In light of the IIE process-centered understanding of socio-scientific reality, all Islamic economic and financial instruments are to be taken up in such a systemically unified knowledge-induced general equilibrium framework. The instruments so developed can then be explained in terms of causal interrelationships. The epistemology of Divine Unity and its reflection in these instruments can then be made to explain the endogenous nature of ethics (i.e. knowledge flows) within a systemic world view of unity of knowledge. 

The five major Islamic economic and financial instruments are, (1) abolition of interest, (2) profit-sharing under economic cooperation between labour and capital, (3) joint ventures, principally though not wholly through equity participation; (4) the institution of charity; (5) avoidance of wasteful use of resources. Many more instruments can be evolved from a combination of these five. 

Abolition of Interest

In the general systems-oriented understanding of Islamic ethico-economics, the ethical and economic meaning of abolition of interest are fused together. Let us then understand why abolition of interest becomes mandatory in such a framework of analysis.

The presence of interest in financial and economic activities implies dissociation between two major sectors of the economy. These are the monetary sector and the productive sector. Money is treated as a commodity of the monetary sector. Its price is made to capitalize risk that indeed can be avoided in alternative ways. Risk is assumed to exist ex-ante because the holder of money can subjectively assign risk and then impute it in his price for money, which is the rate of interest. Hence assuming ex-ante risk to exist generates earnings to the money lender. Alternatively however, risk could have been avoided or reduced by resource mobilization, instead of holding it in the bank or in speculative outlets. Money is not saved but mobilized in the real economic sectors to earn real economic returns. The real sector then pays off the returns on loanable funds. 

In the macroeconomy as well, the policy to stabilize inflation, to slow down the excess demand for investment resources, and attract world savings into the national economy, reflect the government�s approach to make the monetary sector act independently of the real sector. In these cases the rate of interest is used as a basic monetary instrument. Consequently, the potentiality for reducing macroeconomic instability and dis-equilibrium otherwise by generating real sectoral linkage with money capital flows, is ignored. The end result is that the monetary sector gains over the real sector through the profits earned on loanable funds. The two sectors are thus once again de-linked through such a competition.

Knowing that the rich gain from the money markets in terms of earnings of interest and the poor gains by real sectoral activity, the above independence between the two sectors can be seen to adversely affect the poor. The ethical acquisition of wealth and the social order are thereby made increasingly unjust. Indeed, in recent times the feverish run for interest-bearing speculative funds in the global financial markets have left the national economies in disorder and their poor adversely affected on all fronts. 

In terms of the intertemporal accumulative nature of savings seen as withdrawal of spending from potential productive ventures, this causes those who hold money to take advantage by earning interest on such savings. Savings thus become an incentive that is causally related with interest rates. The separation of savings as an economic activity from the activity of spending causes competition between the money market and the product market. Savings draw resources into the monetary sector. Resources thereby, leave the real sector when interest rate prevails as an incentive to savings against spending. Savings thus once again cause the economy to be de-linked between these competing sectors and activities. Indeed the neutrality of monetary policy on full-employment income is the result of an economy in which the real sector has become unyielding. This leaves the monetary sector to be unyielding on productivity. 

The outlook of the Islamic economy is to make spending as the basis of resource mobilization. Thus when households put monies in Islamic banks, such funds are to be mobilized by the banks in order to earn returns from permissible productive investments. The return on such resources is the return on the real sectoral venture. There is no return of money on money. Money is simply an ex-post medium for servicing the real sectoral demand for permissible and productive activities. Risk is shared between agents and sectors in terms of the magnitude of the real sectoral rates of return. The concept of saving as withdrawal from spending is replaced by the idea of resource mobilization into permissible and productive investments through Islamic banks. Banks must rapidly turn money capital into real capital through entrepreneurial activities (Choudhury 1997).. 

Contrary to the resource mobilization mechanism, interest bearing financing window determines a subjectively advance estimate for uncapitalized risk to the savers or the borrower in the hope that they can secure a guaranteed return on savings. This price, which is the rate of interest, is a marginal substitution rate on real yield. Intertemporal discounting then ensues in the subjective capitalization method for evaluating risky ventures in an interest-based financial system. Discount rates used are neither objective nor risk-free. The very existence of uncapitalized risk and its pricing by the rate of interest over time implies a permanent constriction of the flow of resources into the real sector. This kills entrepreneurial spirit. An economy cannot be sustained along a development path in such uncertain and socially costly conditions.

Profit-sharing Under Economic Cooperation

In order to replace interest transactions, the Islamic economy provides incentives to mobilize resources into permissible and productive joint ventures. Through such participation and extension of cooperative agents and projects across the economy, an effective diversification of production, investments and risk is attainable. Thus risk pricing by means of the rate of interest is replaced by expected rates of returns. The real sectoral returns are shared ex-post by the participants in cooperative ventures. The marginalizing competition between the monetary sector and the real sector, between owners of capital and labour, and thus between the rich and poor caused by the prevalence of interest, are all replaced by participatory ventures. In this way, resource mobilization through profit-sharing is causally related with complementarity among economic activities and agents.

