SAVING
The Qur’an makes a significant departure from the common economic wisdom by completely ignoring any positive mention of saving as an act of virtue. Not only that, it goes further in emphasising the significance of infaq (spending to earn the pleasure of Allah) as one of the most significant acts of piety. A Muslim scholar has, after quoting a few verses of the Qur’an urging the believer to spend in the way of Allah, rightly concluded that ‘the real spirit [of these verses] is that wealth is not meant for saving and accumulating but for spending…’ (Sioharvi 1984, 53). Saving, in fact, is penalised by a levy of compulsory zakah (involuntary infaq) every year. In short Islam encourages the believer to spend and discourages them from saving.

It needs to be clarified, however, that extravagant spending on personal consumption is strongly condemned by the Qur’an. Qur’anic  encouragement for spending should, therefore, be understood within that context as meaning only a believer’s spending on justifiable personal needs, needs of others — whether close relatives, friends, neighbours, or the needy belonging to none of these categories — and the important national needs of defence, public welfare, or projects of economic development.

The most forceful condemnation of saving despite the existence of genuine avenues of infaq is offered in the Qur’an thus: To those who accumulate gold and silver, and do not spend in the way of Allah, announce the news of a painful punishment. On the day when heat will be produced out of that (wealth) in the fire of Hell, and with it will be branded their foreheads, their flanks, and their backs (and it will be said): ‘This is the (treasure) which you stored up for yourselves, so now taste of what you had stored’ (the Qur’an , 9:34-5)

Not all Muslims, however, believe that the above-mentioned verse and others carrying similar messages are condemning unnecessary accumulation of wealth. It is reported that when Ibn ‘Umar (raa), the companion of the Prophet (sws), was asked about the meaning of the verse, he said that it referred to a person who accumulates wealth without paying zakah on it. According to him the verse was revealed before payment of zakah was made compulsory. After the introduction of zakah, wealth in possession of an individual is purified even if he accumulates it (Bukhari, Vol. 1, 651). Ibn ‘Umar (raa) is also reported to have said that after an individual pays zakah, he cannot be blamed even if he keeps his wealth deep down in the soil. The same is the view of Jabir and Qurtubi, the interpretors of the Qur’an (Qurtubi 1952, Vol. 8, 125).

It has been claimed that ‘Muslim economists, agree that savings are a necessary, though not sufficient on condition for more growth and development’. Chapra believes that savings should be positively encouraged in an Islamic society and that it would be desirable to inculcate saving and banking habits among the masses. Al-Naggar has expressed his conviction that the basis of dynamic economic growth is an increased volume of saving.

Some others might argue that in a situation where a Muslim nation needs rapid economic progress through large-scale investment, saving for investment should, for religious purposes, be regarded as equivalent to infaq because of its role in the economic advancement of Muslims. In fact, it has been argued that under some conditions ‘the more people spend on consumption, the greater is the incentive for businessmen to build new factories and equipment’ (Samuelson). Keynesian economists, in fact, view savings as a leakage out of the circular flow of money (Wilson) and consider it desirable for currency to circulate; on the contrary, accumulation of the means of exchange for its own sake is seen as undesirable (Baldwin and Wilson). 

There is, however, a strong belief that despite the fact that saving is a leakage from the income stream, it is still very essential to save in banks because in that way funds are channelled back into the expenditure stream as the borrowers of those funds use them in spending in the economy (Ranlett). Although this suggestion is quite valid, it is inconsistent with the Islamic teachings which emphasise spending. What is saved by a depositor in a bank is saving from his personal point of view whether it is actually channelled back into the economy or not. It should either be spent on others or invested directly in a project. Islam wants; first and foremost, that spending on others should be done with true intentions of pleasing Allah by helping them. The help extended to others through financial intermediation, should not amount to helping others by pleasing oneself in receiving interest or profit from banks.