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Islamic economics

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Islamic economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

refers to the body of Islamic studies
Islamic studies
In a Muslim context, Islamic studies can be an umbrella term for all virtually all of academia, both originally researched and as defined by the Islamization of knowledge...

 literature that "identifies and promotes an economic order that conforms to Islamic scripture and traditions," and in the economic world an interest-free Islamic banking system, grounded in Sharia
Sharia
Sharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...

's condemnation of interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

 (riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...

). The literature has been developed "since the late 1940s, and especially since the mid-1960s." The banking system developed during the 1970s. The central features of Islamic economic literature have been summarized as the following: "behavioral norms" derived from the Quran and Sunna
Sunnah
The word literally means a clear, well trodden, busy and plain surfaced road. In the discussion of the sources of religion, Sunnah denotes the practice of Prophet Muhammad that he taught and practically instituted as a teacher of the sharī‘ah and the best exemplar...

, zakat
Zakat
Zakāt , one of the Five Pillars of Islam, is the giving of a fixed portion of one's wealth to charity, generally to the poor and needy.-History:Zakat, a practice initiated by Muhammed himself, has played an important role throughout Islamic history...

 tax as the basis of Islamic fiscal policy, and prohibition of interest.

In Shia Islam, some scholars--such as Mahmoud Taleghani
Mahmoud Taleghani
Ayatollah Mahmoud Taleghani was an Iranian theologian, humanist, Muslim reformer, democracy advocate and a senior Shi'a cleric of Iran. Taleghani was a contemporary of the Iranian Revolutionary leader Ayatollah Ruhollah Khomeini and a leader in his own right of Iran's Shi'a resistance movement...

 and Mohammad Baqir al-Sadr--have developed an "Islamic economics" emphasizing the uplifting of the deprived masses, a major role for the state in matters such as circulation and equitable distribution of wealth, and a reward to participants in the marketplace for being exposed to risk and/or liability.

Islamist movements and authors generally describe an Islamic economic system as neither Socialist
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

 nor Capitalist
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

, but as a "third way" with none of the drawbacks of the other two systems.

History


Traditional Islamic concepts having to do with economics included
  • zakat
    Zakat
    Zakāt , one of the Five Pillars of Islam, is the giving of a fixed portion of one's wealth to charity, generally to the poor and needy.-History:Zakat, a practice initiated by Muhammed himself, has played an important role throughout Islamic history...

    - the "taxing of certain goods, such as harvest, with an eye to allocating these taxes to expenditures that are also explicitly defined, such as aid to the needy."
  • gharar - "the interdiction of chance ... that is, of the presence of any element of uncertainty, in a contract (which excludes not only insurance but also the lending of money without participation in the risks)."
  • riba
    Riba
    Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...

    - "referred to as usury (modern Islamic economists have consensus that it does not refer to usury only rather Riba is any kind of interest)"


These concepts, like others in Islamic law, came from the "prescriptions, anecdotes, examples, and words of Muhammad, all gathered together and systematized by commentators according to an inductive, casuistic method." Sometimes other sources such as al-urf (custom), al-aql (reason
Reason
Reason is a term that refers to the capacity human beings have to make sense of things, to establish and verify facts, and to change or justify practices, institutions, and beliefs. It is closely associated with such characteristically human activities as philosophy, science, language, ...

), or al-ijma
Ijma
Ijmāʿ is an Arabic term referring to the consensus of the Muslim community. Various schools of thought within Islamic jurisprudence may define this consensus as that of the first generation of Muslims only; the consensus of the first three generations of Muslims; the consensus of the jurists...

 (consensus of the jurists) were employed.

In addition, Islamic law has developed areas of law that correspond to secular laws of contracts and torts.

Early reforms under Islam


Some argue early Islamic theory and practice formed a "coherent" economic system with "a blueprint for a new order in society, in which all participants would be treated more fairly". Michael Bonner, for example, has written that an "economy of poverty" prevailed in Islam until 13th and 14th century. Under this system God's guidance made sure the flow of money and goods was "purified" by being channeled from those who had much of it to those who had little by encouraging zakat
Zakat
Zakāt , one of the Five Pillars of Islam, is the giving of a fixed portion of one's wealth to charity, generally to the poor and needy.-History:Zakat, a practice initiated by Muhammed himself, has played an important role throughout Islamic history...

 (tax) and discouraging riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...

 (usury
Usury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...

/interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

) on loans. Bonner maintains Muhammad also helped poor traders by allowing only tents (not permanent buildings) in the market of Medina, and by not charging fees and rents there.

Classical Muslim economic thought


To some degree, the early Muslims based their economic
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 analyses on the Qur'an
Qur'an
The Quran , also transliterated Qur'an, Koran, Alcoran, Qur’ān, Coran, Kuran, and al-Qur’ān, is the central religious text of Islam, which Muslims consider the verbatim word of God . It is regarded widely as the finest piece of literature in the Arabic language...

 (such as opposition to riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...

, meaning usury
Usury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...

/interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

), and from sunnah
Sunnah
The word literally means a clear, well trodden, busy and plain surfaced road. In the discussion of the sources of religion, Sunnah denotes the practice of Prophet Muhammad that he taught and practically instituted as a teacher of the sharī‘ah and the best exemplar...

, the sayings and doings of Muhammad
Muhammad
Muhammad |ligature]] at U+FDF4 ;Arabic pronunciation varies regionally; the first vowel ranges from ~~; the second and the last vowel: ~~~. There are dialects which have no stress. In Egypt, it is pronounced not in religious contexts...

.

Amongst the important early Muslim scholars who made valuable contributions to economic theory are Abu Yusuf
Abu Yusuf
Yaqub ibn Ibrahim al-Ansari, better known as Abu Yusuf was a student of legist Abu Hanifah who helped spread the influence of the Hanafi school of Islamic law through his writings and the government positions he held.-Biography:...

