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ماہنامہ دختران اسلام > دسمبر 2020 ء > Importance of Economic Development for the progress of Developing Countries
ماہنامہ دختران اسلام : دسمبر 2020 ء
> ماہنامہ دختران اسلام > دسمبر 2020 ء > Importance of Economic Development for the progress of Developing Countries

Importance of Economic Development for the progress of Developing Countries

Hadia Saqib Hashmi

Economic development is one of the subjects that basically are categorized as a science that offers an approach in reaching the ultimate goals of developing economics science. However, the conventional approach, that has been built, is being considered failure in solving the Ummah problems, such as poverty, backwardness in human capital, and attainment in proper jobs and life, and even a climate change issue. Unfortunately, those condition are predominantly found in Muslim world, whereby inherently have been emerging and embodying in Muslim life. Furthermore, arguably the paradox of Muslim world has been facing, is that, it is naturally resource rich but economically and commonly weak and poor. As matter of the fact that in Muslim society, there is a lack of motivation achievement. So that, there is no rule out the possibility to find out the appearance a number of approaches within Islamic framework, notably in the area of economic development (Kusuma, 2010)

Conventional Concept of Economic Development

In a conventional system, the concept of economic development is centered mainly on the pursuit of personal gain, in the form of satisfaction, utility, or profit. The pursuit of self-interest in a conventional economy may not necessarily lead to improvements in the general well-being of society. Monopolistic situations may develop; price distortions, speculation, and hoarding of goods may ensue, and can result in certain segments of the society being deprived in favour of others with more influence in the market. It follows that in a conventional economy, the well-being of the society as a whole is not central in the pursuit of economic development. The conventional world view separates the worldly and spiritual affairs of life. Thus, the concept of economic development is devoid of any spiritual values. Absolute freedom is granted to individuals in their economic pursuits, which in most circumstances focus on the material interest alone. Any incentive structures or sanctions put in place to guide human behaviour in the economy are based on man-made rules and are subject to discretionary changes and influence. Traditionally, in a conventional system, the process of economic development is centered on the quest for increasing economic prosperity, as evidenced by early discussions on economic development following World War II, which focused mainly on the structural transformation of economies toward increasing the level of productivity and per capita income.

The Islamic concept of Economic Development

The concepts of economic and human development in Islam are not time dependent, as Islam is an immutable rules-based system. The rules of behaviour for humans and society to achieve material and nonmaterial progress are grounded by the rules prescribed in the Qur'an. The Islamic concept of development covers three interrelated dimensions: Iindividual human development, physical-material development, and development of the human collectivity.

The first dimension is the most important, and specifies a dynamic process of the growth of individuals toward realizing their full potential given by the Creator. The second dimension refers to the utilization of natural resources provided by the Creator to meet the material needs of individuals and society. The third dimension refers to the progress of the human collectivity toward full integration and unity. The first dimension-which starts from an intense awareness of oneself and the Creator, such that every action is taken in compliance with the rules prescribed by the Creator-will lead to harmony and unity with the rest of humanity and creation. Failure for the three dimensions to proceed in tandem leads to harmful distortions.

The achievement of the three dimensions is reflected in the principal teaching of Islam, which is justice and equity. Every rule in Islam enjoins activities that serve to remove obstacles from the path of humans toward individual and collective well-being and spiritual fulfillment, in line with the Creator. Consequently, the development in the human collectivity and the physical-material realm will be achieved as the actions and decisions of humans are taken in consonance with the well-being of the society and the environment, as well.

Current condition of Developing Countries regarding economic development

Islamic world, currently, have been facing several acute problems which are basically affording a low quality of life, such as poverty incident, starving, and hunger. All of those examples are seriously exacerbating and creating the social problems in the Muslims society. Let's put one case in terms of poverty incident in presently world. Among 107 developing countries, 1.3 billion people which is 22 percent of the whole world live in multidimensional poverty, from which half of them are children under age 18. According to the Global Multidimensional Poverty Index 2020 about 84.3 percent of poor live in South African and South Asian countries. Every multidimensionally poor person is being left behind in a critical mass of indicators. For example, 803 million multidimensionally poor people live in a household where someone is undernourished, 476 million have an out-of-school child at home, 1.2 billion lack access to clean cooking fuel, 687 million lack electricity and 1.03 billion have substandard housing materials. 107 million multidimensionally poor people are of age 60 or older, it's a particularly importantly figure during the COVID-19 pandemic (United Nations Development Programme, 2020).

