Wednesday, December 26, 2007

Hoarding of wealth is prohibitted

The phenomenon of maldistribution of wealth among individuals all over the world is one of the realities reflected clearly in all aspects of daily life, to the extent that this does not require an evidence to be proven, and what people suffer due to the flagrant disparity in meeting their needs cannot be over-emphasised. Capitalism had made several attempts at tackling this phenomenon but to no avail.

When the capitalist economists study the theory of income distribution, they completely ignore the mal distribution of individual income, and become contented with the publication of figures and statistics without offering a solution and without any comment.

However, despite the relative parity among people as far as the basic needs are concerned, there may be some very wealthy individuals in the society; Islam has not imposed the parity on ownership, but rather obliged that every individual is independent from others in his ordinary needs. Bukhari reported that the Messenger of Allah said: “The best sadaqa is that which is given out of one’s wealth after sufficiency.” These large amounts of wealth prepare the ground for their owners to save, and help them acquire large incomes. Therefore the wealth remains intact, for wealth generates wealth, although personal effort plays a part in gaining such wealth and in generating the opportunities to invest the wealth. This does not pose a danger to the economy, on the contrary, it helps increase the economic wealth of the community as well as the individual.

The danger lies in the hoarding of money by some individuals with very large fortunes, leading to the fall in the standard of income and causing wide unemployment thus pushing people into poverty. It is therefore essential to tackle the hoarding of money. Money is the medium of exchange between two properties, or between a property and a service, or between two services, hence it acts as a measure to this exchange. Therefore, when money becomes scarce and people are unable to obtain it, the exchange vanishes and the economic wheel comes to a grinding halt. The more that money changes hands, the more economic activity proceeds.

This is because every person’s or company’s income must originate from another person or company. Funds levied by the State are regarded as income to the State and an expense to the individuals, and the monies spent by the State on employees, projects and servicemen’s salaries etc. are in fact incomes to those people and an expense to the State; the monies spent by the employee, the serviceman, among others are incomes to those who sell their goods and services to those people, such as butchers, grocers, landlords, traders etc. Therefore, people’s incomes and their overall spending would be constantly circulating. If a person were to hoard a sum of money, he would in fact be withdrawing it from the market, and this would lead to a decrease in spending and to a decrease in the income of persons who would have had dealings with that person had he not hoarded that money. This in turn would lead to a decrease in their production, for the demand for goods decreases, thus leading to unemployment and an overall economic decline. Therefore, the hoarding of money leads definitely to unemployment and to economic decline due to the decline in people’s incomes.

It should however be made clear that this damage to the economy emanates from money hoarding and not from saving; saving does not halt the employment cycle whereas hoarding money does. The difference between hoarding money and saving is that the former means accumulating money without purpose. It means taking money away from the market, whereas, the latter i.e. saving, means accumulating money for a purpose, such as saving to build a house, or for a wedding, or to set up a business etc. This type of money accumulation does not affect the market nor does it affect the employment cycle, for it does not lead to taking money from the market, rather it means saving a sum in order to spend it at a given time, thus the money will circulate again once it is invested, there is therefore no harm in saving, unlike hoarding the money for no real purpose.

Islam has made it lawful to save gold and silver, for it means the accumulation of money for a purpose.Islam has also permitted a man to save money in order to accumulate a dowry for a woman he wishes to marry, or to save money in order to go to Hajj etc. The saver would only have to pay the Zakat due on the accumulated money if it reached the Nisab and remained in his possession for a full year. When the verse was revealed prohibiting the hoarding of gold and silver, these two metals represented at the time the units of exchange and measure of the effort spent (in work) and the units of value put on goods, services and properties, whether these were minted or not; the prohibition was therefore directly linked to the fact that they represented the unit of exchange.

The hoarding of gold and silver was prohibited explicitly in the Qur’an.

Allah says:
“And let those who hoard gold and silver and do not spend them in the way of Allah know that a severe and painful punishment is awaiting them.” [At-Tauba: 34]

This warning of severe punishment for those who hoard gold and silver serves as a clear evidence that the Law Giver has decisively ordered us to refrain from doing so; it is therefore forbidden to hoard gold and silver(money).

Evidence of the fact that the verse has conclusively forbidden the hoarding of gold and silver(money) is reflected in the following:

1. The generality of the verse: The text of the verse in Mantuq (words) and in Mafhum (meaning) serves as evidence about the clear-cut prohibition of hoarding gold and silver. To say that the hoarding of gold and silver is permitted once the Zakat has been paid would mean abandoning the rule of the verse, which is clearly indicated. This cannot be deduced from the verse unless there were another evidence, independent from this verse, leading to such an understanding or abrogating the rule of the verse. And there is no such sound text to lead us to understand other than what the verse clearly indicated.