 (d. 798), Al-Mawardi
Al-Mawardi
Abu al-Hasan Ali Ibn Muhammad Ibn Habib al-Mawardi , known in Latin as Alboacen , was an Arab Muslim jurist of the Shafi'i school most remembered for his works on religion, government, the caliphate, and public and constitutional law during a time of political turmoil...

 (d. 1058), Ibn Hazm
Ibn Hazm
Abū Muḥammad ʿAlī ibn Aḥmad ibn Saʿīd ibn Ḥazm ) was an Andalusian philosopher, litterateur, psychologist, historian, jurist and theologian born in Córdoba, present-day Spain...

 (d. 1064), Al-Sarakhsi (d. 1090), Al-Tusi (d. 1093), Al-Ghazali
Al-Ghazali
Abu Hāmed Mohammad ibn Mohammad al-Ghazzālī , known as Algazel to the western medieval world, born and died in Tus, in the Khorasan province of Persia was a Persian Muslim theologian, jurist, philosopher, and mystic....

 (d. 1111), Al-Dimashqi
Abu al-Fadl Ja'far ibn 'Ali al-Dimashqi
Abū al-Faḍl Jaʻfar ibn ʻAlī al-Dimashqī was a prosperous Muslim merchant from Damascus. He is best known for being the author of Kitab al-Isharah ila Mahasin at-Tijarah wa Marifat Jayyid al-A’rad wa Kadiiha wa Ghush-ush al-Mudallisin fiha Abū al-Faḍl Jaʻfar ibn ʻAlī al-Dimashqī was a prosperous...

 (d. after 1175), Ibn Rushd (d. 1187), Ibn Taymiyyah (d.1328), Ibn al-Ukhuwwah (d. 1329), Ibn al-Qayyim
Ibn al-Qayyim
Muhammad ibn Abu Bakr...

 (d. 1350), Al-Shatibi (d. 1388), Ibn Khaldun
Ibn Khaldun
Ibn Khaldūn or Ibn Khaldoun was an Arab Tunisian historiographer and historian who is often viewed as one of the forerunners of modern historiography, sociology and economics...

 (d. 1406), Al-Maqrizi
Al-Maqrizi
Taqi al-Din Ahmad ibn 'Ali ibn 'Abd al-Qadir ibn Muhammad al-Maqrizi ; Arabic: , was an Egyptian historian more commonly known as al-Maqrizi or Makrizi...

 (d. 1442), Al-Dawwani (d. 1501), and Shah Waliyullah (d. 1762).

Perhaps the most well known Islamic scholar who wrote about economics was Ibn Khaldun, who is considered a father of modern economics. Ibn Khaldun wrote on economic and political theory in the introduction, or Muqaddimah
Muqaddimah
The Muqaddimah , also known as the Muqaddimah of Ibn Khaldun or the Prolegomena , is a book written by the Maghrebian Muslim historian Ibn Khaldun in 1377 which records an early view of universal history...

(Prolegomena), of his History of the World (Kitab al-Ibar). In the book, he discussed what he called asabiyya (social cohesion), which he sourced as the cause of some civilizations becoming great and others not. Ibn Khaldun felt that many social forces are cyclic, although there can be sudden sharp turns that break the pattern.

His idea about the benefits of the division of labor also relate to asabiyya, the greater the social cohesion, the more complex the successful division may be, the greater the economic growth. He noted that growth and development positively stimulates both supply and demand, and that the forces of supply and demand are what determines the prices of goods. He also noted macroeconomic forces of population growth, human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

 development, and technological developments effects on development. In fact, Ibn Khaldun thought that population growth was directly a function of wealth.

Economy in the Caliphate


During the medieval Arab Agricultural Revolution, a social transformation took place as a result of changing land ownership
Ownership
Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has...

 giving individuals of any gender
Gender
Gender is a range of characteristics used to distinguish between males and females, particularly in the cases of men and women and the masculine and feminine attributes assigned to them. Depending on the context, the discriminating characteristics vary from sex to social role to gender identity...

, ethnic or religious background the right to buy, sell, mortgage and inherit
Inheritance
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...

 land. Based on the Quran, signatures were required on contracts for major financial transaction
Financial transaction
A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...

s concerning agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...

, industry
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...

, commerce
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...

, and employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

. Copies of the contract were usually kept by both parties involved.

There are similarities between Islamic economics and leftist or socialist economic policies. Islamic jurists have argued that privatization of resources of oil, gas, and other fire-producing fuels, agricultural land, and water is forbidden. The principle of public or joint ownership has been drawn by Muslim jurists from the following hadith
Hadith
The term Hadīth is used to denote a saying or an act or tacit approval or criticism ascribed either validly or invalidly to the Islamic prophet Muhammad....

 of the Prophet of Islam:

Ibn Abbas reported that Muhammad said: "All Muslims are partners in three things--in water, herbage and fire." (Narrated in Abu Daud, & Ibn Majah) http://www.muslimtents.com/shaufi/b16/b16_19.htm Anas added to the above hadith, "Its price is Haram (forbidden)" Jurists have argued by qiyas
Qiyas
In Islamic jurisprudence, qiyās is the process of deductive analogy in which the teachings of the Hadith are compared and contrasted with those of the Qur'an, in order to apply a known injunction to a new circumstance and create a new injunction...

 that the above restriction on privatization can be extended to all essential resources that benefit the community as a whole.

Aside from similarities to socialism, early forms of proto-capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

 and free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

s were present in the Caliphate. An early market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...

 and early form of merchant capitalism
Merchant capitalism
Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economic and social system. Early forms of merchant capitalism were developed in the medieval Islamic world from the 9th century, and in medieval Europe from the 12th...

 developed between the 8th and 12th centuries. A vigorous monetary economy developed based on the wide circulation of a common currency (the dinar
Dinar
The dinar is the official currency of several countries.The history of the dinar dates to the gold dinar, an early Islamic coin corresponding to the Byzantine denarius auri...

