HISTORY OF ISLAMIC ECONOMIC THOUGHT

Lecture Notes

Presented to several training sessions of Institute of Islamic

Economics, International Islamic University, Islamabad during
early 1990s

1. Opening Remarks

There is no work available on this subject. The Muslim thinkers,

jurists and scholars have been writing on various subjects of economics during the
last 14 centuries. A comprehensive coverage would require a team of scholars for
a number of years and their output may result into an encyclopedic work. Thus
the present effort is only a bare outline of the actual subject.
The Islamic economic thought does not cover Qur'an and Sunnah since
they are divine sources. A history of thought involves history of human thinking.
Therefore, it covers interpretation of the divine sources and not the sources
themselves. The present study also does not include opinion of the companions of
the Prophet since no single work is available on that subject.

So far as jurists are concerned most of the jurists have been giving their
verdicts on the economic matters of their respective times. Thejuridical literature is
a vast treasure of such verdicts. It is not possible to cover the juridical literature in
this study. Moreover, the present study takes into account the application of
juristic thought to concrete economic situations and therefore excludes mention of
legal literature.
We can study the present subject under following headings:
A. Early thinkers
B. Thinkers of recent past
C. Orthodox religious scholars. (Ulema)
D. Professional economists and bankers
E. Orientalists and western economists

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 A. EARLY THINKERS

1. Imam Abu Yusuf (113-182 AH/731-798 AD)

Kitabul Kharaj:(Translated into Urdu by M.N. Siddiqi)
 Mainly deals with :
- Agricultural relations
- Taxation
- Economic responsibilities of the state.

 Prefers state taking a proportion of agricultural produce from the

cultivation rather than a fixed rent on land.
 Imam Abu Yusuf laid down canons of taxation such as ability to
pay, convenience of the tax payer regarding time place and mode.
 Opposed tax-farming. Proposed paid tax collectors.
 Recommends public works such as roads, bridges, canals.
 Opposes price control.
 Opposes market imperfections such as hoarding, collusion and
monopoly.
 Discusses in detail Caliph Umar's process of decision making
regarding lands of Iran, Iraq and Egypt.
2. Yahya b. Adam al-Qarashi (d.203/818)
Kitabul Kharaj: (Translated by Ben Smesh)
Mainly a compilation of hadith on the subject. Over 600 ahadith. (Abu
Yusuf made a compilation of jurisprudence and was analytical). Yahya
concentrated on truth and completeness of the compilation.
Subjects:
 Ghanima, fai', kharaj, jizya.
 Principles of distribution of ghamina.
 kharaj:
 Prohibition of buying land burdened with kharaj.

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  Caliph can take back the land if not cultivated for 3 years.
 God's ownership on land. This principle still survives in Iraq, Jordan,
Pakistan. (Miri Aradi)
 Revival of dead lands.
 Right of preemption.
 Fai': Taxation of minerals - 1/5th of the output.

3. Abu Ubaid al-Qasim b. Sallam (d.224)

Kitabul Amwal (Translated into Urdu by A.R. Tahir Surti)
 Rich in historical and juridical context.
 Sources of bait al-mal revenue: Khumus, Fai', Jizya, (collection,
rates, expenditure).
 Land Management. kharaji and Ushri lands.
 Expenditure from out of bait al- Mal:
 Distribution of fai'
 Distribution of ghanima/khumus
 Iqta'
 Ihya Mawat
 Public Property (common property
 Zakah nisab/rates/collection/expenditure.

4. Qudama b. Ja'afer (d.337/948)

Kitabul Kharaj: (Translated into English by Ben Smesh)

5. Abul Hasan al-Mawardi (d.450/1058)

Ahkam al-Sultaniyyah: Deals with wide ranging subjects including market
supervision (hisba), agricultural relations and taxation. Other subjects discussed
are:
 Kharaj, ushr, fai' ghanimah;
 Duties of tax collector;

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  - Land management, ihya al- mawat, hima, iqta' and irrigation ;
 Baitulmal administration.
 Opposes hereditary feudal rights.

6. Nizamul Mulk Tusi (408-485/1018-1093)

Siyasat Namah for saljuq dynasty in Iran. He treated all land as property of
the ruler and landlord as a mere tax collector on behalf of the ruler. The ruler
could withdraw the land from the landlord if the latter failed to fulfill his
obligations. He rationalised the feudalistic practices of ancient Iran.