2. At-Tabari extracted in his commentary on the authority of Abu Umama Al-Bahili who said: “A man from the people of the Suffa (poor) died and a dinar was later found in his garment, upon this the Messenger of Allah said: ‘That is a branding (burn).” Then another man died and two dinars were found in his garment, and upon this the Messenger of Allah said: ‘That is two brands.’” This was because the two men were living off the Sadaqah while they had gold. One Dinar or two do not reach the Nisab in order to say that Zakat is taken out of them. So when the Messenger of Allah said about them “a branding and two brandings”, he was referring to them as hoarding, even though the amount is not liable for Zakat. He was referring to the verse of the hoarding where Allah says:
“On the day their wealth will be heated in hell fire, and with which their foreheads, flanks and backs will be branded” [At-Tauba: 35]

4. Linguistically, Al-Kanz (hoarding) means piling up money, and hoarded money means accumulated money. Kanz also means anything piled up and hidden underground or overground. The words of the Qur’an can only be explained with the linguistic meaning, unless a Shari’ah meaning to such words is mentioned, in which case they would then be explained with the Shari’ah meaning. It has not been established that the word Kanz has had a Shari’ah meaning, therefore it must be explained with its linguistic meaning only, which is to hoard money and pile it up without purpose. This hoarding is abhorred and it is the one which Allah warned against and for which He promised the perpetrator a severe punishment.



Dr. Abdul Baseer said...

As salaam alaikum. I quote from last point in above article "It has not been established that the word Kanz has had a Shari’ah meaning, therefore it must be explained with its linguistic meaning only,"
This statement stands corrected in face of following ahadith
Abu Dawood (1564) narrated from Umm Salamah (may Allaah be pleased with him) that the Prophet (peace and blessings of Allaah be upon him) said: “That which reaches the level where zakaah is to be paid and its zakaah is paid, is not kanz (hoarded wealth).” Classed as hasan by al-Albaani in Saheeh Abi Dawood.

Al-Bukhaari (1404) narrated that Khaalid ibn Aslam said: We went out with ‘Abd-Allaah ibn ‘Umar (may Allaah be pleased with him) and a Bedouin said: Tell me about the words of Allaah, “And those who hoard up gold and silver (Al‑Kanz: the money, the Zakaah of which has not been paid) and spend them not in the way of Allaah”. Ibn ‘Umar (may Allaah be pleased with him) said: The one who hoards them and does not pay zakaah on them, woe to him. That was before zakaah was revealed; when it was revealed, Allaah made it a purification of wealth.

Maalik narrated in al-Muwatta’ (595) that ‘Abd-Allaah ibn Dinar said: I heard ‘Abd-Allaah ibn ‘Umar when he was asked about kanz – what is it? He said: It is wealth on which zakaah is not paid.

Ibn Katheer (may Allaah have mercy on him) said commenting on the verse in al-Tawbah: With regard to kanz, Maalik said, narrating from ‘Abd-Allaah ibn Dinar from Ibn ‘Umar: It is wealth on which zakaah is not paid. Al-Thawri and others narrated from ‘Ubayd-Allaah from Naafi’ that Ibn ‘Umar said: That on which zakaah is paid is not kanz, even if it is buried beneath seven earths, but that which is not buried and on which zakaah is not paid is kanz. This was narrated from Ibn ‘Abbaas, Jaabir, and Abu Hurayrah in both mawqoof and marfoo’ reports. ‘Umar ibn al-Khattaab said something similar: Any wealth on which zakaah is paid is not kanz, even if it is buried in the earth. And any wealth on which zakaah is not paid is kanz with which its owner will be branded (on the Day of Resurrection), even if it is on the face of the earth. End quote.

Thus it is clear that the kind of wealth that is blameworthy is that on which zakaah is not paid. As for that which is beneath the threshold (nisaab), or which reaches the threshold and zakaah is paid on it, it is not kanz.

Anonymous said...

Very poor article from economic point of view. After starts by taking classical approach to market, the one that was advocated by J. S. Mill J. B. Say etc., by saying that hoarding leads to excess demand for money with corresponding excess supply in real market. Right after that he takes Keynesian stand by saying that the above mentioned market condition is an indication of failure of effective demand. Finally he concludes that saving is not hoarding but the latter is prohibited in Islam. Therefore hoarding should be prohibited.

Now there are a few problems:

First, the author failed to define saving. The most basic and reasonable definition would be something like, saving is a residual of income that is not spend on immediate consumption. Now the problem is that the same definition can be applied to the term hoarding. The only difference is that we believe that saving doesn't lead to general glut. The only solution is to assume that saving is the residual of income that is not spend by the owner but spent on immediate consumption of another person. In other words, saving must equal investment for equilibrium to hold true.
The second problem follows from that assumption. What market mechanism insures that all income will be spent or saved in form of investment. If such mechanism doesn't exist or fails to equilibrate the money market, hoarding will take place. Now in conventional economic system such mechanism is believed to be the nominal interest rate. (It failed). The paramount question is what alternative to the interest rate can islamic economic offer? Unfortunately the article failed to adequately address this vital question.

After studying Islamic economics for the last couple of years, I realized that this question as well as some other paramount issues regarding Islamic economics have not been addressed yet. However it doesn't mean that Islamic economics is false. It merely indicates that we need more time and people to solve the puzzle.

Meanwhile I did acquire some hypothesis that can emerge in substantial answers which in their turn can turn into a foundation for comprehensive Islamic economic theory. Although a lot of time and research is required before any actual result would come. I just wish to find some people who excel in economics and who would devout a some time to talk, teach, criticize or mentor me so that my progress can accelerate inshaAllah.