) and the integration of previously independent monetary areas. Business techniques and forms of business organization employed during this time included early contracts, bills of exchange, long-distance international trade
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...

, early forms of partnership
Partnership
A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace...

 (mufawada) such as limited partnership
Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...

s (mudaraba), and early forms of credit, debt, profit, loss, capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

 (al-mal), capital accumulation
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...

 (nama al-mal), circulating capital
Circulating capital
Circulating capital refers to physical capital and operating expenses, i.e., short-lived items that are used in production and used up in the process of creating other goods or services. This is roughly equal to Intermediate consumption. It includes raw materials, intermediate goods, inventories,...

, capital expenditure
Capital expenditure
Capital expenditures are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year...

, revenue, cheque
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...

s, promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...

s, trusts (waqf
Waqf
A waqf also spelled wakf formally known as wakf-alal-aulad is an inalienable religious endowment in Islamic law, typically denoting a building or plot of land for Muslim religious or charitable purposes. The donated assets are held by a charitable trust...

), savings account
Savings account
Savings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return...

s, transactional accounts, pawning, loaning, exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...

s, bankers, money changer
Money changer
A money changer is a person who exchanges the coins or currency of one country for that of another. This trade is thought generally to be the origin of modern banking in Europe....

s, ledger
Ledger
A ledger is the principal book or computer file for recording and totaling monetary transactions by account, with debits and credits in separate columns and a beginning balance and ending balance for each account. The ledger is a permanent summary of all amounts entered in supporting journals which...

s, deposits, assignments
Assignment (law)
An assignment is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party—the assignor—to another party—the assignee...

, the double-entry bookkeeping system
Double-entry bookkeeping system
A double-entry bookkeeping system is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different nominal ledger accounts....

, and lawsuit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...

s. Organization
Organization
An organization is a social group which distributes tasks for a collective goal. The word itself is derived from the Greek word organon, itself derived from the better-known word ergon - as we know `organ` - and it means a compartment for a particular job.There are a variety of legal types of...

al enterprises
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

 similar to corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

s independent from the state
Sovereign state
A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...

 also existed in the medieval Islamic world. Many of these concepts were adopted and further advanced in medieval Europe from the 13th century onwards.

The concepts of welfare and pension
Pension
In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...

 were present in early Islamic law
Sharia
Sharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...

 as forms of zakat
Zakat
Zakāt , one of the Five Pillars of Islam, is the giving of a fixed portion of one's wealth to charity, generally to the poor and needy.-History:Zakat, a practice initiated by Muhammed himself, has played an important role throughout Islamic history...

one of the Five Pillars of Islam
Five Pillars of Islam
The Pillars of Islam are basic concepts and duties for accepting the religion for the Muslims.The Shi'i and Sunni both agree on the essential details for the performance of these acts, but the Shi'a do not refer to them by the same name .-Pillars of Shia:According to Shia Islam, the...

, since the time of the Rashidun caliph
Rashidun Caliphate
The Rashidun Caliphate , comprising the first four caliphs in Islam's history, was founded after Muhammad's death in 632, Year 10 A.H.. At its height, the Caliphate extended from the Arabian Peninsula, to the Levant, Caucasus and North Africa in the west, to the Iranian highlands and Central Asia...

 Umar
Umar
`Umar ibn al-Khattāb c. 2 November , was a leading companion and adviser to the Islamic prophet Muhammad who later became the second Muslim Caliph after Muhammad's death....

 in the 7th century. The tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

es (including zakat and jizya
Jizya
Under Islamic law, jizya or jizyah is a per capita tax levied on a section of an Islamic state's non-Muslim citizens, who meet certain criteria...

) collected in the treasury
Treasury
A treasury is either*A government department related to finance and taxation.*A place where currency or precious items is/are kept....

 (bayt al-mal
Bayt al-mal
Bayt al-mal is an Arabic term that is translated as "House of money" or "House of Wealth." Historically, it was a financial institution responsible for the administration of taxes in Islamic states, particularly in the early Islamic Caliphate. It served as a royal treasury for the caliphs and...

) of an Islamic government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...

 were used to provide income for the needy, including the poor, the elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali
Al-Ghazali
Abu Hāmed Mohammad ibn Mohammad al-Ghazzālī , known as Algazel to the western medieval world, born and died in Tus, in the Khorasan province of Persia was a Persian Muslim theologian, jurist, philosopher, and mystic....

 (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a disaster or famine occurred. The Caliphate was thus one of the earliest welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...

s.

Post-colonial era


During the modern post-colonial era, as Western ideas (including Western economics) began to influence the Muslim world, some Muslim writers sought to produce an Islamic discipline of economics. Because some Islamic scholars consider Islam to be more than a spiritual formula but rather a complete system of life in all its aspects, these writers believed that it should logically follow that Islam also had its own economic system, unique from and superior to non-Islamic systems. To date, however, there has been no agreement as to the methodological definition and scope of Islamic economics.

In the 1960s and 1970s Shia thinkers worked to develop a unique Islamic economic philosophy with "its own answers to contemporary economic problems." Several works were particularly influential:
  • Eslam va Malekiyyat (Islam and Property) by Mahmud Taleqani (1951),
  • Nidham ul-Iqtisad fil Islam (The Economic System of Islam) by Taqiuddin Nabhani (1953),
  • Iqtisaduna
    Iqtisaduna
    Iqtisaduna is a major work on Islamic economics by prominent Shia cleric Muhammad Baqir al-Sadr. Written between 1960 and 1961, it is al-Sadr's main work on economics, and still forms much of the basis for modern Islamic banking....

