Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge 1. Keynote address for the First World Congress on Integration and Islamicisation of Acquired Human urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions Knowledge for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find August 23-25, IIUM, Malaysia

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 11 the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

12 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. 2. For example: http://inceif.org; http://www.islamic-banking.com; http:// Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance www.netversity.org/index1.html; http://financeinislam.com; (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the http://www.islamic-world.net/economics/index.htm; http://scholar.google.com; University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last http://alhudacibe.com; http://insif.org ; www.iefpedia.com.ccv New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is 3. For example: Islamic Development Bank’s IRTI journal Islamic Economic Studies; King Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has Abdulaziz University journal, KAAU Journal: Islamic Economics; Journal of International among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Association of Islamic Economics, Review of Islamic Economics; International Islamic Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. University Malaysia journal, Journal of Economics and Management; and International Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- Journal of Islamic Financial Services, India (online); Journal of Muamalat and Islamic ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an Financial Research (Malaysia); Thoughts on Economics (Bangladesh); Journal of Islamic paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions Accounting and Business Research (since 2010), International Journal of Islamic and Middle for development. They believe that Islam presents a far more superior solution to ‘all Eastern Finance and Management (since 2008), Journal of Islamic Marketing (since 2010), etc problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 13 of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and 4. For example, Nazim Ali (2008, 157) mentions 484 research projects and 75 PhD dissertations are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize in various universities of 10 countries including US, UK and Germany. human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or 5. For example: Postgraduate Diploma in Islamic Finance, Certified Islamic Banker, Certified Islamic (d) Relationship with conventional economics Insurance Professional and Certified Islamic Investment Analyst Programs by International Institute of new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] Islamic Business and Finance (IIIBF); Certified Islamic Finance Professional by International Centre for research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional Education in Islamic Finance (Malaysia); Islamic Finance Qualification by The Securities and lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, Investment Institute of UK; Certified Islamic Public Accounting, and Shari’ah Auditor Advisor in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of Certificate by Accounting and Auditing Organization for Islamic Financial Institutions , Bahrain; • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an Islamic Finance Program by Oxford Centre for Islamic Studies; etc. Some universities in the UK like behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a CASS Business school, Reading University, Durham University, Loughborough University and Surrey a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their University; and International Islamic University Islamabad (Pakistan), Ripha International University institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that Islamabad (Pakistan) offer courses in Islamic economics and finance and also conduct regular research consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their in these fields. Universities of Harvard (USA) and Bochum (Germany) have launched departments or to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from programs for the study of Islamic economics. Universiti Teknologi MARA Malaysia (UiTM), University postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available Utara Malaysia (UUM), Yarmouk University Jordan offer bachelors’ courses in Islamic economics. elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Imam Muhmmad University of Riyadh offer courses on Islamic economics as part of courses on Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that conventional economics. On 4 July 2011, Durham University (UK) launched a new Doctoral Training future and just distribution of the output within the framework of the Shari’ah and centre named as Durham Centre for Islamic Economics and Finance (DCIEF). economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

14 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 15 of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in days, well-being of Muslims, etc. There cannot be any objection to all this if the Primary reason for developing IE as a separate branch of knowledge emanated from conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics economists have successfully locked out the non-Muslims, and non-Arabic • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

16 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in days, well-being of Muslims, etc. There cannot be any objection to all this if the Primary reason for developing IE as a separate branch of knowledge emanated from conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics economists have successfully locked out the non-Muslims, and non-Arabic • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 17 are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

18 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of attention of the wider intellectual community. require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 19 are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in days, well-being of Muslims, etc. There cannot be any objection to all this if the Primary reason for developing IE as a separate branch of knowledge emanated from conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics economists have successfully locked out the non-Muslims, and non-Arabic • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

20 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in days, well-being of Muslims, etc. There cannot be any objection to all this if the Primary reason for developing IE as a separate branch of knowledge emanated from conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics economists have successfully locked out the non-Muslims, and non-Arabic • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 21

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

22 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in days, well-being of Muslims, etc. There cannot be any objection to all this if the Primary reason for developing IE as a separate branch of knowledge emanated from conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics economists have successfully locked out the non-Muslims, and non-Arabic • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 23

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in days, well-being of Muslims, etc. There cannot be any objection to all this if the Primary reason for developing IE as a separate branch of knowledge emanated from conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics economists have successfully locked out the non-Muslims, and non-Arabic • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

24 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 25

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

26 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 27 clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

28 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges and Future Prospects 29 such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

