And whatever the Almighty has bestowed on His Prophet from the people of the cities, it is reserved for Allah and His Prophet and the relatives of the Prophet¹ and the orphans and the needy and the wayfarers so that it may not circulate in only the rich among you. (59:7)

    The context of this verse is that in the Prophet’s times when people demanded that the wealth, land and assets obtained from the enemy without waging war against it be distributed among them, the Qur’an refused this demand; it asserted that they belong to Allah and the Prophet (sws) and are reserved for the collective requirements of the state and religion, and for the poor and needy. This, according to the Qur’an, was necessary so that wealth should not get concentrated in the rich and that it be directed to those sectors of the society as well who because of their natural disabilities and lack of resources are unable to struggle for their livelihood or for some reason are left far behind others in earning for themselves. 
    Since the wealth and assets referred to in the above mentioned verse were obtained without any assistance from the believers merely through the Almighty’s help, all of these were reserved for collective purposes. The spoils of war obtained in the times of the Prophet (sws) in various battles fought in Arabia were owned by Allah and the Prophet (sws)² as well because of the peculiar nature of these armed offensives. However, since the believers had also assisted in acquiring them by using their personal weapons, camels and horses as well as the food and camps needed during these wars, it was necessary to give them their due from these spoils. Nevertheless, even in these spoils the Qur’an reserved 1/5 th of the share for these collective purposes: 

[You should] know that a fifth of the spoils you get hold of are for Allah and the Prophet and the near relatives and the orphans and the needy and the wayfarer. (8:41)

    If the terminology of our times is used, we can say that it is the purport of the Qur’an that in the economy of a country a public sector should come into being parallel to the private sector. The reason is that at the state level, this is the only way through which a balance can be achieved in the circulation of wealth, and the problem of concentration of wealth in certain sections of the society as a result of the development of private sector can be resolved in an organized and planned manner. 
    As far as the way this public wealth and property are to be organized is concerned, the Shari`ah has left the matter to the circumstances which prevail in a society and upon the general well-being of the Muslims. Therefore, the ruler of an Islamic state in consultation with the elected representatives can adopt whatever measures he deems appropriate in this regard. 
    Consequently, it is known that the Prophet (sws) in his times gave the lands of Khaybar for crop sharing<sup>3</sup>, left certain lands under the permanent control of certain people for which these lands had been reserved<sup>4</sup>, regarded certain lands as Hima<sup>5</sup>, left certain things to be shared equally by every one<sup>6</sup>, fixed the principle of `the nearest, then the next nearest …’ for using the water of certain springs and canals⁷ or the way the Caliph `Umar (rta) imposed a fixed amount of tribute (Kharaj) on the state owned lands of Syria and Iraq conquered in his times, according to the extent of their produce while leaving them in the hands of their owners⁸. 
 

^1. Since the Prophet (sws) had stopped his relatives from taking a share from the sadaqat, a portion of this collective wealth was also reserved for them. 
^2. They ask you about the spoils of war. Say: The spoils belong to Allah and the Prophet. (8:1) 
^3. Muslim, Kitab al-Masaqat, Ch 5 
^4. Abu Da`ud, Kitab al-Kharaj wa al-Fay wa al-Imarah, Ch 34 
^5. Bukhari, Kitab al-Masaqat, Ch 11 
^6. Ibn Majah, Kitab al-Rahun, Ch 16 
^7. Bukhari, Kitab al-Masaqat, Ch 7 
^8. Kitab al-Kharaj, Abu Yusuf, Pgs 26-29