whom He pleaseth;

And Allah careth for all

And He knoweth all things.  (Qu’ran 2.261)

The rewards and incentives for cooperating in consumption seem to arise from each individual’s reduction in their own consumption and bring an equal increase in the consumption of their brothers in Islam.  It can be shown that despite the reduction in the donor’s own consumption, his/her utility will increase in addition to the receiver’s utility.  Muslims have a strong conviction that the promise of rewards beyond imagining in the hereafter will never be broken; hence their large-scale commitments to charitable contributions.” – Iraj Toutounchian


Posted on 14th July 2012 by Camille Paldi


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