Islamic Economic System vs Capitalism

Islamic Economic System vs Capitalism

Comparison between Islamic Economic System and Capitalism is done to highlight the different features of each system.

Islamic Economic System Capitalism
Islam does not deny the needs of human beings, but on the other hand it sets guidelines on how these needs and desires are to be fulfilled. The system depends upon the separation of church and state
Once we accept Islam freely, we then follow the teaching of Islam. This is how Islam defines the freedom in our lives. Freedom is to live in the best possible way. It is not to create a system that devastates the lives of human beings. Islam allows freedom but sets limits as well. Halal and Haram are made cleared in every aspect of life.


The concept of freedom plays a major role in the Capitalist ideology. In capitalism, individuals are free to engage themselves in any king of profitable business.
By declaring that Allah SWT is the real owner of everything, Islam presents unique concept of ownership. Means of production are managed and owned by individuals for their own profits which results in concentration of wealth in few hands.
Islam doesn’t allow any kind of economic activity which is harmful for the society or public at large. Islamic system takes into account the fact that individuals have different expertise, motivational levels and entrepreneurial desires and Islam don’t restrict them from earning high. It is because of this freedom of satisfying their needs that the businesses like smuggling, black marketing, hoarding, speculation are common in those societies. Pornography and alcohol/drug industry are two of the largest money-making businesses in the Capitalist society.
Islam does not share this idea of relative scarcity. Capitalism is also based on the theory of relative scarcity. This means that there always has to be a real or as in the majority of cases, a forces insufficiency of commodities to meet the needs of the people.
Islam prohibits interest and encourages trade. Interest based financial institutions play key role in the capitalist society.
Though Islam allows legal ownership but individuals are supposed to fulfill their moral obligations as well. Islam introduces system of Zakat and Sadqat for circulation of wealth in the society and it prohibits hoarding of wealth. A small group of people hoard almost 90% of the total wealth of the world while the rest of society struggles to have a home and food.


Islam discourages businesses to monopolize markets because this leads to inflation in that particular market and also it restricts the small businesses from flourishing. Under capitalism, giant businesses have control over the markets and they charge prices as much high as they want.
Islam prohibits exploitation of weaker class of the society. In capitalist society, the dominant part of the society exploits the weak and poor.