30 Journal of Islamic Economics, Banking .... Vol-10, No1 January-March, 2014 such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though. Editorial Notes nent of Islamic society. In addition, it encourages productivity for the benefit of society, gained a one percentage point market share increase in the past five years. While the changes in the financial services industry pose some significant challenges. The article as well as a balance of productivity, religious life, and the acquisition of knowledge. As industry is still relatively new, the authors suggest that poor or unproven governance discusses these issues and provides insights into the ways in which they may be resolved. A key criticism that is often asserted about Islam is that its teachings focus too heavily on the Prophet commanded, “seek knowledge from the cradle to the grave,” because practices in place within the Islamic finance industry may be one explanation for its In the sixth paper, Henry Chalu answers a common criticism that Islamic banks are not the afterlife and very little on motivating useful disciplines for everyday life. As a result, “seeking knowledge is an obligation upon every Muslim" (Ibn Majah; Muslim). failure to capture a larger global market share. The author suggests that improving “Islamic” enough by conducting a comparison of Islamic banking practices. The study this can lead some to believe that Islam as a religion is anti-productivity or lacking in Holy works such as the Qur’an as well as the words and actions of the Prophet show advertence to Shari’ah principles may help to improve agency problems within Islamic examines the characteristics of Islamic banks in Tanzania using four criteria: compliance motivation to achieve worldly goals; however, as evidenced in the Qur’an and other holy that Islam is an empowering religion that validates productive pursuits both in this life finance institutions and mitigate criticisms of the industry that claim Islamic finance, with the principles of Islamic finance, selection of customers, the structure of conventional works, this criticism is unwarranted. In fact, the Qur’an offers many examples promoting and in the next. Often, critics of Islam insinuate that Islamic teachings are anti- while presented in a different form, is substantively the same as conventional finance. banks providing Islamic banking services, and the competence of the Shari’ah Advisory effort, work, and productivity, even when little can be expected in return. In one such productivity, that they encourage unbalanced or extreme beliefs and behaviors, or that In the third paper, Bijan Bidabad examines the concept of Mudarabah financial products Board. The study uses data provided by 60 Islamic financial institutions that responded. example, Allah encourages Mary (the mother of Jesus) to shake the trunk of a palm tree Islamic teachings are counter to rationality and the acquisition of knowledge. An in Islamic finance. The Mudarabah Financial Sharing (MFS) arrangement is one that The study finds that religion plays a very limited role in the selection of customers, in order to yield fresh dates. For practical purposes, it is unlikely that Mary would be able examination of many of the teachings of Islam show that this is not the case, however. allows depositors to participate in real sector projects. The arrangement is compatible because the authors find a very limited awareness with regards to compliance with to exert enough force to shake loose dates from a palm tree. However, this is a lesson Muslims are encouraged to be productive and provide for the needs of society. Addi- with Islamic banking ideas. Instead of borrowing money at interest, the borrowers Shari’ah principles. In turn, banks have a very limited incentive to structure themselves in aimed at encouraging faith and trust in Allah regarding being productive and working tionally, Islamic teaching focuses on striking a balance or moderation between engage in a profit sharing arrangement with the bank where project profits are distrib- a way that promotes Shari’ah compliance or promotes the competency of the Advisory hard, even if success seems unlikely. Passages like these show that Islam encourages religious observance and actively serving the needs of society. Finally, the pursuit of uted to depositors based on the rate of return of projects in the real economy. In addi- Board. As a result, the study concludes that so-called Islamic banks in Tanzania lack the productivity and hard work through faith in Allah, despite adversity. This type of work knowledge is held in equal regard as that of religious piety and productivity. tion, the financial institution receives a commission for providing intermediary services criteria needed to promote true Islamic banking and therefore, are not really “Islamic”. ethic encourages real world productivity in a way not dissimilar to that of entrepreneurs. Perhaps a contributing factor to the common accusation that Islamic teaching does not related to the administration of the sharing arrangement. Depositors in the mudarabah In the seventh paper, by Sari, Bahari and Hamad, examines the Islamic banking industry In addition, the teachings of the Prophet himself also encourage Muslims to build a encourage productivity is a general difference in the way Islamic society views relationship receive a Mudarabah Certificate, which can be traded in in the Rastin in Indonesia in terms of its recent growth and future potential. Since Indonesia has the productive society. “Earning a lawful (halal) living is an obligation (fard) after obligatory productivity. In Western society, successful production is often associated with some Certificate Market for a share of the project’s profits or losses at the end of the project. largest Muslim community in the world, it is ripe for the Islamic banking industry. The worship” (al-Tabarani; al-Baihaqi). Productive behavior is also encouraged by the tangible personal outcome, such as the acquisition of personal fame or wealth. Produc- The fourth paper, by Saad and Abdullah, analyzes the practice of zakat in Malaysia as first Islamic bank opened in the county in 1992, and it was followed by many other Prophet, as he asserts, “If the moment of the truth (the end) arrives while one of you has tivity often involves separating the individual from society and religion. However, in it relates to the alleviation of poverty in an Islamic society. Poverty can become a Islamic banks as well as conventional banks with Islamic banking windows. The indus- a little plant in his hand, he should go ahead and plant it if he can”. In this sense, the words an Islamic context, religion is at the heart of productive motivation. From this perspec- serious problem in Islamic countries, as in most. However, the teachings of Islam try has grown considerably since then; however, Islamic banking only