Caliphate, Economy, Featured

Industry is a new revenue for the Bait ul-Mal

This is based on an article from Al-Waie Magazine, Issue 407, 4 Aug 2020 by Youseff Al-Sarisi.

As the Muslim ummah heads towards revival and victory, practical research is required in relation to the financial structure of the Bait Al-Mal (State Treasury) and additional revenues that will supplement the traditional funds from fai’, kharaj, jizya, ‘ushur, khums and zakat. This is with the aim of avoiding the possibility of financial bankruptcy, if its resources do not meet the rising expenditure required in modern states especially with regards to military weapons, heavy industries and infrastructure projects.

This is why serious thinking is required on how to provide additional resources for the state, so that it does not fall into the sea of ​​poverty and destitution, and therefore cannot fulfill its mission, nor play its role as a state that carries a message of guidance to other nations.

Is there a new Shariah resource that we can find for the Bait Al-Mal which was not mentioned previously among the Shariah rulings related to the Bait Al Mal and its revenues?

To find such a resource requires creativity in practically solving the problems that the future Khilafah State will face.

Al-Kharaj – The genius solution which found a new revenue for the treasury

The issue of insufficient resources in the Bait al-Mal to cover the major tasks required of the state was of great concern to Umar ibn Al-Khattab (ra), a matter that preoccupied his mind and made him tired. With his insightful, political and administrative insight, he realized that there must be an additional, permanent, and constant revenue for the treasury, so that the money from which gifts come out is available, and it is spent on the interests of the state, jihad and armies, feeding the poor, and spending on all the obligatory areas. Therefore, Umar imposed kharaj tax on agricultural lands in countries that had been conquered by force, such as Syria, Iraq and Egypt, and prevented its distribution to warriors as ghaneema (spoils of war) in order to find a stable financial revenue to cover the state’s increasing expenses, even though some of the Companions objected to this.

It is clear that there is a real possibility in a modern Islamic state, that the treasury will face a lack of revenues as almost happened in the past and which Umar resolved with the kharaj. It could happen in the coming Khilafah state as a result of the tremendous development in the civilization of the modern world. Accordingly, it must be resolved by ijtihad and the fiqh of renewal after understanding the reality and achieving the relevant requirements to come up with solutions for the revenues of the treasury, and if possible to achieve financial surpluses.

Charitable endowments – a creative idea in solving the problems of financing the needs of the community

It is worth mentioning here that Muslims in their long history made a great many innovations in solving the problem of financing the needs of the Muslim community, such as the creative idea of ​​the waqf “endowment”. Among these creative solutions were endowments for the general benefits of Muslims, where some of the rich endow real estate, land and money for specific interests, as the Messenger ﷺ urged in his honorable hadith for Muslims to do ongoing charity (sadaqa jariyah) in his saying: “If the son of Adam dies, his deeds come to end except for three: ongoing charity, knowledge by which people benefit, or a righteous son who prays for him.” (Sahih Muslim 1631) The Muslims, following this hadith, made many ongoing charity, the most prominent forms of which was waqf charitable endowments.

Searching for additional revenues for the Bait ul-Mal

It must be said that the three Amirs of the daw’ah (Hizb ut-Tahrir) addressed this problem. For his part, Sheikh Abdul Qadim Zalloum, may Allah have mercy on him, in the book “Funds in The Khilafah State” raised this problem, and addressed its treatment when he discussed how to cover any shortfall in spending by three methods:

  1. Borrowing from foreign countries and international financial institutions
  2. Protecting (hima) some of the public property assets of petroleum, gas and minerals
  3. Imposing taxes on the Ummah

As for borrowing from foreign countries or international financial institutions, it is rejected as an option because of its association with riba, as well as making the disbelievers have authority over the Muslims. As for the hima and taxes, they are from the shariah procedures with specific and temporary controls. In them, he relied on Sharia ijtihad with two evidences:

Firstly, he worked hard on the permissibility of the Khaleefah’s permission to designate some types of public property temporarily, so they would provide the state with an additional financial income to the treasury. In the event that there is no money in the treasury, the state protects some oil wells and then spends this money on the areas obliged upon the state.