7. Abu Hamid al-Ghazali (451-505/1053-1107)

Ihy'al `Ulum al- Din

 Chapter on shukr provides rare insights on role of money. Money as a

means and not end. Disadvantages of barter. Hoarding a misuse of money.
 Riba a form of kufran as it displaced money from its actual role.
 A just government a condition for prosperity.
 Behavior of economic agents to be governed by Islamic ethics.
 Taxes other than Zakah possible if the defense so requires.
 The concept of ribh al- mu'tad
 Concept of iktishaf (defects and market price)
 Condemns beggary
 Disagrees with the use of counterfeit coins
 Seller to be magnanimous (samaha)
 Seller to extend credit and inzar al mu'sir.
 Government must install justice. It is a sin qua non for economic
prosperity.
 Individual must take public interest into consideration and activities
injurious to others such as profiteering and hoarding to be avoided.
8. Nasiruddin Tusi (597-672/1201-1274)

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 Tusi wrote a memorandum for Mongol Kings on finance. Stressed
primacy of agriculture over trade and commerce. Emphasized savings and
opposed expenditure on jewelry or uncultivable land. Stressed well being of the
land tiller and advised against conspicuous consumption. Emphasis division of
labor and public welfare.

9. al-Dimashaqi (6th/11th Century)

Kitab al- Ishara ila Mahasin al Tijara (Translated by Ritter)
 Recognizes the selfishness of the traders as legitimate.
 Types of traders
i) Khazzan (whole salers.
ii) Rakkad (one who carries his merchandise from place to place.
iii) Mujahhiz (Exporter).
 The wholesaler (Khazzan) should remain aware of the market, supply
sources, sales opportunities; he should make bulk purchases; he should
remain aware of political situation.
 The Rakkad should concentrate on what to purchase, keeping in view his
destination and changes of the route. He should know the price
differential between his own market and the destination. He should have
storage arrangements at destination.
 Exporter (Mujahhiz), should have a wakil abroad to conduct business
on his behalf.
al-Dimashaqi has emphasised the importance of information in the market
and in determination of prices.
10. Ibn Taimiyah (661-728/1263 - 1328)
i) Public Duties in Islam (Translated into English arranged by the Islamic
Foundation, Leicester, UK)
ii) al- Siyasat al- Shar'iah
 Concept of the `price of the equivalent' thaman mithl. He wanted to arrive
at the price determined in the market free of imperfections. It is not the

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 same thing as just price. Price of the equivalent can be determined by
studying the market while the concept of just price in western economic
literature of medieval times is more of a theoretical concept.
 Opposes hoarding and monopoly.
 Recommends state intervention to streamline market. ( al- Hisba)
 State can delimit property rights if it is a source of injustice.
 Gives importance to social interest but does not up-hold total public
control.
 States' responsibility to provide basic needs, if market fails. Public welfare,
the prime duty of the ruler.
 Price control if necessary (Tas’ir)
 Supervision of production and distribution.
 Economic activities relating to basic needs are fard kifaya. If individual
fails then state to intervene.

11. Ibn Khaldun (732 - 808/1332 -1404)

Muqaddimma (Trans: Franz Rosenthal)
 Theory of value; (labor theory of value) (Anticipates Marx)
 Price system - supply and demand. Importance of state intervention (if
market imperfections). But generally supports free market.
 Division of labor
 Production, distribution, consumption - (Anticipates Adam Smith and
Ricardo)
 Economic growth, trade, population
 Public finance, taxation, trade cycle
 Theory of population - very close to Malthus
 Role of state
 Stages of growth and decline of societies
 Analysis followed by policy suggestions
 Approach is multi disciplinary

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  Role of Government expenditure to avoid slumps (Precursor of Keynse).
 Relation of taxes with economic growth. (Opposes high taxation)
 Explanation of differences in prices across borders. (Anticipates modern
theory of international trade).
 When wages rise, supply of labor is reduced. An example of backward
sloping labor supply curve. Vested interests groups try to restrain the
supply of labor to support high wage rates. This is seen these in the form
of various professional bodies which try to keep their numbers restricted.
 Money as a medium of exchange and not a commodity
 International division of labor based on differences in skill and expertise of
the people of different regions.