maintains a 3.2% of the Prophet himself are an apt response to the criticism that Islam is anti-productive. tive, the goals of productivity are inseparable from those of the religious goals of Islam promote the use of zakat, which is essentially a wealth tax, as a way to redistribute market share in Indonesia, which is very small compared with its Muslim population. Another common criticism of Islam is that its teachings encourage unbalanced or extreme and those of society. In essence, the misunderstanding regarding the Muslim view of wealth, decrease income inequality, and reduce poverty. There has been criticism of This is curious, given the fact that other Muslim countries typically maintain a much actions or beliefs; however, this assertion, too, is refuted by the Qur’an and the words of productivity stems from key differences between the West and East in the way produc- zakat in terms of its ability to actually alleviate poverty and achieve social goals, as it larger Islamic banking presence. The authors conclude that maintaining Islamic banking the Prophet himself. For example, on one occasion, the Prophet saw a Muslim man tivity is related to their religious underpinnings. is intended. It is possible that inefficiencies exist between the collection and distribu- practices must not be a priority for Muslims in Indonesia. There are several proposed spending most of his time in the Mosque, even outside of prayer times. The Prophet The first paper, by Akram Khan, reviews the literature regarding the progress that Islamic tion sides of zakat that prevent it from being an efficient way to reduce poverty. This reasons for this, including the lack of knowledge and customer awareness regarding confronted the man and asked him why he spent so much time at prayer and whether he economies have made over the past several decades for the purpose of adding to the litera- paper examines the issue of zakat distribution in Malaysia in order to determine Islamic banking, and a lack of support from government and religious leaders. had a family to provide for. The man responded that he did have a family and that his ture by assessing areas in which improvements can be made. The author identifies the whether it is effective in alleviating poverty in Muslim countries. The results of the In the eighth paper, Asif Ehsan analyzes the permissibility of the futures contract in brother worked to fulfill their needs. The Prophet responded, “Your brother is more pious main problem with study of Islamic economies as the failure to translate Islamic econom- study are used by the authors to make recommendations as to how the distribution of Shari’ah compliant financial transactions. Futures contracts have some key features and devout than you are”. Again, this teaching shows that Muslims should be encouraged ics from a theoretical standpoint (Islamic teachings) to a valid social science framework zakat funds can be modified in order to increase its efficacy at eliminating poverty. that make them a desirable and useful financial instrument. They are highly liquid and to be productive. Additionally, the Prophet is encouraging Muslims to maintain balance that would potentially allow for the justification of its theoretical underpinnings. This The fifth paper, by Scott Morrison, examines the issue of reconciling traditional and can be liquidated before the delivery date; however, there is considerable debate as to in their lives. To be truly pious, a Muslim must fulfill his religious responsibilities, but he paper attempts to fill this gap in the literature by proposing a methodology to allow Islamic Shari’ah governance in British financial institutions following the financial crisis of whether futures-type transactions are permissible under Shari’ah law. Since futures or she must also meet the real needs of his or her family and society by being productive. economic principles to be translated in a social science framework. The author does so by 2007. In Britain, in particular, the Islamic finance industry and Islamic finance windows contracts are relatively modern inventions, there is little precedent in Islamic law to use A final criticism that is commonly asserted about Islam is that the teachings of Islam are helping to redefine Islamic economics in a way that overcomes weaknesses in the current at conventional banks have made significant growth. The policies in the U.K. have as a guide for their permissibility. In this paper, the authors examine several legal somehow incongruent with the pursuit of reason or knowledge. However, this claim, literature, and the paper also presents some interesting avenues for future research. generally been neutral toward this trend, and the government sometimes has crafted issues regarding the potential permissibility of futures in Islamic finance. Futures too, is refuted by Islamic teachings. The Qur’an asserts, “Allah will exalt those who In the second paper, Parvez Ahmed examines the status of the global Islamic finance policies that have promoted the spread of Islamic banking in the U.K. However, the contracts have several features that potentially conflict with Shari’ah financial princi- have Faith amongst you, and those who have knowledge to high ranks” (Qur’an, 58, community and assess why, despite impressive growth, the industry still fails to capture recent global financial crisis has led policymakers to pass new regulations regarding ples, including the non-existence of an underlying asset, sale prior to possession, bai 11). Additionally, the Prophet Muhammad stressed the role of knowledge in Muslim a significant share of the global financial market share. Starting with the establishment governance practices in U.K. financial institutions. Islamic institutions are governed by al-kali bil-kali, and the potential for speculation and hedging. The authors conclude life. “If a son of Adam dies, his good deeds come to an end except for three: charity that of Egypt’s Mitt Ghamar Saving Bank in 1963, Islamic finance has grown to a value of Shari’ah boards, which are charged with reducing agency problems and upholding that futures contracts are only acceptable in Islamic finance for hedging purposes, keeps providing benefit, knowledge that people still benefit from, and a pious child who $1.357 trillion. Additionally, the industry has grown over 150 percent in the past five Islamic beliefs. While the goals and practices of the Shari’ah board are not dissimilar where delivery of the asset is intended. Futures contracts for the purpose of speculation supplicates for him”. Again, this teaching promotes knowledge as an important compo- years. However, despite the rapid growth of the Islamic finance industry, it has only from those of conventional boards, the process of reconciling the two in light of recent should be strictly forbidden. In addition, the authors suggest ways in which delivery of