In the production sector, complementarity between factors of production (capital and labour) is brought about by the choice of equally capital-labour augmenting technological change and by extensive participatory ventures economy-wide. Now both entitlement and empowerment, which are consequences of participatory decision-making and cooperative sharing of risk and returns, are realized. In the macroeconomy, the monetary sector where the financial capitalists prevail, and the productive sector where labour prevails, are interconnected by means of complementarity between these sectors and agents.

In Islamic profit-sharing under economic cooperation, because of the exclusive liability of capital in joint ventures, capital owners assume all financial costs in the case of losses and business dissolution. On the other hand, labour can opt to delay taking dividends and/or defer portions of wage payments in such participatory enterprises. There are however, innovative methods that can be established to circumvent the problem of risk and costs in enterprises. One such option is a development fund generated with accruals from wages and profits for use during times of exigency. Such pooled funds can also be treated as a wage and corporate insurance. The range of enterprise linkages and activities is thus broadened and diversified. The result is risk and product diversification.

The concept of sharing time as an investment resource by labour for a deferred return can be considered as another innovative means of capitalizing shareholding between capital and labour in an enterprise and among many enterprises for that matter. All of these possibilities affirm the principle of complementarity among factors, resources, goods, ventures and sectors through a production relationship that is contrary to the de-linking nature of interest-based financing of enterprise (Vanek 1977).

Variable contracts in profit-sharing between capital and labour is yet another mode that can increasing the entitlement of labour and generate more resource flows in the economy through heightened participation and wealth mobilization. In a purely participatory Islamic economy such kinds of variable financial contracts would also be linked with choices on options and links by way of indexes of financial holding in the emerging resources and investment funds. 

Joint Ventures and Equity Participation

Owners of capital can cooperate with each other in extending their investment resources and also in diversifying risk and ventures by outlays over an expanding economic space. Risk and product diversification so caused by extension of pooled resources also removes the relevance of interest pricing of risk, in which case money and product markets remain detached and compete for independent gains. Interest rates are thus effectively replaced by actual ex-post sharing of returns on ventures with realized and fully evaluated risk.

Although Islamic economists have treated profit-sharing and equity participation in separate ways, there is neither reason for nor efficacy in doing so. Since capital and labour are complementary in the Islamic economy and equity participation is another cooperative mechanism among capitalists, therefore, increasing numbers of enterprise and labour are realized and interconnected by a mix between profit-sharing and equity-participation, both taken up as participatory entrepreneurial activities.

Consequently, in the case of equity-participation a contractual undertaking between owners of capital is also a contract between capital and labour and thus between and among all. This means a systemic extension of the resource mobilization process across the Islamic economy. Such an extensive participation must be upheld if interest is to be eliminated. Hence the principle of complementarity relates money capital to productive ventures. In the same way, joint ventures and equity-participation must serve the wider empowering and entitlement generating effects of labour and capital within an entrepreneurial framework with increasing decision-making possibilities.

In a systemic view of the Islamic economy there is no need to particularly differentiate profit-sharing from equity-financing, except to identify the sources of funds and the contractual claims on dividends by the participants. But in the general systems framework the causal interrelationships among resource flows from one to another do not make a difference in terms of specificity of the sources of funds. Registering the specificity of sources of such funds is not of any economic significance; it is simply a matter for legal and accounting viablity of contracts. 

In such a general systems framework it is interesting to examine the role that such resource flows can play in establishing a dynamic equilibrium system with endogenous ethics in it. Ethics is represented in Islamic systemic world-systems by their intrinsic presence in all entities as knowledge flows derived epistemologically. Thus when universal complementarity prevails across diversity in the Islamic economy, unity in this sense is to be taken as a sign of unification of knowledge of the various agencies, sectors, variables and their relations. Such a complementary process is realized through participation. This is realized through the above two financial instruments. It is also reflected in terms of engineering methods that enable such evolutionary systems of interactions and integration to be analytically studied (Shakun 1988).

The Institution of Charity

Charity in Islam has a wide meaning. Zakah as charity is a mandatory take on wealth for specific purposes of meeting a wide range of social responsibilities as explained in the Qur�an (Chapter 2, verse 177). One of these social mandates is poverty alleviation. Here zakah guarantees basic needs to the needy and establishes social as well as distributive justice. The use of zakah can be seen as an example of the deontological (rights and duties) aspect of ethical market transformation. �Deontological consequentialism� of markets is a social problem that we showed has occupied Sen�s interest in his theory of social well-being and agency. 

Sadaqah is another form of charity. It is exclusively voluntary and meant to be spent on the destitute. There is however, no reason why sadaqah cannot be organized on the same format as zakah. This inference follows from a verse of the Qur�an that identifies the two with similar modes of expenditure. See Qur�an, Chapter 2, verses 177 and 215. Verse 177 is specific on zakah, whereas verse 215 mentions charity broadly, and yet the organization of expenditure is the same. Consequently, the implication of overall organization of zakah can be generalized for all forms of charity, including voluntary sadaqah.