    (Our Economics) by Mohammad Baqir al-Sadr (1961) and
  • Eqtesad-e Towhidi (The Economics of Divine Harmony) by Abolhassan Banisadr
    Abolhassan Banisadr
    Abulhassan Banisadr is an Iranian politician, economist and human rights activist who served as the first President of Iran from 4 February 1980 after the 1979 Iranian Revolution and the abolition of the monarchy until his impeachment on 21 June 1981 by the Parliament of Iran...

     (1978)
  • Some Interpretations of Property Rights, Capital and Labor from Islamic Perspective by Habibullah Peyman (1979).


Al-Sadr in particular has been described as having "almost single-handedly developed the notion of Islamic economics"

In their writings Sadr and the other authors "sought to depict Islam as a religion committed to social justice, the equitable distribution of wealth, and the cause of the deprived classes," with doctrines "acceptable to Islamic jurists," while refuting existing non-Islamic theories of capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

 and Marxism
Marxism
Marxism is an economic and sociopolitical worldview and method of socioeconomic inquiry that centers upon a materialist interpretation of history, a dialectical view of social change, and an analysis and critique of the development of capitalism. Marxism was pioneered in the early to mid 19th...

. This version of Islamic economics, which influenced the Iranian Revolution
Iranian Revolution
The Iranian Revolution refers to events involving the overthrow of Iran's monarchy under Shah Mohammad Reza Pahlavi and its replacement with an Islamic republic under Ayatollah Ruhollah Khomeini, the leader of the...

, called for public ownership of land and of large "industrial enterprises," while private economic activity continued "within reasonable limits." These ideas helped shape the large public sector and public subsidy policies of the Iranian Revolution.

In the 1980s and 1990s, as the Islamic revolution failed to reach the per capita income level achieved by the regime it overthrew, and Communist states and socialist parties in the non-Muslim world turned away from socialism
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

, Muslim interest shifted away from government ownership and regulation. In Iran, it is reported that "eqtesad-e Eslami (meaning both Islamic economics and economy) ... once a revolutionary shibboleth, is indubitably absent in all official documents and the media. It disapperared from Iranian political discourse about 15 years ago [1990]."

But in other parts of the Muslim world the term lived on, shifting form to the less ambitious goal of interest-free banking. Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on usage of money with modern concepts of ethical investing. In banking this was done through the use of sales transactions (focusing on the fixed rate return modes) to achieve similar results concerning interest. Many modern writers have strongly criticized this approach as a means of covering conventional banking with an Islamic facade.

Traditional approach


While many Muslims believe Islamic law is perfect by virtue of its being revealed by God, Islamic law on economic issues was/is not "economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

" in the sense of a systematic study of production, distribution, and consumption of goods and services. An example of the traditionalist ulama
Ulama
-In Islam:* Ulema, also transliterated "ulama", a community of legal scholars of Islam and its laws . See:**Nahdlatul Ulama **Darul-uloom Nadwatul Ulama **Jamiatul Ulama Transvaal**Jamiat ul-Ulama -Other:...

 approach to economic issues is Imam Khomeini's work Tawzih al-masa'il where the term `economy` does not appear and where the chapter on selling and buying (Kharid o forush) comes after the one on pilgrimage. As Olivier Roy puts it, the work "presents economic questions as individual acts open to moral analysis: `To lend [without interest, on a note from the lender] is among the good works that are particularly recommended in the verses of the Quran and the in the Traditions.`"

Property


The Qur'an states that God is the sole owner of all matter in the heavens and the earth. Man, however, is God's viceregent on earth and holds God's possessions in trust (amanat). Islamic jurists have divided properties into three categories:
  • Public property
  • State property
  • Private property

Public property


Public property in Islam refers to natural resources (forest
Forest
A forest, also referred to as a wood or the woods, is an area with a high density of trees. As with cities, depending where you are in the world, what is considered a forest may vary significantly in size and have various classification according to how and what of the forest is composed...

s, pasture
Pasture
Pasture is land used for grazing. Pasture lands in the narrow sense are enclosed tracts of farmland, grazed by domesticated livestock, such as horses, cattle, sheep or swine. The vegetation of tended pasture, forage, consists mainly of grasses, with an interspersion of legumes and other forbs...

s, uncultivated land, water
Water
Water is a chemical substance with the chemical formula H2O. A water molecule contains one oxygen and two hydrogen atoms connected by covalent bonds. Water is a liquid at ambient conditions, but it often co-exists on Earth with its solid state, ice, and gaseous state . Water also exists in a...

, mines
Mining
Mining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...

, oceanic resources etc.) over which all humans have equal right. Such resources are considered the common
The commons
The commons is terminology referring to resources that are owned in common or shared between or among communities populations. These resources are said to be "held in common" and can include everything from natural resources and common land to software. The commons contains public property and...

 property of the community. Such property is placed under the guardianship and control of the Islamic state, and can be utilized by any citizen, as long as it does not undermine the right of other citizens over it.

Some types of public property can not be privatized under Islamic law. Muhammad's saying that "people are partners in three things: water, fire and pastures", has led some scholars to believe that the privatization of water
Water
Water is a chemical substance with the chemical formula H2O. A water molecule contains one oxygen and two hydrogen atoms connected by covalent bonds. Water is a liquid at ambient conditions, but it often co-exists on Earth with its solid state, ice, and gaseous state . Water also exists in a...