the asset from a futures hedge can be made certain, such as through bank guarantees. Reconstruction of Economics Based on the Paradigm of First, the emergence of interest in IE is expression of historical nostalgia of the Muslims solutions for these problems. That encouraged them to think more deeply about The ninth paper is by Shah and Hussain and examines and encourages the spread of Tawhid: Present Challenges and Future Prospects to re-live the times of the Prophet and early caliphs when pristine Islam was actually a economic problems from Islamic perspective. Islamic finance and banking in the South Asian Muslim minority countries of India and dominant force. The Muslims perceive a direct correlation between the glorious period Sixth, Tawhid refers to Allah’s role as Sustainer and Provider of sustenance to all Sri Lanka. The Islamic finance and banking industries have experienced significant 1 of Islamic history that followed and remained dominant for more than seven centuries Muhammad Akram Khan creatures. Simultaneously, it defines the role of man as vicegerent of Allah on this growth since the 1970s. The Islamic financial industry has received much attention thereafter and practice of Islamic teachings. Since the fall of Baghdad in 1258, the earth. As vicegerent of Allah, man has to create, nourish and preserve resources for from practitioners and academics, especially in the Middle East and The West; how- subconscious mind of the Muslim ummah has yearned to recapture the past glory. The well-being of all creatures, play a positive role in environmental protection and fight ever, this paper exploits the lack of attention to the Islamic banking industries in Abstract Muslims have a realization that they are torch-bearers of the last message of Allah and corruption and destruction in all forms. Developing IE as a social science is a step in Muslim-minority countries. This paper analyzes the growth of Islamic baking practices it is their innate responsibility to spread that message and persuade the humanity about Islamic economics has made a respectable progress during the last four decades. A brief its truth. IE could be a modern vehicle to realize that dream. understanding and realizing this role in the world. in India and Sri Lanka in order to expand the academic literature in this regard. assessment of the existing literature on Islamic economics leads to identification of gaps. The In the tenth paper, Catovic examines the Islamic banking industry in the United States. most glaring deficiency in the existing literature is that it restates Islamic economic teachings Second, political emancipation from the colonial rule by most of the present day 3. Main achievements Islamic finance is unique from the conventional banking system primarily in its prohi- but does not move any far toward transforming this knowledge into a social science that would Muslim states gave them a sense of identity-assertiveness. It gave them a feeling that allow verification or falsification of its postulates. Besides, there are several problems with the During the first half of the twentieth century whatever appeared in the name of Islamic bition of riba, or interest. The United States holds a significant Muslim population, and “We are free in all respects; we do not have to depend on the West for anything; we framework of Islamic economics. The paper proposes a methodology for transforming Islamic economics was part of the writings of Muslim religious scholars. In those days there was analyzing the success of Islamic banking in attracting these customers is significant have our own systems; we have an Islamic economic system, etc.” The assertiveness economic teachings into Islamic economics as a social science. The paper also presents a no exclusive platform or journals for publishing contributions on Islamic economics. from both an industry and religious perspective. The authors survey a sample of New created a longing for developing a knowledge-base in economics as well as in other definition of Islamic economics that aims to overcome the deficiencies of the definitions Sporadic writings appeared in various types of scholarly and general-purpose magazines. Jersey mosques regarding their use of Islamic banking. The results provide some presented so far. It makes some suggestions for refining the framework of Islamic economics. subjects that springs from the teachings of Islam. The turning point came with the establishment of the Centre for Research in Islamic mixed results. Firstly, the results show that Muslims in the U.S. consume Islamic and In the end, the paper suggests some significant areas for future research. Third, some Muslim scholars analyzed that the Western education system is based on Economics (CRIE) in 1976 (now re-named as Islamic Economic Institute) in King conventional banking products at approximately the same rate. This results is godless rationality and tends to influence the minds of Muslim youth in a manner that Abdulaziz University, Jeddah. Within a short span of a few years several financial 1. Objective troubling, since it implies that Islamic banking may be unable to differentiate itself detaches them from Tawhid and pristine sources of Islam. The Muslim leadership institutions also came into being, with the avowed purpose of doing business on the basis properly within Islamic communities in the U.S. Secondly, the study concludes that educated and trained in the West-dominated institutions is alienated from Islam. The The objective of this paper is to reflect on state-of-the-art of the nascent discipline of of Islamic principles. For the last three decades now, there have been significant Islamic banking utilization does not appear to be limited to certain age, ethnic, or Muslim scholars felt that a storm was brewing up in the form of emerging leadership developments in the production and circulation of research documents, books and journal religious groups. This result suggests that the Islamic finance industry has a potential Islamic economics (IE) and offer some suggestions for its strategic direction and future that will steer the society away from our culture, history and religion. No amount of development. articles on Islamic economics and finance. For example, Harvard Islamic Finance Project market that exceeds the bounds of the Muslim community in the U.S. preaching would be of any consequence so far the Muslim youth is exposed to the databank had by June 2013 more than 9000 records available for free access. A number I hope you will benefit from the current issue papers of Journal of Islamic Economics, godless secular educational system. To bring back the Muslim youth to the fold of of websites which host research material on Islamic economics have come up2. Several Banking and Finance. 2. Emergence of interest in Islamization of knowledge Islamic teachings, the knowledge should be ‘Islamized’ so that the Muslim youth magazine and research journals exclusively devoted to Islamic economics and finance learns modern knowledge from a perspective that gives a deeper understanding of 3 Interest in the economic teachings of Islam emerged with the general awakening about have started publication . Some universities in Muslim and Western countries have Tawhid and Islam’s basic teachings. The project of ‘Islamization of knowledge’, 4 political independence and the right to self-determination of Muslim countries at the completed or registered Ph.D. dissertations on Islamic economics and finance . A number Sincerely, started under the able leadership of Ismail Faruqi al-Raji (1921-1986) in 1980s, has end of the nineteenth and beginning of the twentieth century. Muslim leaders like Professor M. Kabir Hassan done valuable work. IE can be treated as an element of this project. Jamaluddin Afghani (1839–97), Muhammad Abduh (1849–1905), Syed Ahmad Khan Hibernia Professor of Economics and Finance (1817–98) and Muhammad Iqbal (1876–1938), to name a few, were at the forefront of Fourth, the Muslim leadership has realized that the contemporary dominance of the University of New Orleans, USA creating this awakening. However, we do not see the use of terms like ‘Islamic West has its roots in the power of knowledge. They think that as trustees of the last New Orleans and Philadelphia economics’ or ‘Islamic finance’ explicitly in their writings and speeches. It was with message of Allah the Muslims have better sources of knowledge than the West. Only February 2014 the work of and a later generation of scholars like Khurshid Ahmad, Umer Chapra, that they are unable to present this knowledge in a format and language that is Anas Zarqa and Monzer Kahf, again to name a few, that these terms became popular comprehensible to the knowledge community across the globe. The realization has among Muslim scholars and economists.We can see several under-currents in recent given impetus to Muslim scholars for re-stating the basic teachings of Islam in modern Reference interest for developing IE as a distinct discipline. language and format. IE is one such example of this effort. Rasem N. Kayed and M. Kabir Hassan, Islamic Entrepreneurship, Routledge Publish- ing Company, November, 2010. ; ISBN13: 9780415584494, 376 pages, hardback, Fifth, overwhelming underdevelopment and poverty of the Muslim people creates an paperback, Published by Routledge urge among Muslim scholars to find ‘local’, indigenous and ‘culture-bound’ solutions for development. They believe that Islam presents a far more superior solution to ‘all problems of humanity’. They thought of going back to the Islamic sources to find