The meaning of charity in Islam goes beyond zakah and sadaqah. Endowing public property for the general benefit of the needy community (waqf), building an environmental enclave (hima) for ecological balance, and in general goods and exchanges in society individually and collectively, are forms of charity. Thus charity becomes a widely accepted resource flow in the grants economy with the elements of both a monetary as well as a social asset and returns associated with it. In this sense, charity induces linkages between groups and socioeconomic possibilities. The goal is to mobilize charity for attaining social justice, equality and distributive justice, and productive transformation of the recipients of charity and activities in and by the endowed assets. 

Charity in Islam is not meant to generate free-ridership. That is, it is not considered as an outlay without a useful return that favourable influences socioeconomic transformation. Consequently, charity is to be understood as a medium for a socially productive mobilization of excess resources from the wealthy to the needy for enabling both of these groups to interact, integrate and prosper in the social economy. The wealthy promotes such integration by participating in the social needs through spending his excess resources. The needy participates by utilizing resources in productive activities towards transforming his state of poverty. This necessitates complementarity among the whole gamut of inter-sectoral linkages, economy-wide participation, as we explained earlier. The mutual interest between the rich and poor in this act of sharing in the charitable enterprise is the prospect of attaining social stability and a grants economy that delivers social goods as returns to all.

In such a milieu of productive transformation comes about the importance of resource flows through the participatory economic instruments of profit-sharing and equity-participation. The increasing presence of such instruments in the face of the inverse relationship between such participatory economic instruments and interest rate, phases out the interest rate regime. A general systems treatment of charity as resource augmentation enhances the productive capacity of the poor along with establishing enterprises for them. Such an approach can manage to integrate the poor in the hub of mainstream economic activities, in trade and development, and in entitlement and empowerment through participatory decision-making, as human resource advances. 

There are many innovative ways in which charitable resources including zakah and sadaqah can be mobilized for the above kind of productive and ameliorative transformation. One example is the setting up of a development fund that will encourage informal labour force activity including human resource development in the case when below subsistence wages cause discouragement effects and low calorific intake by the poor (Choudhury & Hasan 1998). In such a case, wage exploitation of low-wage earners by employers can be avoided while productive activity continues on to be enhanced. Such a development fund can be set up by giving an international perspective to Islamic charity as a source of resource flows from the wealthy to the needy groups in the Islamic world. The total mobilization of emerging productivity of the poor along with the rich through participatory ventures where zakah funds can be mobilized enhances the total wealth formation through productive mobilization of resources. This in turn increases the total national output, resources and wealth.

Indeed, zakah is a claim on wealth, not simply on cash balances and discretionary income. In the Islamic economy, wealth is formed through capital mobilization by means of a productive regeneration of returns in appropriate channels. Such a conception of production of wealth when combined with the equitable distribution of wealth, which depends upon charity, most importantly zakah, signifies a linkage between zakah and the ethical production and distribution of wealth. Zakah cannot therefore, cause a disincentive effect on the productive transformation of resources into wealth. 

Such a way of generating and distributing wealth is unlike the case of capital accumulation by means of savings using the instrument of interest rate. In this case, the presence of interest rate harms productive activity by limiting the supply of loanable funds and inflating the cost of investment. The rate of return is then negatively affected by interest rate. Productive assets and monetary assets remain competing and negatively affected in the presence of interest rates as the price of money capital.

Avoidance of Wasteful Use of Resources

The attainment of all of the above-mentioned Shari�ah instruments is based on the avoidance of wasteful use of resources that cause leakages in the socioeconomic system and hence scarcity. Scarcity then returns back to neo-classical resource allocation and this re-introduces marginalism and its associated postulate of methodological individualism as we found in the case of the classical and neo-classical schools. Only with waste reduced in the economy can diversity be realized and maintained. Thereby, cost and risk diversification can be attained. The result is the possibility of attaining complementarity among possibilities of the real economy in terms of its goods, services, agents and variables and their various relations. 

The avoidance of waste is extended from the demand side to the supply side (production side). On the demand side the promotion of dynamic basic needs of life will necessitate a human ecological balance to be maintained. This will preserve price stability of the Islamic economy and provide plenty for the sustenance of life. Such preconditions result in the nature of near normal profit levels. On the production side the response to the interactive process of knowledge sharing between consumers and producers will result in the appropriate kinds of dynamic basic needs to be produced. Consequently, the choice of production menu based on complementarity between buyers and sellers and between goods produced is an organizational concept of biodiversity of production. It is an important part of sustainability emanating from the production side. Thus in the general systems perspective of the Islamic economy interactions between the two sides through interchange of knowledge flows preserve the ecological balance. Sustainability in such a concept is causally related to the avoidance of waste.