12. Shah Waliullah (1114 - 1176)

Hujjatullah al- Baligha
 Economic well-being of the people.
 Condemns extravagance and luxurious life-style.
 Condemns monopoly, hoarding, profiteering.
 Need for division of labour and specialisation.
 Disadvantages of barter.
 Cooperation (speculation, gambling, riba negate cooperation).
 Social justice.
 Human needs.
 Private ownership of property.
 Cooperation.
 Evaluation of society from simple primitive stage to the complex affluent
culture. Luxury leads to decline of nations.
 Social prosperity
 Riba is haram because it kills the spirit of cooperation ( ta'awun).

Concluding Remarks on Early Thinkers

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  They perceived life as a totally, economic aspect being one
dimension.
 Their thought was deeply influenced by Islam's worldview.
 They were concerned about the economic well-being economic
justice and fulfillment of basic needs of the people.
 The economic thinking was mainly of the nature of policy
recommendations.
 They had a problem solving bias.

B. THINKERS OF RECENT PAST

1. Muhammad Abduh (1849-1905)

Ambivalent towards capitalism. Riba is haram but riba al- fadl can be
relaxed if the shura of ulema finds that it is essential for economic growth. Saving
bank interest is lawful. ( Tafsir al- Manar, Vol.4, pp. 128-31). His disciple, Rashid
Rida, says that Abduh thought interest on postal saving schemes was not riba.
There is nothing directly from Abduh on this subject.

2. Muhammad Iqbal (1289-1357/1873-1938)

 Mainly through his poetry he raised voice against the poverty of the
Muslim Ummah. Opposed social injustice especially in the agriculture.
Wrote against interest.
 Economics should be subservient to ethics as the material resources
are meant to promote man's spiritual well-being and help him actualise
his potentialities. If the material resources do not lead to the growth of
human personality, they are of no use to man. Wealth, by itself is not
an end. It is a means to achieve higher ends.
 Rejected Socialism. Had the notion that socialism plus God is equal to
Islam. Capitalism is also alien to Islam. The cure lies in holding fast to
the Islamic teachings.

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3. Khalifa Abdul Hakim (1895-1959)
Islam and Communism
Compares Islam and Communism. Supports Islamic Socialism by which
he means social justice ensured through peasant proprietorship, prohibition of
riba, enforcement of zakah, inheritance and state interference where necessary.
Modernist.

4. Khalid Muhammad Khalid

Min Huna Nabda (1950). (From here we start).(Trans:1953)

Advocated European social democracy justified in plainly utilitarian terms.

His program and pleaded for:

 Fifty feddan limit on land ownership.

 A legal maximum for agricultural rents.
 Nationalization of natural resources and means of production.
 Enactment of protective legislation for workers.
 Support for birth control.
 Claimed that his program was sanctioned by Islam.

5. Ghulam A. Pervaiz

Quran Ka Nizam- e- Rububiyyat (Qur’an’s system of economic maintenance)

A socialistic interpretation of Qur'an. Support nationalization of all
productive resources. Combines communism with spiritual growth of the individual.

6. Nasir A. Sheikh:
Islami Dastur and Islami Iqtisadiyat Ke Chand Pehlu (1959)( Some aspects

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of Islamic constitution and Islamic economics)
 Socialistic interpretation of Islam on the foot- steps of Perwaiz.
 Prohibition of riba
 Zakah on machinery.
 Nationalization of all land.
 Zakah is negative interest on idle wealth.
 Banks on the basis of profit/loss sharing and bank charges.
 Basic needs: responsibility of the state.
 Price controls by the state.
 Public works for employment.

