Fazal Masood Malik and Farhan Khokhar, Canada
In his Friday sermon of 4 April 2025, Hazrat Khalifatul Masih Vaa referenced two financial terms from early Islamic history, “ghanimah” and “fay’”. These concepts, central to the economic system established during Islam’s formative period, offer insights into governance principles that remain relevant today.
At the heart of early Islamic financial administration stood the Bayt al-Mal, literally “the house of wealth” – the public treasury established during the time of the Holy Prophet Muhammadsa and developed under his successors, the Khulafa-e-Rashideen. Unlike royal treasuries in other civilisations, the Bayt al-Mal was founded on a revolutionary principle: these funds belonged not to the ruler but to the community as a whole.
Al-Mawardi, the influential 11th-century jurist, defined treasury wealth as “any property entitled to the Muslim community and not owned by any specific person.” (EI3, “Bayt al-Mal”) This communitarian conception of public finance represented a significant departure from prevailing norms of the time, when state coffers were typically viewed as extensions of monarchical power.
While the term ‘Bayt al-Mal’ itself does not appear in the Holy Quran, the concept’s foundations are firmly established there. The idea of systematic resource management can be traced to the time of Prophet Yusufas, with the Holy Quran mentioning his oversight of “khazain al-ard” (treasures of the land) in Surah Yusuf (12:56). During the life of the Holy Prophet Muhammadsa, funds like zakat and spoils of war (ghanimah, fay’) were typically distributed immediately rather than held in a formal treasury. The Holy Quran, nevertheless, provides detailed guidance on these revenue sources that would later fall under the Bayt al-Mal administration. The formal institution and terminology emerged during the Khilafat of Hazrat Umar ibn al-Khattabra. Expanding upon the system set up by the Holy Prophetsa and Hazrat Abu Bakrra, Hazrat Umarra systematised principles and established a formal building designated as the treasury. What distinguished the Islamic treasury system was its categorisation of revenue sources, each with specific rules for collection and distribution. (For a detailed reading, see “The Islamic Economic System: Origins of the Arabian economy – Part I”, www.alhakam.org, through to part 8)
Ghanimah (The spoils of war)
Ghanimah referred to property acquired from enemies during military engagements. The Holy Quran established clear guidelines for its distribution in verse 8:42, stipulating that one-fifth (al-khums) should be reserved for God, the Prophetsa, relatives, orphans, the needy and travellers – essentially, for public welfare. The remaining four-fifths were distributed among those who participated in the campaign.
The various legal schools differed on handling immovable property such as conquered lands. The Shafi‘is argued these should be distributed like other spoils, while the Malikis and Imami Shi‘is maintained they should become state property. The Hanafis and Hanbalis offered a pragmatic middle ground, allowing the head of state to choose between distribution or leaving the land with its original inhabitant, who would then pay land tax (kharaj) to benefit the broader Muslim community. (Rahim, Abdur, Sir, The Principles of Muhammadan Jurisprudence According to the Hanafi, Maliki, Shafi‘i and Hanbali Schools, London: Luzac, 1911; Also, for a general discussion, see Abou El Fadl, Khaled, “Chapter 5,” in Rebellion and Violence in Islamic Law, Cambridge: Cambridge University Press, 2001)
Fayʾ
More interesting from a governance perspective was fayʾ – property acquired without military confrontation, “without the Muslims having fought them on horses or on foot.” This category included land taxes (kharaj), poll taxes from non-Muslim subjects (jizya), tributes from peaceful settlements and evacuated properties.
The distribution of fayʾ followed guidelines in Quran 59:8, though interpretations varied. Some scholars saw a similar distribution pattern to ghanimah, while others maintained that all fayʾ revenue should fund public interests: defence, infrastructure, religious institutions and administration. The distinction reveals an early understanding of different revenue streams requiring different allocation principles – a sophistication sometimes lacking in modern fiscal systems.
The treasury also claimed proceeds from mines, buried treasure (a form of inheritance tax) and estates of those who died without heirs. Religious contributions (zakat) were also collected, though these were earmarked for specific beneficiaries rather than general treasury use. (Sajjadi, Sadeq, and translated by Rahim Gholami, “Bayt al-Māl,” in Encyclopaedia Islamica Online, Brill, 2015)
Institutional evolution
The simple treasury system set up by the Holy Prophetsa evolved considerably over time. The Second Khalifa, Hazrat Umarra introduced the diwan – a registry system recording beneficiaries and systematising distribution. Under the Abbasids, specialised departments emerged for accountancy (diwan al-zimam), expenditure (diwan al-nafaqat) and military finance (diwan al-jaysh).