Secondly, the obligation to spend on weapons and the army for jihad in the way of Allah. When the treasury becomes empty, the Khaleefah may impose a certain tax on the Muslim community, or collect this money from public property revenues that are owned by the community, by protecting from it what covers these expenses instead of taxes.

The legal basis for hima and taxes is that some ahkam such as jihad and feeding the poor are among the duties of sufficiency on the ummah, so it is obligatory for her to provide the necessary funds if other funds were unavailable. However, both options are temporary, and not a permanent resource like the kharaj. Therefore, it became necessary to search for a new permanent resource for the treasury to enable the state to carry out its responsibilities.

State Heavy Industries – A new and permanent revenue for the Bait ul-Mal

After researching, reviewing and thinking about the issue of finding a new and permanent resource for the Bait Al-Mal, to cover the exorbitant expenses of the military industries and armies, it was noted that the Kharaj as a permanent resource would not be sufficient to cover the necessary expenses, after the massive civil development in industries, technology and weapons.

When we delve into the rule of the kharaj that was imposed on agricultural land, we find that in the past, agriculture was the main resource for individuals and states, while industry was limited to handicrafts and simple machines that were essentially needed for wars, agriculture, household tools, and others. There were no real industries in the modern form, and handicrafts and crafts were secondary to the incomes of individuals and the state. Today, agriculture constitutes only 3% or less of the resources of the real industrialized countries, and employs less than 3% of the labor force. As for industry, it forms the backbone of the economy and the main source of money in most countries. Therefore, we need to think about industry as a revenue for the treasury.

The importance of industry and the role of the state

When human beings converted to the use of steam in the running of machines, the automated factory took the place of the manual factory. When modern inventions came, a serious revolution took place in the industry. Production greatly increased, and the automated factory became one of the foundations of economic life.

The Imam and al-Mujaddid Taqi al-Din, may Allah have mercy on him, in his book “The Ideal Economic Policy” looked into the importance of industry and said: “The State can own anything included within private property like any individual such that, today, there are things of private property that the State owns practically, rather than individuals, such as machine factories that produce other machines, car factories and the like that require colossal funds which cannot be undertaken save by the State alone that possesses the capability for such factories.

This is because establishing such factories requires colossal capital beyond individual capability, thus the West became accustomed to founding limited liability companies whose system of founding afforded them the accumulation of colossal funds enabling individuals to establish and own these factories.

Islam however forbids limited liability companies and various such companies agglomerating into one company such as trusts and cartels because the company in Islam is a type of contract like trade and hiring/employment not a type of unilateral will transaction like waqfs and bequests. Thus the company must have partners who personally direct disposal in the company, or with their capital together with a body partner who personally disposes.

Naturally this would not bring about capital accumulation thus no company could be founded owning colossal capital according to Islam’s company rules. So these factories, even if they are (essentially) private property, but due to the colossal expenses can only be State-owned.

Therefore no monopolies for factories and production will exist with machine-producing or car factories etc being private property similar to the capitalist system. Rather applying the Shar’a rules will make these types of factories State property even though they are private property.”

It was mentioned in “Funds in The Khilafah State” with regard to the public utilities that the state provides to people under its care, and that includes postal services, banking, public transport facilities, and factories. He stated that since today’s heavy weapons were no longer individual weapons owned by individuals as was the case previously, but rather became owned by the state,  the duty was imposed on the state to establish factories for the manufacture of weapons and heavy industries.

The shariah evidence for the obligation of the state to establish industries

The Khaleefah is considered to be the representative of the Ummah in governance and authority, and in implementing the provisions of the Shariah, and the legislator has made the responsibility of looking after the affairs necessary for the community among the Khaleefah’s duties, such as establishing public utilities and others. Likewise, everything that was a duty of sufficiency on the ummah and that individuals were unable to do was the duty of the state to do on behalf of the ummah, in accordance with the shariah principle “Whatever is necessary to accomplish a duty is in itself a duty”.