7. (Dr.) Fazal-ur-Rehman
Riba and Interest(1964)
 Methodology for studying the Qur'an. Thinks that the Qur'an gave specific
solutions to actual problems of the Prophet's days. We need to analyze
those solutions and segregate the general from the temporal and then
apply the general content to our specific problems.
 Riba and Interest are not synonymous. Interest on productive loans is
acceptable in Islam. Interest of banks is not riba. Zakah nisab and rates
need revision. Expenditure of zakah on all state activities.
8. Syed Yaqub Shah
Islam aur Chand Ma'ashi Masa’il (1967) (Islam and some economic issues)
 On interest, same views as those of Fazalur Rehman (above)
 Expenditure from Zakah: Zakah to be available for all development
activities of the state.
9. Syed Qutb: (d.1966)
Social justice in Islam (1949)
 Collection of Zakah by the government;
 Establishment of mutual social responsibility
 Levying of additional taxes on the rich to provide for public services

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  Nationalization of natural resources
 Public services and transport; abolition of extremes of wealth and
poverty
 Equal provision of health care and education for all
 Worker participation in the ownership of enterprises
 Prohibition of gambling, prostitution and alcohol

10. Dr. Muhammad Hamidullah

Economic System of Islam

 Wrote on basic principles of Islamic economics in early fifties. Pleads
for ijtihad within the orthodox framework.
 The Muslim Ummah should evolve an international platform for
discussing its problems and arrive at a consensus.

11. Mazharuddin Siddiqi

Islam aur Nizam- e- Ishtarakiyat (1947) (Islam and socialist system)
 Comparative study of the two systems. History of Russian revolution.
Intellectual basis of Marxism. The Islamic model is oriented towards social
justice within the framework of private property and profit motive.

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12. Na'eem Siddiqi
Ma'ashi Nahumwariyon Ka Islami Hall: (Islamic solution of economic
inequalities)
 Basically in the mould of Mawdudi: A problem- solving approach to
distribute wealth more evenly. A lot of idealism and romanticism.
 Interest free banking
 Cooperative movement
 Zakah, Its collection and distribution
 Abolition of feudalism
 Industrial relations in Islam. Applies ahadith relating to slaves to industrial
labor.
 Life Insurance in Islam, and
 Application of 'slave traditions to industrial labour.
13. Isma'il Raji al-Faruqi (d.1986)
Islamization of Knowledge (1980)
 Redeemed the concept of Islamic economics from fiqh
al- muamlat.
 Economics needs to be rewritten within the Islamic framework.
 State of the art studies of secular subjects should lead Muslim scholars to
analyze them for secular and religious content. New knowledge based on
the Islamic philosophy should be created from them.

14. Muhammad Muslehuddin

Insurance and Islamic Law (1967): The concept of 'aqila and mutual
insurance
 Islamic Socialism (1975): Opposes socialism
 Banking and Islamic law (1974): Mudaraba cannot become basis
for banking. Allows discounting of bills of exchange by banks.
15. Prof. Ziauddin Ahmad
Theory of riba (1978). Orthodox exposition

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 'Ushr and 'Ushr Land (1980)
Zakah and Economic well- being (1981)
Nisab of Zakah (1988)
 Eight heads of Zakah. Adds new insights to the meaning of Ghina:
one, who had nisab. Two, who is neither sahib- al- nisab nor deserves
zakah. Three, who does not accept zakah out of modesty.
 Nisab to be equal to five wasq of food grains or its market price. To be
fixed according to each age.
 Indexation of loans (1989). Thinks that the paper currency should be
treated as a qimi commodity. Then its nominal quality can differ at the
time of returning loan. In this way indexation can be provided a legal
rationale.

16. Sh. Mahmud Ahmad

Economics of Islam (1947)
His research on theory of interest Man and Money (Published from UK)
Towards Interest free Banking (1989)
 Concept of Time - multiple counter - loans (TMCL) as an
alternative to interest.
 No deficit financing.
 No statutory reserve
 Balanced budget
 Zakah - Rate should be flexible. No other taxes than Zakah.
 Agriculture - Peasant proprietorship. Opposes feudalism.
 Basic pillars of Islamic economics are: prohibition of interest and
promotion of enterprise through profit. Zakah is only a
contingency plan.
17. Dr. Ziaul Haq
Land lord and Peasant in Early Islam (1971)
Islam and feudalism (1985)

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  Peasant Proprietorship.
 Valuable work on riba- al- fadl. Considers all malpractices in trade
as fiba- al- fadl.

18. Rafi'ullah Shihab

Islami Riyasat Ka Maliyati Nizam (1973) (Financial system of an Islamic
state)
 Only two taxes: Zakah and Kharaj
 All lands in Pakistan are Kharaji.