of bibliographies of books, journal articles and dissertations have also come out supervisory boards, and accounting and auditing organization for Islamic financial lying buried in pithy and difficult Arabic texts, most of which would not be intelligible its intents. [Yusri 2002, 28] pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and institutions, etc. even to Muslims, not to talk of non-Muslims. The Muslim economists did a yeoman’s It seems that Muslim economists are unable to agree on a general wording of the other regional languages. The Islamic Foundation (UK) and Centre for Maghreb and job in presenting these teachings in modern jargon that made sense to Muslims and 4. A brief assessment definition, although most of them want to say that Islamic economics studies the Islamic Studies are preparing a five-volume encyclopaedia of Islamic economics and non-Muslims. However, the original objective of developing a social science parallel economic problem from an Islamic perspective. If this understanding is correct, it finance. Islamic Economics and Finance Pedia has also started online publications on the (a) Presenting legal content in the jargon of economics to conventional economics escaped their achievements. would raise a further question as to whether such a social science can be made pattern of Wikipedia where members are allowed to upload their writings for free access universally acceptable. Will it be possible to present Islamic economic analysis in such (b) What exactly is IE? by others. During the two decades (1990–2010) literally thousands of publications, The earlier writings on Islamic economics by such religious scholars as Manazir Ahsan persuasive terms that even non-Muslims would like to consider its conclusions? If hundreds of seminars, conferences and symposia, and scores of websites hosting Gilani, Haiderzaman Siddiqi, Muhammad Yusufuddin, Sheikh Mahmud Ahmad, There cannot be a dispute on the assertion that if IE has to be a social science distinct Islamic economics has to grow further, it is time that Muslim economists joined forces literature on Islamic economics and finance have appeared. Eight international Muhammad Mazaharuddin Siddiqi, Naeem Siddiqi, Abu Al’ala Mawdudi, Hifzur from conventional economics, it should have a clear and unambiguous definition. to develop a generally acceptable definition of the subject which would mean the same conferences under the auspices of International Association of Islamic Economics have Rehman Seoharvi, Muhammad Nejatullah Siddiqi, Baqir alSadr and so on, mainly Unfortunately, the Muslim economists have not been able to present a generally thing to everyone. The definition should also remain attractive for everyone, been held. Ninth conference is due to be held in Istanbul in Sept 2013. There are now discussed principles of Islamic economics as derived from the primary sources of accepted definition of IE. Several writers have presented their definitions, though. nonMuslims included. A social science which requires belief in Islam or focuses on several research and training institutions exclusively devoted to Islamic economics and Islam. These principles dealt with such subjects as the Islamic worldview, property and Some examples of the definitions presented are as follows: problems of Muslims only simply locks out the majority of the scholarly community. finance. A large number of consultancy services and other educational organizations inheritance law, consumer behaviour, finance and interest, and zakah law. Soon these Will not such an effort defeat the very purpose for which Islamic economics is being offer courses on Islamic finance beyond their other business. writings caught the imagination of Muslim economists who were educated in modern • IE studies the Islamic injunctions within the framework of conventional developed as a social science? universities and trained as professional economists. They started questioning the economics by using the same methodology but incorporating different behavioral Significant developments have taken place in the field of Islamic finance (IF). By end methodology, assumptions and scope of conventional economics and expressed variables. [Laliwala, 1989; Haque, 1992] (c) What is an Islamic economy? 2012, the size of IF industry had crossed $ 1.5 trillion; its annual growth rate was about dissatisfaction with it. They tried to build a case for developing Islamic economics as 15 percent. Institutional infrastructure to sustain the Islamic financial institutions (IFIs) • [Islamic economics is a] Social science which studies the economic problems of Muslim economists have not so far tackled the basic question: what are the minimum a social science that is based on the worldview of Islam with an entirely different set of is coming up. Examples are international Islamic financial market, Islamic interbank people imbued with the values of Islam. [Mannan 1992, 18] and sufficient conditions for an economy to be called ‘Islamic’? Are there any degrees assumptions and analytical approach. The objective was to use the economic teachings money market, Islamic financial services board, liquidity management centre, • Islamic economics is the knowledge and application of its functions and rules of of ‘Islamicity’ when it comes to defining an economy in these terms? Shall we say that of Islam as stated in its primary sources and the historical records of Muslim thinking International Islamic liquidity management corporation, Islamic international rating Shari’ah that prevent injustice in the acquisition and disposal of material prohibition of commercial interest will make an economy Islamic or that during the last 14 centuries as the raw material for developing a new academic agency, Islamic indices, Islamic interbank benchmark rate, establishment of shari’ah resources in order to provide satisfaction to human beings and enable them to implementation of zakah will do so? What will transform the present-day Muslim discipline parallel to conventional economics. Muslim economists started writing on perform their obligations to God and the society. [Hasanuzzaman, 1984, 85] economies into ‘Islamic economies’? Taking the present-day Muslim economies, why such subjects as microeconomics and macroeconomics and the methodology and are they not treated as ‘Islamic’? In the absence of such a basic definition it becomes scope of the new discipline in light of Islamic teachings. • Islamic economics may be defined as that branch of knowledge which helps realize human well-being through an allocation and distribution of resources that is in difficult to place the economic analysis in any perspective. There was a lot of discussion and ambiguity about the exact method for developing the conformity with Islamic teachings without unduly curbing individual freedom or (d) Relationship with conventional economics new discipline. Without arriving at a conscious consensus on this question, some creating continued macroeconomic and ecological imbalances. [Chapra, 2001,33] research institutions, exclusively devoted to Islamic economics and finance, took the • To formalize matters, we may define Islamic economics as that part of Islam’s Literature on IE presents a confused picture about relationship of IE with conventional lead. They employed Western trained professional economists with some background social doctrine that deals with the problems of choice in the face of uncertainty economics. One approach is to reject everything that conventional economics offers, in Islamic studies. Unwittingly, the development of Islamic economics at the hands of and resource scarcity so as to promote falah in a holistic framework. [Hasan 1998] since its basic assumptions and worldview are not compatible with the Shari’ah [Yusri these economists adopted a path that did not take them to the original goal of • Islamic economics is a systematic effort to study the economic problem and man's 2002]. The idea is to develop a social science solely based on the primary sources of developing a distinct discipline. Muslim economists, the majority of whom had an behavior in relation to it from an Islamic perspective. It is also an effort to develop Islam. Another response is to develop IE on a similar basis to conventional economics education and training in conventional economics, took up the task of developing a a scientific framework for theoretical understanding, as well as design appropriate by using tools of the latter. Still another approach to modify conventional economics separate branch of knowledge under the rubric of Islamic economics. However, their institutions and policies pertaining to the processes of production, distribution and by incorporating ‘Islamic’ assumptions but using the same analytical tools as limitation and challenge were to develop a social science about a model economy that consumption, that will enable optimal satisfaction of human needs, enabling man conventional economics does. Some Muslim economists have also argued for did not exist in the real world. They could not test and establish the veracity of their to serve higher ideals in life. [Zaim 1989] replacing conventional economics by IE (Addas 2008, 5). The issue is still far from postulates. In the absence of such an opportunity, they engaged themselves in settled. Whether we should teach IE along with conventional economics and if yes, • Islamic economics is the science that studies the best possible use of all available elaborating various concepts of Islamic economics as found in the primary texts of how to relate the both? Or, should we teach only IE? If yes, then how to fill the gaps economic resources, endowed by God, for the production of maximum possible Islam, in particular Islamic jurisprudence. They tried to present the legal content of in the content of IE that the conventional economics addresses? Should we try to find output of Halal goods and services that are needed by the community now and in Islam in the language of conventional economics to make it intelligible for modern an Islamic alternative in all our lessons of conventional economics? If so, where is that future and just distribution of the output within the framework of the Shari’ah and economists. By itself it was a commendable effort. Islamic economic teachings were alternative in the literature that the teachers can use for their lessons? These questions

