Is the democracy system considered haram in Islam?
Managing a country is similar to managing a business or a village. People should do whatever works best in their circumstances. There is a hadith that says the Muslims will eventually establish a caliphate, but as I discuss here, that hadith is unauthentic. The reality is that Islam forces no particular type of government on us, leaving it to our own judgment. What matters is to minimize oppression, spread justice, and ensure that people’s religious freedom and integrity is maintained. A society that already follows Islam properly will be better off if it is ruled by a democratic system than by a tyrant who does whatever he or she likes. If they are good and pious Muslims, they will vote for politicians who are good and pious like themselves, and in this way the system will be both democratic and ruled by pious people.
Shaykh Yusuf al-Qaradawi says:
The essence [of democracy] is for the people to choose who rules them and directs their path, rather than a ruler forcing a certain direction on them of despite their refusal. This is what Islam recommends through commanding rule by shūrā [counsel] and bayʿa (people giving their vote of allegiance to a ruler), and through criticizing pharaohs and tyrants, and through recommending the choosing of one who has a strong, trustworthy, reliable and knowledgeable character [as a ruler or authority], and through recommending rule by al-sawād al-aʿẓam [the majority], and through saying that God's hand is with the majority. [...]
It is the right of every nation to advise the ruler, to encourage it to do good and forbid it from doing evil, following the proper etiquette in doing these things. [It is also its right to] obey the ruler in good and disobey him in clearly evil things, since there is no obedience to a created being in disobedience of the Creator. [...]
The method of elections and the preferment of those who get the most votes, which democratic systems have settled on, is a method that is good and proper in general terms, even if it is not free from faults. It is better than its alternatives and should be defended against liars, hypocrites and fraudsters.
As for the claim of certain religious people that democracy is against God's rule since it is rule by the people, we say to them: what is meant by the rule of the people is that it is opposed to the absolute rule of the individual, meaning the rule of a dictator. Its meaning is not that it is opposed to the rule of God, since we are speaking of democracy in a Muslim society that is already following God's law.