CONCLUDING REMARKS ON THINKERS OF RECENT PAST

 A range of opinion from strictly orthodox interpretation of Islam to

progressive and apologetic viewpoints. Their main concerns have
been :
 Social justice
 Feudalism, Capitalism and Socialism
 Modernists plead going back to pristine Islam but most of them
have not developed a rigorous methodology. Moreover, they chose
some issues on ad hoc basis and not Islam as a whole.

C. ORTHODOX RELIGIOUS SCHOLARS (ULEMA)

1. Hasan al-Banna (d.1949)

 Pleaded for social security for workers.
 Concept of mutual social responsibility (Takafal al- Ijtimaiyyah).
 Basic needs of all to be fulfilled. No body to be out of job. Zakah as the
mainstay of the system.
 Capitalism cannot work since it gives the employer the right to hire and
fire.

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  Foreign enterprises are main exploiters. Organized trade union activities to
oppose foreign owned capitalist enterprises. A symbol of conservative
Islam.

2. Abu al Ala’ Mawdudi (d.1979)

Sud
Mas’ala milkiyyat e zamin
Economic teachings of the Qur’an
Islamic economics (edited by Khurshid Ahmad)
 Orthodox framework with few progressive insights
 Economic problem of man. It is subservient to man's ethical and
spiritual needs.
 System's approach. Comparative study of economic system of Islam
with socialism and capitalism.
 Basic principles of Islamic economics
 Role of state
 Prohibition of interest: His is a seminal work on this
subject. Some elementary thoughts on interest- free banking on the
basis of shirka and mudaraba.
 Private property. Moved to limitation of private property later on.
 State can levy taxes other than zakah.

3. Hifzur Rehman Seharwi

Economic System of Islam (1950)
 Basic principles for earning and consumption
 Public finance:
 Bait al- Mal - Sources of revenue
 Land management
 Trade laws
 Interest

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  Interest-free banking on the basis of mudaraba/cooperatives
 Zakah
 Law of inheritance.
 Expenditure from Bait al- mal:
* Sadaqat
* Awqaf
* Gifts, Iqta.
 Comparative study of system. Socialism and fascism

4. Mufti Muhammad Shafi

 Interest: Historically riba was prevalent on commercial loans. Moreover,

in traditional Arab society, consumption loans were rare.
 Zakah law
 Insurance - life insurance not permissible
 Trade laws of Islam. Business ethics, lawful and unlawful practices.
 Interest on provident fund.
5. Manaazir Ahsan Gilani

Islami Ma'ashiyat (1947)

 A loose statement on basic principles but has flashes of original ideas.
Some information on economic history of the Muslim people as well.

6. Yusuf al-Qardawi

 Fiqh al- Zakah: Encyclopedic work on the subject.

 Zakah can be paid to one person till one is productive
 Zakah on salary income (gross)
 Zakah on Rent income (gross)
 Islamic solution of poverty

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7. Ja'afar Shah Phalwarwi
 Commercial interest is not riba
 Abolish all property

8. Baqir al-Sadr
Iqtisaduan: A comprehensive text from Shi'i point of view.
 Interst-free banking
 Islamic economic system
 Criticism of Marxism on philosophical ground
 Criticism of dialectical materialism
 Criticism of Capitalism
 Basic principles of Islamic economic system
 Private property. Public (social) property
 Taxes (Basic principles)
 Land management ushr/kharaj
 Islamic banking: Rationalizes the bank's changes on the concept of
ju'ala

9. Muhammad Tasin
 Muzara'a is not lawful. Peasants-proprietorship.
 Mudaraba acceptable only as an undesirable necessity.
 Ijara
 Zakah payable on machinery
 Bai' mua'jjal - difference between cash and credit prices is riba.
 Joint stock company' incorporation and limited liability is not
covered by the shari'ah.
 Adopts a Marxist line of argument
10. Maulvi Fazalur Rehman
Tijarti sud ki fiqhi hathiyat ( Legal nature of commercial interest) (1964)