are far from settled. The real problem is that, despite efforts for developing a separate The Muslim economists have not made a compelling case for developing IE as a The question arises, if Islamic economics is unable to break new ground, then why do (c) Audience of IE discipline of Islamic economics, there is not much that can be genuinely called distinct social science. They have tried to make a case for Islamic economics as a social we have a new discipline to begin with? ‘economics’. Most of Islamic economics consists of theology on economic matters. science on the basis of certain assertions about conventional economics and Although all Muslim scholars assert that Islam is a divine message for the whole of Islamic economics requires distinct textbooks and teaching material which neither assumptions about the Islamic worldview (e.g. Siddiqi 2004). On both counts they A far more persuasive and convincing approach could have been to demonstrate that humanity, yet the way IE has developed, it restricts its audience to Muslims only as is exist nor are easy to create. As a proxy for the whole concept they have started teaching have made an unconvincing case. The assertion that conventional economics does not by developing IE as a social science distinct from conventional economics economic evident from the following: ‘conventional economics from an Islamic perspective’. The Islamic economic courses integrate ethical considerations in economic modelling is by and large not attested by problems of humanity at large would be solved or at least addressed in a more robust • Some definitions of IE explicitly mention the study and application of the shari’ah are taught as an adjunct to conventional economic courses. As of June 2013 no facts. There is a lot of emphasis even in conventional economic analysis on ethical manner. Had Muslim economists adopted this approach, IE would have attracted the attention of the wider intellectual community. as the main field of IE. Others refer it to the study of Muslims only. Still others standard textbook of Islamic economics was available. considerations. The welfare of society at large is one of the primary concerns of require some sort of faith in Islam before a person contributes to IE. Somehow, in conventional economists as well. Analysis and cure of poverty, income distribution, (e) Methodology and scope of IE the back of mind of Muslim economists, IE revolves around study of Islamic environmental protection, debt relief to the least developed countries, and progressive (b) Qur’anic statements relating to economics economic teachings, Islamic law, public financial management of early Islamic Muslim economists are not comfortable with the generally accepted methodology of taxation are some of the prime examples of the accommodation of ethical values in Primary reason for developing IE as a separate branch of knowledge emanated from days, well-being of Muslims, etc. There cannot be any objection to all this if the conventional economics where the economic postulate become hypothesis, theories economic analysis. Of course, one can always say that economic theory does not Muslims unanimously decide to restrict IE to Muslims only. However, it will put the Muslim claim that the conventional economics depends solely on human and laws after a rigorous process of examination through verification or falsification. integrate Islamic ethical values, which may be an overstated case if we note that off the wider community of scholars. It would not be able to benefit from the rationality and does not benefit from the divine sources of knowledge. After making They are afraid that this methodology would question the sacred texts of the Qur’an or Islamic ethical values are universal values and are generally accepted. However, if collective knowledge of scholars around the globe and will be reduced to a branch Sunnah which are immutable by definition. Literature on IE is replete with Muslim economists still feel that Islamic ethical values are not adequately integrated this highly persuasive assertion, the Muslim economists got engaged in creating a of knowledge where Muslims are talking to Muslims. inconclusive debates on methodology and scope of the subject. Some of the unsettled in economic analysis, they can do that in the analytical framework of conventional discipline of economics quite similar and almost mimicry of the conventional issues are: economics and enrich human understanding of economic reality. There are hardly any economics with sporadic pasting of verses of the Qur’an and quotations from the • Another evidence of restricting IE to Muslims only can be seen from the style of grounds for conceiving a new social science on the basis of this criticism of hadith literature. The Qur’an and hadith literature contains a wealth of material on writings on IE. The literature on IE addresses Muslim audience only. It uses the • Is IE a positive or a normative social science or both? conventional economics. various Islamic economic concepts such as distribution income and wealth (rizq), idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by the Muslim audience only. Non-Muslims are effectively barred. Muslim The other reason offered by Muslim economists is that conventional economics corruption on earth (fasad fil ard), infaq, bukhl, israf, tabdhir, al-afw, shukr, taqwa, • Should we borrow the tools of analysis from conventional economics or not? If tauba, baraka, hasanaat, etc. The Muslim economists have not paid due attention to the economists have successfully locked out the non-Muslims, and non-Arabic assumes selfishness as the primary trait of the human character, while Islam teaches audience from the content of Islamic economics. The larger academic readership yes, to what extent and with what caveats and how do we do that? Qur’anic verses relating to economic prosperity and misery in human societies. The altruism and sacrifice. The fact is that even the Qur’an certifies that human beings are does not find IE an easy discipline to follow and pursue. Trying to show off as selfish, narrow-minded and maximizers of material gains unless they follow the divine Qur’an deals with this subject extensively. There are at least 24 places where the torch-bearers of an independent discipline, Muslim economists have ended up • What are basic assumptions of Islam about human beings? Are they selfish or Qur’an mentions divine laws of prosperity and misery. The message of these verses, in altruistic or both? How does our position differ from the conventional economics? guidance. There is no doubt that the Qur’an wants human beings to change this talking to one another to the exclusion of others. Unwittingly, they have made behaviour, but this is a subject of theology and not of economics. brief, is that there are deeper, imperceptible and long-term currents of events taking Islamic economics a closed discipline which no one but hardboiled Muslims place in the universe as a result of human actions and under the divine will of God. should study. Even ordinary Muslims should not try to dabble in it. • How to develop a social science without existence of an Islamic society? How to Another reason for developing Islamic economics as a social science is couched in a test the postulates and hypothesis of IE in absence of empirical evidence? These currents affect the process of wealth creation in ways that cannot be explained romantic view of Islamic society based on the mental construct of historical society in easily in a simple cause–effect framework. The Qur’an points toward ethical (d) Islamic theory of income and wealth distribution the early days of Islam. Creating a new branch of knowledge to study such a society, behaviour, which gets translated into prosperity and misery. The divine will of God • If we have to rely on divine teachings of Islam, how do we accommodate the which does not exist anywhere and which is only part of the wish list of Muslims, is The literature on Islamic economics is replete with what the Qur’an has enjoined with concepts of verification and falsification prevalent in the methodology of operates through and in response to human actions. The precise mechanism through not a realistic goal to pursue. reference to the equitable distribution of wealth so that it does not circulate among the economics? which it operates is as yet not fully known. The meanings and interpretations of the rich only (Q. 41:7). Beyond this reference Muslim economists have not ventured to Has Islamic economics enhanced understanding of human economic problems such as Qur’anic texts on the subject require further thinking and deeper understanding. The develop a theory of income and wealth distribution. The Qur’an mentions God’s scheme • What is the scope of IE? At present IE deals with all sorts of subjects relating to poverty, underdevelopment, distribution of income and wealth, unemployment, absence of any research by Muslim economists in this field gives an impression that of distribution of sustenance (rizq) in numerous places. However, the Muslim economists philosophy, history, sociology, finance, law and ethics. Do we draw a line inflation, environmental balance and so on? Muslim economists have discussed these they have never noticed these verses of the Qur’an. did not pay much heed to these verses of the Qur’an, as is evident from their neglect to somewhere to demarcate IE from other sciences? issues and have cited various primary sources of Islam to highlight solutions to these develop a theory of income distribution in Islam, although the content of these verses A deeper understanding of these invisible divine laws and a detailed investigation into 5. Gaps in the Existing Debate problems. If we go deeply into the suggested solutions, besides references to the suggests a great potential for doing so. The global community is ambitiously searching primary sources of Islam there is hardly anything that is different from mainstream meanings and application of various Qur’anic terms would have opened up new vistas for a solution to disparities in income and wealth within an economy and among (a) Case for IE as a social science did not attract the attention of wider intellectual economics. The suggested Islamic solutions do not stray significantly from what of knowledge and enquiry for the humanity at large. The literature on IE does mention economies of the world. A valid theory that explains these differences would be more community. humanity already knows. In sum, Islamic economics has not enhanced human these concepts but skips from their elaboration and development with reference to than welcome everywhere. IE could make a contribution in this field in light of divine understanding of economic problems and has not led to any innovative solutions. human economic problems. I think this is one big gap in the present literature on IE. guidance. It would have added a clear dimension to human understanding of this problem.