Jihad is an obligation on the Muslims, and the establishment of weapons factories necessary for jihad is considered a duty of sufficiency for them as a sign of necessity, and this duty is transferred to the state when individuals are unable to perform it. It also requires the establishment of the necessary industrial infrastructure for weapons, which can only be accomplished by having an industrial infrastructure for machines that manufacture machines, and factories for manufacturing materials needed for armament, such as iron factories, copper, lead, gunpowder and other materials.

Industrialization is also one of the duties of sufficiency for the ummah, and this duty is not fulfilled except through the establishment of the industrial infrastructure. As long as individuals are incapable of performing this duty then the duty is transferred to the state, and the state must establish the necessary infrastructure for industry and the establishment of heavy factories that individuals are unable to do. As for the industries that individuals can establish, the first thing is that the state should not conduct industrial and commercial competition for individuals because it is a state sponsor of affairs, not a merchant.

The Profits of Heavy Industry

When the goods and products that originate from the state-owned factories are sold in the internal and external markets, the state naturally obtains profits from them that are an additional revenue for the treasury. The state also obtains profits from the sale of some weapons abroad, provided that the sale of arms is in the interests of the Muslims and does not constitute a supply or aid to the enemy. Consequently, civil manufacturing and weapons generate profits that are an additional resource for the Bait ul-Mal, and are placed within the revenues of the Diwan of Fai’ and Kharaj.

Industry therefore would be an important resource to cover the expenses of the Bait ul-Mal, as it would cover the potential shortfalls for the expenses of the military industries and the cost of the Islamic army. In addition, this new resource keeps pace with modern industrial development. It is not wise to leave such a major economic resource without any of it returning to the treasury.

However, we may encounter an obstacle in providing the necessary funds to initiate the military and heavy industrialization process, especially since we are talking here about the establishment of industry in the first place, so this obstacle must be addressed first.

Providing funds for heavy industry and military industry

If the profits of heavy and military industries are the new resource that will cover a part of the state’s financial revenues, a question arises: How can the necessary capital be provided to start, launch and nurture those industries by acquiring advanced technology, providing raw materials and training so that those factories begin production?

In our opinion, this problem to provide the money needed to launch heavy and military industries is addressed in the following ways:

A- It is permissible for individuals to be partners with the state in the factories of heavy industry

Some public property resources such as oil, gas, gold, iron and others result in money that is distributed in kind or in cash to state citizens, and they can spend these funds in their own affairs or invest them. An appropriate way to invest the money that is surplus to the people’s needs is in industry. A “special fund for the people’s money from public ownership” صندوق خاص بأموال الرعية من الملكية العامة can be established so that the funds resulting from public ownership are placed here as an asset for the individual citizens, from which the costs of electricity, water, sewage services, waste, etc. are deducted, and the rest of the money, which they can invest in state factories instead of receiving the money in cash.

B- Encouraging state nationals to invest their money in the factories of heavy industry

The state encourages individuals, especially the rich owners of capital – with their consent and choice – to become partners in the state’s factories, and in this case they are “partners of money” in these factories.

This musharika (partnership) by the citizens of the state in the factories of heavy industry achieves a number of goals:

  • Provides part of the funds necessary to finance the establishment and operation of the factories of heavy industry
  • Avoids imposing taxes on the ummah, for the purpose of establishing heavy industries in the first place, except in cases of necessity, and this as mentioned provides some funds without the need for taxes or reduces them.
  • Solving the problem of hoarding money that is forbidden by Shariah, and is a way out – in particular – for individuals who cannot invest their money.
  • The state and its partners from among the members of the ummah benefit from the profits from the products of heavy industries, which raises their standard of living.

C – The Treasury benefits from the zakat on industry profits

The Bait ul-Mal benefits from the obligatory zakat it receives on the profits from Muslims selling the products of these industries, in the event that the shariah conditions for the payment of zakat on trade goods are fulfilled.