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 Orthodox interpretation of riba. Refutes Dr. Fazalur Rahman's thesis on
riba.
11. Yusufuddin
Islam ke Ma'ashi Nazariyye (1952)
 Compendium of historical information on early Islamic economy.
12. Mahmud Taleqani (d.1979)
Islam and Ownership
 Based on Shi'a jurisprudence.
 Social justice. Taxation of all that is surplus to needs.
 Criticizes Marxism and Capitalism
13. Muhammad Hanif Nadvi
Private property in Islam was tolerated as an interim institution. It does not
match the over-all philosophy of Islam. However, Marxism is also not acceptable
on theological grounds.
14. Mufti Syed Siyahuddin (d.1987)
 Progressive among the orthodox ulema. Has a better appreciation of the
modern problems.
 Cash and credit prices should be the same otherwise it would involve riba
 A strong stand on zakah heads of account and tamlik
 Welfare of the people to come by economy and simple living.
15. Muhammad Taqi Uthmani
 Interest in all its forms is riba.
 Incorporation of joint stock companies is allowed. Liability of private
companies should be unlimited while hose of public companies should be
limited.

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 CONCLUDING REMARKS ON ORTHODOX RELIGIOUS
SCHOLARS (‘ULEMA)
 Problem solving approach
 Islamic system is superior to western system
 Idealism
D. PROFESSIONAL ECONOMISTS

1. Dr. Anwar Iqbal Qureshi

Islam and Theory of Interest (1946)
Fiscal System of Islam (1978)
 Western theories of interest. Islamic theory of interest. Interest and
trade. Speculation. Forward trading. interest-free banking. Effect of
interest on society and business.
 Islamic system of taxation - zakah. Practice during early period.
 Ushr and kharaj. Land tenure system. More rights for tenant. No
absentee landlordism. Landlord should provide the seed.
 Institution of waqf.
 Othmani law of land tenure.
2. Dr. Nejatullah Siddiqi (Faisal Laureate)
Most prolific writer on Islamic economics. Can be rightly termed as Father of
Islamic economics. There is hardly any aspect of Islamic economics and finance
on which he has not written excellent pieces of literature.
Islam and Ownership (two volumes)
Banking without interest (Pioneer of Profit sharing concept)
Economic system of Islam
Economic enterprise in Islam (Microeconomics)
Economic surveys
Bibliography
Public Finance
Islamic economics as a discipline
Insurance (lawful in Islam)
3. Khurshid Ahmad (Faisal Laureate)
 Contribution towards developing Islamic economics
 Need for Islamic economics
 Need for theory of economic development in Islam
 Islamic strategy for economic development by integrating Islamic values
with resource development. Focus on human development.

4. Umer Chapra (Faisal Laureate)

Economic system of Islam ( 1970)
Welfare Role of State (1971)
Just Monetary System (1985)
Challenge of Economics and Islam (1992)
 Integration of moral values into economic behaviour. Moral
development of human beings distinguishes Islamic system from
Capitalism.
 Spokesman for two filter system. The first is the moral filter which cuts
down unnecessary and unlawful spending and the other is price filter
which operates in a free market economy.
 The governments must cut down their fiscal deficits, preferably by
curtailing expenditure on defense.
5. Anas Zarqa
 Project Evaluation and discounting by using expected rate of return as
discounting factor.
6. Monzer Kahf
Macroeconomic Model of Islamic Economy (1978)

 Economic development is not the responsibility of an Islamic state.

State can not levy taxation for development, except by shura.

 A limited role for Islamic state

  Zakah assessment in American environment.

7. S. M. Hasan-uz-Zaman
 Economic historian of early Islamic days
 Contribution on Zakah and financing techniques as discussed in fiqh.
 Liability of shareholders in a joint stock company is limited.
Indexation of loans is not allowed in the Shari'ah.
8. Ziauddin Ahmad
 Islamic banking: a balanced view
 Fiscal system of Islam. IMF Working Paper (1990)

9. Muhammad Uzair
Poverty and Income Distribution in Islam (1992).
Interest- free banking (Mudaraba and Profit sharing): Opposes markup
financing.
[First comprehensive model of interest-free banking (1955)]
Central banking: Monetary policy in the absence of interest
Fiscal policy: Role of zakah in fiscal policy.
10. Muhammad Abdul Mannan
Islamic Economics (1969); New edition (1987)
Application of Islamic teachings to western economic ideas and
modifying them wherever there is a clash.
Making of an Islamic Economy (1983)
Abstracts of Research in Islamic Economics (1984)

