Basic Difference Between Capitalist & Islamic Economy

Capitalist or conventional economy focus solely or mainly on profit motive which always lead to 'end justifies the mean'. This objective is not controlled by any divine injunctions. Islamic economy, on the other hand, set the divine injunction as the ultimate objective which cannot be breached in any circumstances. Board of Directors (BOD) is the highest authority in capitalist organisation whilst Shariah Supervisory Council (SSC) rank at par (at least) with BOD in an Islamic organisation. The ideal situation is that SSC must be the highest authority however in reality they stand at par with BOD.

BOD members mainly dedicate their responsibilities to enhance the shareholders value. One may argue that the non-independent BOD members are responsible to balance the objective for shareholders and other stakeholders but in reality those members have insignificant vote in the board meetings. Thus, SSC members play the role to oversee with respect to the benefits attributable to other stakeholders especially society at large. They should not in any circumstances be victimized for the sake of profits.

Let's evaluate based on simple example as follows:

A company applies a loan or financing from a bank to setup it's business or for business expansion. Under conventional bank, feasibility study of the bank mainly in terms of ability to repay the debt is the main concern. Should the study confirm to be positive then the application may likely be approved. Similar concern is also applicable in an Islamic financing process however SSC will also evaluate the type of business whether any element of detrimental to the society will result besides all prohibitions or 'haram'. In other words, the Islamic economy will protect the public at large in any business transaction. As for conventional insurance and takaful, similar process of consideration applies.

Capitalist economy lead to monopoly environment whilst Islamic on free market based on demand and supply.