, energy
Energy
In physics, energy is an indirectly observed quantity. It is often understood as the ability a physical system has to do work on other physical systems...

 and agricultural land
Agricultural land
Agricultural land denotes the land suitable for agricultural production, both crops and livestock. It is one of the main resources in agriculture...

 is not permissible. Other types of public property, such as gold mines, were allowed by Muhammad to be privatized, in return for taxes to the Islamic state. The owner of the previously public property that was privatized has to pay zakat
Zakat
Zakāt , one of the Five Pillars of Islam, is the giving of a fixed portion of one's wealth to charity, generally to the poor and needy.-History:Zakat, a practice initiated by Muhammed himself, has played an important role throughout Islamic history...

 and, according Shiite scholars, khums
Khums
Khums is the Arabic word for One Fifth . According to Shia Islamic legal terminology, it means "one-fifth of certain items which a person acquires as wealth, and which must be paid as an Islamic tax"....

 as well. In general the privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...

 and nationalization
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...

 of public property is subject to debate amongst Islamic scholars. Public property thus, eventually, becomes state or private property.

State property


State property includes certain natural resources, as well as other property that can't immediately be privatized. Islamic state property can be movable, or immovable, can be acquired through conquest, or peaceful means. Unclaimed, unoccupied and heir less properties, including uncultivated land (mawat), can be considered state property.

During the life of Muhammad, one fifth of military equipment captured from the enemy in the battlefield was considered state property. During his reign, Umar
Umar
`Umar ibn al-Khattāb c. 2 November , was a leading companion and adviser to the Islamic prophet Muhammad who later became the second Muslim Caliph after Muhammad's death....

 (on the recommendation of Ali
Ali
' |Ramaḍān]], 40 AH; approximately October 23, 598 or 600 or March 17, 599 – January 27, 661).His father's name was Abu Talib. Ali was also the cousin and son-in-law of the Islamic prophet Muhammad, and ruled over the Islamic Caliphate from 656 to 661, and was the first male convert to Islam...

) considered conquered land to be state property, instead of private property (as was usual practice). The reason for this was that privatizing this property would concentrate resources in the hands of a few, and prevent this property from being used for the general good of the community. The property remained under the occupation of the cultivators, but the taxes collected on it went to the state treasury.

Muhammad said "Old and fallow lands are for God and His Messenger (i.e. state property), then they are for you". Jurists draw from this the conclusion that, ultimately, private ownership takes over state property.

Private property


There is consensus amongst Islamic jurists and social scientists that Islam recognizes and upholds the individual's right to private ownership. The Qur'an extensively discusses taxation, inheritance, prohibition against stealing, legality of ownership, recommendation to give charity and other topics related to private property. Islam also guarantees the protection of private property by imposing stringent punishments on thieves. Muhammad said that he who dies defending his property was like a martyr.

Islamic economists have classified the acquisition of private property into three categories: involuntary, contractual and non-contractual. Involuntary means are inheritance, bequests, and gifts. Non-contractual is acquisition involves the collection and exploitation of natural resources that have not previously been claimed as private property. Contractual acquisition includes activities such as trading, buying, renting, hiring labor etc.

A tradition attributed to Muhammad, with which both Sunni and Shi'ite jurists agree, in cases where the right to private ownership causes harm to others, then Islam is in favor of curtailing the right in those cases. Maliki
Maliki
The ' madhhab is one of the schools of Fiqh or religious law within Sunni Islam. It is the second-largest of the four schools, followed by approximately 25% of Muslims, mostly in North Africa, West Africa, the United Arab Emirates, Kuwait, and in some parts of Saudi Arabia...

 and Hanbali
Hanbali
The Hanbali school is one the schools of Fiqh or religious law within Sunni Islam. The jurisprudence school traces back to Imam Ahmad ibn Hanbal but was institutionalized by his students. Hanbali jurisprudence is considered very strict and conservative, especially regarding questions of dogma...

 jurists argue that if private ownership endangers public interest, then the state can limit the amount an individual is allowed to own. This view, however, is debated by others.

Market


Islam accepts markets as the basic co-ordinating mechanism of the economic system. Islamic teaching holds that the market, through perfect competition, allows consumers to obtain desired goods, producers to sell their goods, at a mutually acceptable price.

The three necessary conditions for an operational market are said to be upheld in Islamic primary sources:
  • Freedom of exchange: the Qur'an calls on believers to engage in trade, and rejects the contention that trade is forbidden.
  • Private ownership (see above).
  • Security of contract: the Qur'an calls for the fulfillment and observation of contracts. The longest verse of the Qur'an deals with commercial contracts involving immediate and future payments.

Interference


Islam promotes a market free from interferences such as price fixing
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...

 and hoarding
Hoarding
Hoarding or caching is a general term for a behavior that leads people or animals to accumulate food or other items in anticipation of future need or scarcity.-Animal behavior:...

. Government intervention, however, is tolerated under specific circumstances.

Islam prohibits the fixation of a price by a handful of buyers or sellers who have become dominant in the market. During the days of Muhammad
Muhammad
Muhammad |ligature]] at U+FDF4 ;Arabic pronunciation varies regionally; the first vowel ranges from ~~; the second and the last vowel: ~~~. There are dialects which have no stress. In Egypt, it is pronounced not in religious contexts...

, a small group of merchants used to meet agricultural producers outside the city and bought the entire crop, thereby gaining monopoly over the market. The produce was later sold at a higher price within the city. Muhammad condemned this practice since it caused injury both to the producers (who in the absence of numerous customers were forced to sell goods at a lower price) and the inhabitants of Medina.

The above mentioned reports are also used to justify the argument that the Islamic market is characterized by free information. Producers and consumers should not be denied information on demand and supply conditions. Producers are expected to inform consumers of the quality and quantity of goods they claim to sell. Some scholars hold that if an inexperienced buyer is swayed by the seller, the consumer may nullify the transaction upon realizing the seller's unfair treatment. The Qur'an also forbids discriminatory means of transaction.

Government interference in the market is justified in exceptional circumstances, such as the protection of public interest. Under normal circumstances, government non-interference should be upheld. When Muhammad was asked to set the price of goods in a market he responded, "I will not set such a precedent, let the people carry on on with their activities and benefit mutually."