(e) Economic development (g) Role of government (i) Defining the basic framework • IE addresses whole of humanity. It is not a science that deals with the problems of Muslims. Its study does not require faith in Islam nor does it require an Islamic Muslim economists have been trying to fine-tune or ‘Islamize’ theories of The literature on Islamic economics does not clearly define the role of government in We need to define basic framework for developing IE as a distinct social science. It society for developing its knowledge-base. Its postulates, hypotheses, theories and development economics in their zeal for proving the superiority of the Islamic the economy. Most of the Muslim economists consider that the government would do will help dispel confusion about scope, methodology and objectives of IE and enable laws are valid for all societies and for all people. IE should come out of the economic system over capitalism (e.g. Khurshid Ahmad, 1980). Some of them have everything to undo injustice and smooth out inequalities from the economy. The future development of the subject on robust footings: problem of conceiving its postulates in the context of Islamic economy since it written on the concept of Islamic economic development. The concept propounded in discussion is based on a romantic view of early day Islamic society and ignores the does not exist anywhere in the real world. Instead, IE should deal with problems of • Most of what has been presented in the name of IE so far consists of Islamic these writings generally matches closely with the concept of development in capitalist ground reality of Muslim economies in the present age. It seems that Muslim the economies that exist in the real world. economies. Both concepts deal with such economic variables as savings, investment, economists who delve into the romantic view of Islamic government do not have any teachings and can be legitimately termed as theology. However, from these employment, the competitive market, the oversight role of governments, and a private perception of the capacity and will of government functionaries in present-day Muslim theological roots a distinct discipline of IE can be developed. For transmuting from • IE should present its postulates, hypotheses, theories and laws on rational grounds property regime protected by the rule of law. If we take out references to the divine societies. They have not realized properly that the economies of poor countries are theology to a social science, IE needs to adopt a methodology that makes it a and not on the force of their divine origin. Even when an idea has been derived texts and the assumption of an ideal Islamic economy, the Islamic concept turns out to steeped in corruption and fraud. Empowering government functionaries with resources genuine social science. As a social science, IE should adopt the same methodology from divine sources, it should be argued out on rational basis. Only in that case IE be so close to the capitalist concept of development that it becomes difficult to tell one and authorizing them to play an extended role may play havoc with whatever is still as that of the conventional economics. However, it needs to adopt a new would attract the attention of the wider intellectual community. from the other. Muslim writers on economic development did not develop the concept being performed by secular institutions for the welfare of the poor and delivery of perspective for thinking over the Qur’an and Sunnah teachings. The basic of man’s vicegerency and his role in development. If man is God’s vicegerent, what is public goods and services. injunctions of Islam as derived from the Qur’an and the Sunnah are divine and • IE should not feel shy of adopting and using tools of analysis used by conventional economics or other contemporary social sciences. These tools are available in the his role on the earth? Most probably, he is charged with the task of developing immutable, but that is the domain of theology. When it comes to developing a (h) Assessment in brief present form after centuries of thinking and experimentation and are a common resources of the earth. The activities that promote development of the resources match social science like Islamic economics these very injunctions have to be well with the role of man as God’s vicegerent. The activities which lead to destruction heritage of the humanity. IE can borrow from that heritage freely. • No agreed definition of IE reformulated into verifiable or falsifiable postulates. For example, the law of zakah of resources, such as burning of crops, killing of human beings, pollution of the presents various limits and rates. Once the law is enforced, economists can come (j) Defining IE environment, destroying of buildings and infrastructure in physical sense, cutting • No agreement on methodology, scope and objectives of IE forward and frame postulates in the following manner: (a) the enforcement of asunder of kinship ties, internecine wars, mutual exploitation, and fraud and cheating The above discussion has set stage for venturing into a new definition of IE. I would zakah has led to a more (or less) equitable distribution of wealth in the economy; in dealings in an economic and social sense, defeat the primary role of man. The • No contribution to the human welfare through problem solving suggest following definition of IE: Qur’an terms such activities corruption on earth (fasad fil ard). An Islamic theory of (b) enforcement of the zakah law has reduced (increased) the incidence of poverty; (c) zakah has encouraged (discouraged) investment in the economy; and so on. development could be developed on the concepts of vicegerency of man and fasad fil • Muslims talking to one another without involving wider community of economists Islamic economics is a social science that integrates human understanding of divine ard. Muslim economists have not paid much attention to this potential area of and scholars around the globe Such postulates can be tested and verified by empirical evidence. It would not sources of knowledge into the study of economic problem. contribution. require an ideal Islamic society. Once they are verified by empirical evidence or The definition has certain implications: • Basic concepts and terminology of the Qur’an and Sunnah relating to economic cannot be falsified in any manner they will become theories of Islamic economics. (f) Islamic finance on driver’s seat concepts not yet developed. The process of postulate-making is a human endeavor and is subject to • It clearly delineates IE from other Islamic disciplines such as theology, law, examination and correction. When Muslim economists are able to translate Islamic history, etc. By making IE a social science, it agrees to accept and use the Islamic finance (IF) is a branch of IE. However, it has stolen the show from IE, which • Invisible laws of God referred to in the Qur’an or Sunnah have not been explored. methodology and tools of analysis of other social sciences. has been pushed to back burners. With establishment of hundreds of IFIs most of the economic teachings into economic postulates they will take the first step toward creating a social science in the name of ‘Islamic economics’ intellectual activity and research is also focused on IF. The work is more of an effort to • IF has dwindled down to the task of re-engineering conventional finance concepts • The definition does not link IE with Islamic economy or Islamic economic system provide workable solutions to Islamic financial institutions (IFIs) without attracting which does not exist in real world. and tools to avoid objections from shari’ah scholars without making any • IE has no dispute with conventional economics. It does not replace, modify or objections from shari’ah scholars. With their work these institutions have added a new substantial contribution to human welfare supplement conventional economics. The two disciplines have their own subject • The definition does not consist of an inventory of Islamic economic teachings. dimension to the global finance industry. However, most of the intellectual work done Instead, it focuses on human understanding of these teachings. The human matters and can develop side by side. If we have to develop Islamic economics as so far consists of stratagems and ruses for hiding interest in the rigmarole of legal and In brief, IE is still searching for its identity, strategic vision and final destination. It has understanding is subject to examination, verification and falsification. It financial terms. Whatever IFIs are doing is quite similar to the conventional financial yet to gear up for adding value to the human understanding of economic problems. a social science, and we think it is a potentially feasible enterprise, we should not segregates the divine and the mundane and focuses on the mundane. attempt to modify conventional economics from an Islamic perspective. Instead, institutions. The whole pride of IFIs is in showing that they are not ‘far behind’ the • As a social science, IE aims to study the economic problem that emerges from 6. Future Strategic Direction we should study conventional economics as it is but develop Islamic economics as conventional finance. The earlier claims to founding an innovative banking system that unlimited wants and scarcity of resources that have multiple uses. In other words, a social science from its theological foundations. It should not be an attempt to contributes to welfare of the poor and promotes development has dwindled down to I would now like to reflect on possible future course of action if we have to develop IE IE does study the economic problem. However, while doing so, it integrates human transform conventional economics into Islamic economics. While studying what it aimed at replacing in the first place. (See e.g. Boudjellal 2006; El-Gamal 2007; as a distinct discipline. My ideas consist of three parts: (a) Defining the basic understanding of the divine sources into the study of the economic problem. Taqi Uthmani 2008) conventional economics we can make a contribution by using its standard and framework; (b) Defining IE; (c) Research agenda for the future • The definition closes the debate about normative or positive character of IE. It generally accepted methodology.