State policy between commercial profit and looking after the affairs of its citizens

The main engine of civil industries is usually profit, but the state’s use of its property, and the sale of its products, must be dominated by the aspect of taking care of people’s affairs, by fulfilling their interests and providing for their needs. The industries established by the state must be intended to take care of people’s affairs because the origin is care and not profit. The state should not be a merchant, a producer or a businessman. It does not mean to say that looking after the affairs and not profit is the main driver of industry, because this leads to losses for the state, so that industry becomes a burden on the treasury instead of a resource for it. If the industry as a financial resource may be conflicted by these two views, the solution to this apparent contradiction is for the state to give priority to the aspect of care, through the following ways:

  • Meeting the basic and luxury needs of the nation that are not normally available in the markets.
  • Focusing on the establishment of heavy industries that individuals are incapable of establishing themselves.
  • Production in industries that are undesirable for individuals, because there is no suitable profit, or that there is a high risk, or that production takes a long time.
  • Preventing an individual or an entity from controlling basic commodities necessary for people, which would be tantamount to a monopoly.
  • Breaking the monopoly of outside countries on essential commodities whose loss would be detrimental to the nation.
  • The products of state factories are priced reasonably according to the ability of the people to pay, and not commercial prices.
  • Selling goods abroad at reasonable prices to countries in which we desire to spread the da’wah and inspire the hearts of its people.

It is a foregone conclusion that the state will gain profits from the sale of industrial products in all cases. These profits will constitute a new and permanent resource for the Bait al-Mal, which the Khaleefah spends on looking after the interests of the people and on its foreign policy which is jihad in the way of Allah.

Avoiding financial corruption in the state

To immunize the state employees from any financial corruption, the rulers and civil servants should be prohibited from trading or competing with the people of the nation in their commercial businesses. This is because the state’s usage of its property must show the aspect of taking care of people’s affairs, and so must prevent the rulers and civil servants from becoming merchants, businessmen, monopolists or corrupt, especially in light of the heavy industries owned by the state, which generate huge profits for the treasury, and which may tempt some weak-spirited and low-piety state employees, which can become an entry point for financial corruption! As a precaution, the state’s industries are separated from the control of the governors and mayors. Thus, they are prevented from interfering in the affairs of these industries financially.

Umar (ra) used to count the wealth of the governors and mayors before and after he assigned them their mandate, and then confiscate the any wealth gained during their tenure.

It was mentioned in the book “Institutions of the Khilafah State” that the management of heavy industry is carried out by the “Director General of Industry”. He is entrusted by the Khaleefah to supervise all the affairs of state industries, and to sell these products internally, and perhaps externally. All the expenses of industrial affairs and the profits of its products must be subject to the accountability of the head of the treasury, and all data and information must be transparently available upon the request of the National Assembly (Majlis ul-Ummah) or some of its members. It is the right of this council to hold rulers and department heads accountable for all revenues and expenditures in the state. In the penal system, the state must adopt strict punitive provisions for those rulers whose financial corruption is proven (Mal al-Ghulul).


Accordingly, it becomes clear that industry will constitute a new and permanent resource for the Bait al-Mal, avoiding the possibility of other state revenues failing to meet the necessary expenditures for armament and jihad, and avoiding the state imposing taxes or protecting public property. In addition, industrialisation raises the level of the nation economically, and makes it significant in front of other nations which helps in carrying the call, and in the Islamic state becoming a successful model to be followed in the application of the systems of Islam. At the same time, it explains to Muslims the meaning of the fiqh of renewal, and the meaning of creativity in solving problems.

We pray to Allah Almighty to hasten the establishment of the Islamic state in which Muslims are cherished, and whose imam will be a shield for them to fight behind and be feared for. He will establish for them heavy industries that advance the economy and make people tranquil, and prepare the necessary force that terrorizes their enemy, and helps them spread Islam to the world. Amen.