By the Ottoman period, a clear distinction was maintained between the Sultan’s private wealth (Khazine-i Enderun) and public treasuries (Khazine-i Emiriyye) – institutionalising the principle that rulers must not commingle personal and state resources.
The concepts behind the Bayt al-Mal continue to influence contemporary institutions. Modern versions exist in Malaysia, Indonesia and within organisations like Jamaat Ahmadiyya. The challenge is to faithfully adopt historical principles to present-day economic realities.
These adaptations maintain core principles, such as public funds belong to the community, not to leaders; different revenue sources may warrant different distribution approaches; and transparent administration is essential to maintaining trust.
The Islamic approach to spoils of war and conquered territories stands in stark contrast to various Western historical practices. Throughout much of European history, conquered territories and their wealth were often treated as the personal property of monarchs or distributed among victorious generals and nobles with little consideration for public welfare. The “right of conquest” doctrine legitimised the wholesale appropriation of enemy property without the nuanced categorisation found in Islamic jurisprudence. (Korman, Sharon, ‘Introduction’, The Right of Conquest: The Acquisition of Territory by Force in International Law and Practice, Oxford, 2001; online edition, Oxford Academic, 31 October 2023)
Perhaps the most cautionary modern example comes from the aftermath of World War I. The Treaty of Versailles imposed crushing reparations on Germany, demanding approximately 132 billion gold marks (equivalent to about $442 billion in 2025). These punitive economic measures – effectively treating an entire nation as spoils of war – devastated the German economy, contributed to hyperinflation and created conditions that historians widely recognised as contributing factors to the rise of Nazism and eventually World War II.
The contrasting approach in Islam offers an interesting counterpoint. When Western powers shifted to more balanced approaches after World War II, particularly with the Marshall Plan’s reconstructive focus, they achieved more sustainable peace. This evolution toward rehabilitation rather than pure extraction is a reflection of Islamic teachings, that justice must be established, especially if you are the conqueror. Otherwise, generations will remember the injustice and strike back.
This moral dimension of Islamic teaching can be seen directly in the personal example set by the Holy Prophet Muhammadsa. Take, for example, his conduct after his victory at the Battle of Khyber in 628 CE. After defeating the formidable Jewish fortresses at Khyber, the Holy Prophetsa could have imposed any terms he wished – enslavement, expulsion, or execution were common practices of victorious armies throughout history.
Instead, he introduced a remarkable arrangement, one that the inhabitants would retain their lands and continue farming them while giving half of their produce as tribute. This system acknowledged both practical realities (the Muslims lacked sufficient farmers to work the land) and humanitarian concerns (preventing displacement and destitution). When the Jewish residents requested to continue cultivating their date palms and fields, the Prophetsa agreed, recognising the value of their agricultural expertise. (Friday Sermon, 28 February 2025 and 4 April 2025)
This arrangement became a model for later Islamic conquests and influenced the development of kharaj (land tax) systems. The willingness of the Holy Prophetsa to demonstrate mercy and pragmatism when holding complete power established a precedent that shaped Islamic jurisprudence regarding conquered peoples and territories for centuries.
Unlike other victors who sought revenge, the Holy Prophetsa prioritised sustainable arrangements. Instead of seeing only treasures for taking, he recognised the value of maintaining functioning communities. This remarkable self-restraint when holding complete power became the ethical foundation for an Islamic government’s financial systems.
We are blessed today that by highlighting these financial concepts in his various sermons, Hazrat Khalifatul Masih Vaa has illuminated principles that are relevant in contemporary society. The careful categorisation of revenues, the emphasis on communal ownership and the clear demarcation between personal and public resources offer a framework for ethical financial management relevant to both religious communities and secular institutions today.
In a world where public finance is often seen as disconnected from ethical considerations, these Islamic principles offer a reminder that fiscal systems reflect fundamental values about community, leadership and shared resources. The Bayt al-Mal wasn’t merely an administrative innovation – it embodied a vision of governance where public wealth serves the public good, a concept as revolutionary today as it was fourteen hundred years ago.