Subsequently, the issue of poverty is discerned to be serious phenomena by the majority of Islamic scholars. (Soava, Mehedintu, & Sterpu, 2020) argued theoretically for poverty case which is substantially called for "Poverty Growth Inequality Triangle". They are arguing that poverty inevitably will have caused some negative trickle down effects, such as (1) a poor household are unable to participate in the development process, and also automatically being exclusive from financial system, (2) The poor and destitute people will tend to fall into poverty trap cycle that will encourage them, the poor and destitute, to be less competitive and backward in knowledge. Accordingly, (3) poverty will create low aggregate income level and being slow down the economic growth, and finally, (4) Economic growth which is created in the system, and considered as results of economic progress, is able to change on income distribution because of income distribution initially is shared on early stage of development, however, the shared of income then only will be preferably circulated around groups who are having dominant share of wealth in a certain economy area.

Islamic social finance and Economic Development

The pandemic COVID 19 has drowned the developing countries in financial crises, unemployment and poverty. Islamic Social Finance has the capability to face this challenge and be utilized as a solution for the elimination of Poverty. (Qadri & Ali, 2020) has presented a novel model to eliminate poverty. The model is also based on zakat and it is blended with Islamic microfinancing. One of the reasons of failing of zakat system is that the zakat distribution is being done in various countries such as Pakistan in a traditional way and majority of the zakat payers pay it informally and oftenly pay zakat to their known needy persons in small pieces. This amount heals the wounds of recipient for a very short time period and temporarily. In the next year, the same recipient remains in the list for receiving zakat and the cycle goes on. Likewise, in the centralized system, where zakat is being collected by the government and registered NGOs, zakat is distributed in various sectors in minor pieces. In a gist, it can be said that zakat funds are distributed as a charity and not managed in way as the financial funds are managed. Resultantly, the people do not come out of poverty who receive this small amount every year.

This instigates us to come up with a kind of model that would break this cycle of being remaining zakat recipient for years. In his proposed model, the zakat funds are being utilized as funds for microfinancing on Islamic finance modes. It would be based on Qard e Hassana or any other viable mode. The zakat will be distributed in a way that each year the recipients' number would go down and eventually, those who were the recipients will become the Zakat givers.

Conclusion:

The present economic system falls to satisfies and fulfill the goals of economic development, namely fulfilling fairly the fulfillment of material development of individual and society leading to maximum socio-economic welfare and the ultimate good of mankind. In opposite, poverty, unemployment, and unjust income distribution have been inherited in current society, and unfortunately majority found in Muslims society. Therefore, Islam comes up with the notion of economic development concepts which are also focusing more on moral, spiritual, and norms aspects which are hopefully able to eliminate and alleviate of those social ill.

References:

  • Kusuma, D. B. W. (2010). Economic Development in Islamic Perspective. Presented at the International Conference on Business and Economics.
  • Qadri, & Ali. (2020). A Blended Model of Islamic Social Finance to Alleviate Poverty and Boost Economic Development: A Post COVID-Approach. Global Islamic Finance Report, GIFR 2020. Edbiz Consulting. UK
  • Soava, G., Mehedintu, A., & Sterpu, M. (2020). Relations between Income Inequality, Economic Growth and Poverty Threshhold: New Evidences from EU Countries Panels. Technological and Economic Development of Economy, 26(2), 290-310.
  • United Nations Development Programme. (2020). Charting pathways out of multidimensional poverty: Achieving the SDGs. Retrieved from http://hdr.undp.org/sites/default/files/2020_mpi_report_en.pdf

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