Monetary & Fiscal Policy


Monetary and fiscal policy can include developments both for a state in transition to an Islamic model as well as when it reaches equilibrium.

In Equilibrium


Monetary policy emphasizes keeping inflation towards a theoretical zero percent. The value of the currency being maintained according to a basket of goods and services that is reflective of the economy as well as the value of a basket of currencies that would be represented by their level of trade with the Islamic state. The proportion of the two being weighted to the proportion of foreign trade to domestic consumption. This parallels classical and neo-classical ideals.

Money Supply expansion is indexed directly to the population rather than through banking, to avoid an unfair benefit to banking at the cost of the populace. Regulatory creep, conflict of interest and political interference is avoided by a proposed independence of banking and the statistical authority.

In Transition


Gradual transition is preferred over drastic change, calling for a transitional state similar to Communism's transitional state of Socialism. Impairment of banking, staggered increases in reserve ratios and a gradual approach in the general regulatory framework is considered preferable.

A Keynesian fiscal policy is called for to counteract the fall in the money supply caused by the transitionary policies. Timing and proportion is seen as critical to the success of such a transition.

Interest


The Quran (3: 130) clearly condemns what it calls by the Arabic term "riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...

," usually translated "interest": "O, you who believe! Devour not riba, doubled and redoubled, and be careful of Allah; but fear Allah that you may be successful."

Debt arrangements


Most Islamic economic institutions advise participatory arrangements between capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

 and labor. The latter rule reflects the Islamic norm that the borrower must not bear all the cost of a failure, as "it is God who determines that failure, and intends that it fall on all those involved."

Conventional debt arrangements are thus usually unacceptable - but conventional venture investment structures are applied even on very small scales. However, not every debt arrangement can be seen in terms of venture investment structures. For example, when a family buys a home it is not investing in a business venture - a person's shelter is not a business venture. Similarly, purchasing other commodities for personal use, such as cars, furniture, and so on, cannot realistically be considered as a venture investment in which the Islamic bank shares risks and profits for the profits of the venture.

Savings-Investment


An alternative Islamic savings-investment model can be built around:
1. Venture capital firms;
2. Investment banks;
3. Restructured corporations; and
4. Restructured stock market.
This model looks at removing the interest-based banking and in replacing market inefficiencies such as subsidization of loans over profit-sharing investments due to double taxation and restrictions on investment in private equity.

Money changers


Due to religious sanctions against odious debt, Tamil Muslim
Tamil Muslim
Tamil Muslim refers to those Muslims who have Tamil as their mother tongue. There are around 500,000 in Malaysia which is 2.6% of the total population of Malaysia and 20,000 in Singapore.Tamil Muslims are largely urban traders rather than farmers...

s have historically been money changer
Money changer
A money changer is a person who exchanges the coins or currency of one country for that of another. This trade is thought generally to be the origin of modern banking in Europe....

s (not money lenders) throughout South and South East Asia.

Natural capital


Perhaps due to resource scarcity in most Islamic nations, this form of economics also emphasizes limited (and some claim also sustainable
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...

) use of natural capital
Natural capital
Natural capital is the extension of the economic notion of capital to goods and services relating to the natural environment. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future...

, i.e. producing land. These latter revive traditions of haram
Haram
The Arabic term has a meaning of "sanctuary" or "holy site" in Islam.-Etymology:The Arabic language has two separate words, and , both derived from the same triliteral Semitic root . Both of these words can mean "forbidden" and/or "sacred" in a general way, but each has also developed some...

 and hima
Hima
A himá "inviolate zone" refers to an area set aside for the conservation of natural capital, typically fields, wildlife and forests - contrast ḥaram, which defines an area protected for more immediate human purposes....

 that were prevalent in early Muslim civilization.

Welfare


Social welfare, unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...

, public debt and globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

 have been re-examined from the perspective of Islamic norms and values. Islamic banks have grown recently in the Muslim world but are a very small share of the global economy compared to the Western debt banking paradigm. It remains to be seen if they will find niches -
although hybrid approaches, e.g. Grameen Bank
Grameen Bank
The Grameen Bank is a microfinance organization and community development bank started in Bangladesh that makes small loans to the impoverished without requiring collateral...

 which applies classical Islamic values but uses conventional lending practices, are much lauded by some proponents of modern human development theory
Human development theory
Human development theory is a theory that merges older ideas from ecological economics, sustainable development, welfare economics, and feminist economics. It seeks to avoid the overt normative politics of most so-called "green economics" by justifying its theses strictly in ecology, economics and...

.

Islamic stocks


In June 2005 Dow Jones
Dow Jones Industrial Average
The Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...

 Indexes, New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...

, and RHB Securities, Kuala Lumpur
Kuala Lumpur
Kuala Lumpur is the capital and the second largest city in Malaysia by population. The city proper, making up an area of , has a population of 1.4 million as of 2010. Greater Kuala Lumpur, also known as the Klang Valley, is an urban agglomeration of 7.2 million...

, teamed up to launch a new "Islamic Malaysia Index" —a collection of 45 stocks representing Malaysian companies that comply with a variety of Sharia-based criteria. Three variables (the total debt of an indexed company, its total cash plus interest-bearing securities and its accounts receivables) must each be less than 33% of the trailing 12-month average capitalization, for example. Islamic bonds, or sukuk, use asset returns to pay investors to comply with the religion’s ban on interest and are currently traded privately on the over-the-counter market. In late December 2009 Bursa Malaysia announced it was considering enabling individuals to trade Shariah- compliant debt on its exchange as part of a plan to attract new investors to the securities.

Economic Modeling & a New Science of Muslim Economics


Economic modeling in an Islamic context looks to find alternative variables and parameters. For instance, many of the key models in modern economic theory have interest (riba) as a key element. According to one author, Tobin's q could be a replacement for interest. Islamic economics still needs pioneers to create the building blocks of Islamic econometrics.