11. Syed Nawab Haider Naqvi

Economic and Ethics (1980)

 Axiomatic approach: Unity, equilibrium, freedom and responsibility.
  Riba may be abolished but the allocative role of riba may have to be
performed by some other device.
 Enhanced role of state: Delimitation of private property
 Profit-sharing cannot work, it would destabilize the economy.
 Need for finding a solution for the risk-averters without its being
interest
 Interest is rationalized on the following grounds:
 Present is more valuable than the future
 Declining marginal utility of savings as supply of savings increase
 Depreciation of capital over time.
 The solution lies in finding a mechanism which ensures a fixed return
on savings by risk-averters.
12. Fazalur Rahman Faridi
 Main contribution on Islamic fiscal policy.
 Concept of voluntary sector.
 Role of zakah as a fiscal tool.
 Awqaf, orphanages, welfare hourse etc - role in promoting economic
welfare of the people.

13. Mabid Ali al-Jarhi

 Monetary economics
 Efficiency of Islamic interest-free economy over a capitalist economy.

14 Hashmat Alai

Income Distribution in Islam (Georgetown University thesis (1955)

 Minimization of consumption.

 Income to be distributed among different segments of society in such a

way that all segments become equal and all increments to be divided
equally.
15. Mahmud Abu Saud
Contemporary zakah (1989).
 Money is not a commodity. It is a medium of exchange.
 Zakah and carrying cost of money.
 Interest on deposits is not riba.
16. Zubair Hasan
 Lahour - capital participation is the preferable mode of production.
17. Muhammad Arif
 Concept of `Muslim man' as compared to `economic man' in western
economies.

18. Masudul Alam Chaudhry

A prolific writer on Islamic economics. Thinks Islamic economics is a

special case of neoclassical economics. It integrates moral and human dimensions
into neoclassical economics.

Islamic Economic Cooperation (1989)

The neoclassical model modified to accommodate principle and applied to
such issues as debt and trade financing, economic integration, basic needs,
currency, capital markets and manpower policy.

19. Islamic Bankers

- Sami Hassan Hamoud

- Ahmad al-Najjar
- Bagkir al Mudawi

- Prince Saud al-Faisal

- Nawazish Ali Zaidi

 - D.M. Qureshi

- Abdul Jabbar

 Evaluation and growth of islamic banking

 Deal with actual experience and tackle with problems being faced by
Islamic banks.

20. Shah Rukh Rafi Khan

Profit Loss Sharing 1987)

 Based on his Ph.D thesis. (Michigan Univ.) Argues that practice on the
prohibition of riba should be a matter of individual choice.
 PLS on the basis of 100% reserve
 Application of PLS principle to agriculture
21. Muhammad Anwar
 Zakah fund should be incorporated. Those who are eligible for
receiving zakah should be issued zakah certificates of the fund.

 Although interest is riba, yet those people who took commercial

loans in the past must return them with interest.

22-24 Mohsin S. Khan, Abbas Mirakhor, and Zaidi Sattar

 Islamic banking and their effect on the macroeconomic variables of the

economy. Analysis in the neoclassical framework.

E. Orientalits

 Aghnides Mohammadan Theories of Finance

  Somogyi Medieval history of Islamic economic thoughts.
 Udovitch Partnership and mudaraba law
 Rodinson M. Islam and Capitalism
 Mintjes Islamic Socialism
 Lokegaard Islamic Taxation

 Tendency to conclude that Islamic basic texts should be reinterpreted

to accommodate western thinking.
 Most of the texts were not practised. Muslims have started reading
Western ideas into their own texts.

Recent interest by Western Economists

 Traut Wilson Scharf - Islamic Banking

 Volker Nienhaus German economists
D. Weiss

 John Presley ( Directory of Islamic Financial Institutions)

 Rodney Wilson ( Relationship of Islamic banks with
conventional banks).
 Cyril Tomkins & T. Gambling ( Islamic Accounting)
Interest in Islamic banking, regional cooperation and Islamic economics
as an independent discipline.

Overall Concluding Remarks

 Shift towards analysis
 Evolution towards developing Islamic economics as separate discipline.
 Emphasis on practical aspects of Islamic economics like banking, insurance
and economic cooperation.