Popularity and availability



Today there are many financial institutions, even in the Western world, offering financial services and products in accordance with the rules of the Islamic finance. For example, legal changes introduced by Chancellor Gordon Brown
Gordon Brown
James Gordon Brown is a British Labour Party politician who was the Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 until 2010. He previously served as Chancellor of the Exchequer in the Labour Government from 1997 to 2007...

 in 2003, have enabled British banks and building societies to offer so-called Muslim mortgages for house purchase.

In 2004 the UK's first stand alone Sharia'a compliant bank was launched, the Islamic Bank of Britain
Islamic Bank of Britain
The Islamic Bank of Britain plc is a commercial bank in the United Kingdom, established in August 2004 to offer Sharia compliant financial service products to British Muslims. The bank has seven branches in London, Birmingham, Manchester and Leicester...

. Several banks offer products and services to its UK customers that utilise the Islamic financial principles; such as Mudaraba, Murabaha, Musharaka and Qard.

The Islamic finance sector was worth between 300 and 500 billion dollars (237 and 394 billion euros) as of September 2006, compared with 200 billion dollars in 2004. The number of Islamic retail banks and investment funds number in their hundreds and many Western financial institutions offer products that comply with Sharia law, including Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...

, Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...

, HSBC
HSBC
HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom. it is the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine...

, Lloyds TSB
Lloyds TSB
Lloyds TSB Bank Plc is a retail bank in the United Kingdom. It was established in 1995 by the merger of Lloyds Bank, established in Birmingham, England in 1765 and traditionally considered one of the Big Four clearing banks, with the TSB Group which traces its origins to 1810...

 and UBS. In 2008, at least $500 billion in assets around the world were managed in accordance with Sharia, or Islamic law, and the sector was growing at more than 10% per year. Islamic finance seeks to promote social justice by banning exploitative practices. In reality, this boils down to a set of prohibitions—on paying interest, on gambling with derivatives and options, and on investing in firms that make pornography or pork.

Business Method Patents


With the recent ability to patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....

 new methods of doing business
Business method patent
Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking, tax compliance etc. Business method patents are a relatively new species of patent and there have been several reviews investigating the...

 in the United States, a small number of patent application
Patent application
A patent application is a request pending at a patent office for the grant of a patent for the invention described and claimed by that application. An application consists of a description of the invention , together with official forms and correspondence relating to the application...

s have been filed on methods for providing Sharia compliant financial services. These pending patent applications include:
Declining balance co-ownership financing arrangement. This discloses an allegedly Sharia compliant financing arrangement for home purchases and refinances that does not involve the payment of interest.

Views


Sohrab Behada's study argued that the economic system proposed by Islam is essentially a capitalist one.

Criticism


Its popularity notwithstanding, critics of Islamic economics have not been sparing. It has been attacked for its alleged "incoherence, incompleteness, impracticality, and irrelevance;" driven by "cultural identity
Cultural identity
Cultural identity is the identity of a group or culture, or of an individual as far as one is influenced by one's belonging to a group or culture. Cultural identity is similar to and has overlaps with, but is not synonymous with, identity politics....

" rather than problem solving
Problem solving
Problem solving is a mental process and is part of the larger problem process that includes problem finding and problem shaping. Consideredthe most complex of all intellectual functions, problem solving has been defined as higher-order cognitive process that requires the modulation and control of...

. Others have dismissed it as "a hodgepodge of populist and socialist ideas," in theory and "nothing more than inefficient state control of the economy and some almost equally ineffective redistribution policies," in practice.
In a political and regional context where Islamist and ulema
Ulema
Ulama , also spelt ulema, refers to the educated class of Muslim legal scholars engaged in the several fields of Islamic studies. They are best known as the arbiters of shari‘a law...

 claim to have an opinion about everything, it is striking how little they have to say about this most central of human activities, beyond repetitious pieties about how their model is neither capitalist
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

 nor socialist.


Interest-bearing (Riba) and speculation-involving (Gharar) trading are clearly prohibited by explicit canonical texts. Based on this prohibition, presumably financial structures of all the Islamic products should be interest and speculation free. Nevertheless, some new empirical studies hypothesize that “Islamic finance products’ structure is based on the Islamic prohibitions; however, these products’ risk management is still based on revoking the underlying prohibitions”. The most prominent case here is Islamic financial market products such as, inter alia, Salam and Istisna’ these products are used are hedging methods for the Islamic bonds known as Sukuk. If Sukuk’s originator or investors wish to hedge against interest rate or exchange rate risks, then they have to use one of the former methods. These methods as they originally mimic the conventional risk management practice, should involve either interest-bearing or speculation-bearing trading or even both. There have been some innovations that try to avoid falling in interest-based and/or speculation based transactions. Parallel Salam and synthetics are some of the more recent.

See also

  • Fiqh
    Fiqh
    Fiqh is Islamic jurisprudence. Fiqh is an expansion of the code of conduct expounded in the Quran, often supplemented by tradition and implemented by the rulings and interpretations of Islamic jurists....

  • Law and economics
    Law and economics
    The economic analysis of law is an analysis of law applying methods of economics. Economic concepts are used to explain the effects of laws, to assess which legal rules are economically efficient, and to predict which legal rules will be promulgated.-Relationship to other disciplines and...

  • Ibn Khaldun
    Ibn Khaldun
    Ibn Khaldūn or Ibn Khaldoun was an Arab Tunisian historiographer and historian who is often viewed as one of the forerunners of modern historiography, sociology and economics...

  • Muhammad Taqi Usmani
    Muhammad Taqi Usmani
    Muhammad Taqi Usmani is a Hanafi Islamic scholar from Pakistan who was born in 1943. He served as a judge on the Federal Shariat Court of Pakistan from 1981 to 1982 and the Shari'a Appellate Bench of the Supreme Court of Pakistan from 1982 to 2002. He is an expert in the fields of Islamic...

  • Umar Chapra
    Umar Chapra
    Muhammad Umer Chapra is a Senior Research Advisor at the Islamic Research and Training Institute of the Islamic Development Bank, Jeddah who has written extensively on the issues of Islamic economics and Islamic finance...

  • Islamic philosophy
    Islamic philosophy
    Islamic philosophy is a branch of Islamic studies. It is the continuous search for Hekma in the light of Islamic view of life, universe, ethics, society, and so on...

    • Early Islamic philosophy
      Early Islamic philosophy
      Early Islamic philosophy or classical Islamic philosophy is a period of intense philosophical development beginning in the 2nd century AH of the Islamic calendar and lasting until the 6th century AH...

    • Modern Islamic philosophy
      Modern Islamic philosophy
      Aziz Abbassi’s English translation found in the following pages wasmade from the French Introduction à la critique de la raison Arabe,translated from Arabic to French by Ahmed Mahfoud and Marc Geoffroy,...

  • Islamization of knowledge
    Islamization of knowledge
    Islamization of knowledge is a term which describes a variety of attempts and approaches to synthesize the ethics of Islam with various fields of modern thought. Its end product would be a new ijma among Muslims on an appropriate fiqh and a scientific method that did not violate Islamic ethical...

  • Islamic democracy
    Islamic democracy
    Islamic democracy refers to two kinds of democratic states that can be recognized in the Islamic countries. The basis of this distinction has to do with how comprehensively Islam is incorporated into the affairs of the state....

  • Green economics
  • Economy of the OIC
  • Islamic banking
    Islamic banking
    Islamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...

  • Monzer Kahf
    Monzer Kahf
    Monzer Kahf is a Syrian American professor of Islamic economics and finance. He received his Ph.D. in economics from University of Utah in 1975 and lives in Westminster, California.-External links:*http://monzer.kahf.com/...

  • Aly Khorshid
  • Waleed Ahmad J. Addas
    Waleed Ahmad J. Addas
    Waleed Ahmad Jameel Addas is a Saudi Arabian economic methodologist. He published a first comparative study on the subject, entitled...

  • Global Islamic Finance magazine
    Global Islamic Finance magazine
    Global Islamic Finance Magazine is an English-language monthly publication on Islamic finance and Islamic banking owned by Business Media Group Ltd...


Further reading

  • Al-Amine, Muhammad al-Bashir Muhammad, "Risk Management in Islamic Finance: An Analysis of Derivatives Instruments in Commodity Markets", Leiden: Brill, 2008. (ISBN 9789004152465)
  • Muhammad Nejatullah Siddiqui, Muslim Economic Thinking, (Islamic Foundation, Leicester, UK)
  • Syed Nawab Haider Naqi, Ethics and Economics: An Islamic Synthesis, (Islamic Foundation, Leicester, UK)
  • M. Umar Chapra
    Umar Chapra
    Muhammad Umer Chapra is a Senior Research Advisor at the Islamic Research and Training Institute of the Islamic Development Bank, Jeddah who has written extensively on the issues of Islamic economics and Islamic finance...

    , Islam and the Economic Challenge, (Islamic Foundation, Leicester, UK)
  • Aly Khorshid, Islamic finance Scholar and Shari'ah Consultant, ( Elite Horizon Economic Consultancy, UK)
  • Angelo M. Venardos, Islamic Banking & Finance in South-East Asia: Its Development & Future, (World Scientific Publishing, Singapore
    Singapore
    Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...

    )
  • Abbas Mirakhor
    Abbas Mirakhor
    Abbas Mirakhor is an International Monetary Fund Executive Director representing the Iranian government at the IMF.-Career:Abbas Mirakhor has served as an economist in the Research Department of the IMF and was formerly Professor of Economics at the Florida Institute of Technology...

    , Theoretical Studies in Islamic Banking and Finance, (Islamic Publications International)
  • Bakhash, Shaul, The Reign of the Ayatollahs, Basic Books, c1984
  • Behdad, Sohrab and Farhad Nomani, eds., Islam and the Everyday World: Public Policy Dilemmas, Routledge, 2006, ISBN 0-415-36823-5
  • Addas, Waleed. Methodology of Economics: Secular versus Islamic, IIUM, 2008, ISBN 978-983-3855-28-5
  • Halliday, Fred, 100 Myths about the Middle East, Saqi Books, 2005
  • Roy, Olivier, The Failure of Political Islam Harvard University Press, 1994

Torts

  • A. Basir Bin Mohamad. "The Islamic Law of Tort: A Study of the Owner and Possessor of Animals with Special Reference to the Civil Codes of the United Arab Emirates, Lebanon, Tunisia, Morocco, Sudan and Iraq" in Arab Law Quarterly
    Arab Law Quarterly
    The Arab Law Quarterly, the only English language quarterly devoted to Arab law, was born out of the inspiration in 1984 of Dr. Mark Hoyle, a commercial and international Barrister based in London. Dr. Hoyle had completed a PhD at the School of Oriental and African Studies, London University, and...

    V.16, N.4 2001
  • __________. "Vicarious Liability: A Study of the Liability of the Guardian and his Ward in the Islamic Law of Tort" Arab Law Quarterly V. 17, N.1 2002
  • Immanuel Naveh. "The Tort of Injury and Dissolution of Marriage at the Wife's Initiative in Egyptian Mahkamat al-Naqd Rulings" in Islamic Law and Society Volume 9, Number 1, 2002
  • Islamic law of tort Liaquat Ali Khan Niazi, 1988
  • An outline of Islamic law of tort Abdul-Qadir Zubair, 1990

External links