clearly asserts that it is a study of the economic problem and thus a positive science Q. 3:178 says: ‘And they should not think – they who are bent on denying the truth – treatment of certain diseases caused by the bacteria. Similarly all developments in iv. Engage the economists of the world in understanding, interpreting and like conventional economics. However, its findings may be used by policy makers that Our giving them rein is good for them: We give them rein only to let them grow in physical sciences explain various natural phenomena which existed even before they undertaking further research into these laws. to address various problems. sinfulness; and shameful suffering awaits them.’ were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process various physical sciences have also Over a long period of time and after years of research and introspection some of these • The definition takes out the confusion in some of the existing definitions which Q. 5:66 says: ‘and if they (followers of the Bible) would but truly observe the Torah developed methodologies to confirm or refute hypotheses propounded by scientists. In moral laws would be discovered in a format that can be used in economic analysis. The mix-up definition with objectives of IE. Trying to embed objectives of IE into and Gospel and all [the revelation] that has been bestowed from on high upon them by the field of moral laws, this work is yet to be done. Firstly, human beings are not quite whole idea may look like a wild-goose chase at this stage. But the statements of the definition itself overburdens the definition. It puts off non-Muslim social scientists their Sustainer, they would indeed partake of all the blessings of heaven and earth. . . .’ aware of the moral laws that are operating in the universe. These laws are difficult to Qur’an are immutable and true. They have direct relevance to the life of contemporary that are not interested in any of these objectives but would like to broaden their man as they have throughout the ages. It should be possible to interpret the moral laws Q. 11:3 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in discern by the physical senses and material experimentation. They require divine understanding of economic problems from a different perspective. mentioned in these statements. The above-mentioned course of action will enable repentance – [whereupon] He will grant you a goodly enjoyment of life [in this world] guidance to begin with. Secondly, they are extremely complicated and have backward Islamic economics to extend the frontiers of conventional economics. It will have a • By using the phrase ‘divine sources of knowledge’ it keeps the window open for until a term set [by Him is fulfilled]; and [in the life to come] He will bestow upon and forward linkages with the physical world. The moral laws deal with human distinct research agenda for itself and have no dispute with conventional economics. borrowing from earlier scriptures. It can attract attention of the wider knowledge everyone possessed of merit [a reward for] his merit. But if you turn away, then, verily, behaviour, but changes in human behaviour can also influence the operation of these Both social sciences can complement the findings of the other and live side by side. community, which is unbiased about borrowing from any source of knowledge I dread for you the suffering [which is bound to befall you] on that awesome Day.’ Q. laws. Thus it is a two-way relationship. The moral laws influence and are in turn One of the contributions of Islamic economics to human knowledge could be to that can help enhance our understanding of the problems. 11:52 says: ‘Ask your Sustainer to forgive your sins, and then turn towards Him in influenced by changes in human behaviour. That complicates the situation further. develop a methodology for making the Qur’anic economic laws manifest in human repentance – [whereupon] He will shower upon you heavenly blessings abundant, and Thirdly, the divine time scale is much longer than the usual human time scale. The In brief, we should develop IE from the perspective of social science that studies situations. Since the Qur’anic economic laws operate in human situations, the effects will add strength to your strength: only do not turn away [from Me] as lost in sin. Qur’an mentions the length of one divine day as equal to one thousand years by our the economic problems. It should aim to enhance human understanding of the reckoning (Q. 22:47). The moral laws may have linkages with human behaviour at of these laws are measurable. Only the process is not visible. We need to ‘discover’ economic problems by integrating guidance obtained from divine sources of I can cite more examples from the Qur’an which refer to such laws of material points of time which are not discernible easily at the present moment. that process. We need to define the variables in measurable terms so that our knowledge into humanly acquired knowledge. prosperity and misery, distribution of income and wealth (rizq), the effects of understanding of the laws is confirmed or falsified by empirical evidence. charitable spending (infaq), and so on. The moot point is that these ethical laws are Since it is not possible for human beings to discover these moral laws by direct sensory (k) Research agenda We think that the method will be a breakthrough in the development of IE as a social statements of facts, but we do not understand exactly how these laws operate in perceptions, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (PBUH). The two primary sources of science. Instead of trying to copy the postulates of conventional economics and The future research agenda of IE should be guided by the gaps that have remained physical terms. Islamic economics refer to certain moral laws that affect our material well-being. presenting them as ‘Islamic’ versions, it will be better to present the laws of the Qur’an unaddressed so far. Some of the areas for further research are as follows: The moral laws influence the nature of the economic problem faced by man. Without However, the exact functioning of these laws is not yet known. We need to discover it as given statements, with a challenge for economists to discover the cause–effect Understanding economic concepts and statements of the Qur’an and Sunnah studying the influence of these laws, the study of the economic problem remains partial by introspection, experimentation and dialogue. For example, the Qur’an points to the mechanism for these laws. It will generate a lot of intellectual activity, and the result and incomplete. It does not provide a comprehensive explanation of the differences moral law of prosperity and misery but does not explain its exact operation in a will be beneficial for humanity at large. It will give us a clue to the behaviour pattern The Qur’an makes several statements about the economic aspect of life. These between material possessions and the causes of prosperity and misery. Conventional cause–effect framework. Human beings have to discover that relationship as they that leads to prosperity and blessings and also indicate the behaviour pattern that leads statements are nothing short of divine laws stated by God. Muslims believe that these economics does not recognize the operation of any moral laws that influence the discovered the relationship of various facts in the physical sciences. The task in the to misery. One can say that these behaviour patterns are already well known to laws in fact operate in this life through the divine will of God. But how these laws economic problem of man. The methodology cannot help in understanding the moral social sciences has yet to start. This should be the main task before Muslim economists Muslims. What is the use of getting into the process of postulate testing? It is true that actually take effect is not evident from the Qur’an directly. laws, because they are invisible and not measurable and operate in a complicated if they are to develop Islamic economics as a distinct social science. Instead of trying humanity is aware of good and bad behaviour in ethical terms, but humanity cannot see the linkages of this behaviour with the creation and destruction of wealth as stated in Some examples of these divine laws are as follows: manner. They are not amenable to economic analysis in the usual manner. Mere human to prepare an ‘Islamic’ copy of conventional economics they should take up the task of thinking cannot make them explicit. It requires divine guidance to understand the expanding the frontiers of economics by discovering the moral economic laws and the Qur’an. One of the strong points of this methodology is that it does not require an Q. 2:155 says: ‘And most certainly shall We try you by means of danger, and hunger, existence and operation of these laws. enriching the pool of knowledge for the benefit of humanity. This can be done in the Islamic society to be in existence. These postulates can be tested in any society. and loss of worldly goods, of lives and of fruits. . . .’ Q. 7:130 says: ‘And indeed We following manner: punished the people of Pharaoh with years of drought and shortness of fruits (crop, The human understanding does not take into account invisible factors that influence i. Prepare a list of moral laws as discerned from the Qur’an and authentic Traditions Defining economic concepts and terms of the Qur’an etc.) that they might remember (take heed).’ There are other verses in the Qur’an that the process of generation and distribution of wealth. Our present knowledge does not of the Prophet relating to economics. have a similar message (e.g. Q. 7:168, Q. 9:26). These verses indicate that poverty and go much beyond what the text of the Qur’an says about certain moral laws that affect We come across several concepts and terms that have some relationship with economic the distribution of resources on earth. Although the moral laws influence the material misery could be either a trial to judge human conduct at times of adversity or a form of ii. Try to understand and interpret the moral laws in a cause–effect framework and problem of man. Examples are riba, zakah, infaq, israf, tabdhir, bukhl, sadaqa, baraka, conditions significantly, man has not as yet discovered these laws. An illustration from divine punishment for past human sins. present them in the format of postulates that can be tested and verified. fasad fil ard, shukr, taqwa, tauba, rizq, hatyat tayyeba, hasanaat, etc. The literature on the field of physical sciences will explain the point. The law of gravity was operational IE mentions these concepts in very general terms that do not allow precise and Q. 2:276 says that God diminishes riba and increases charity (yamhaqu Allah al-riba in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused iii. Publish the results of postulate testing and invite the community of economists to measurable definitions. For example, when do we say a certain expenditure is israf? wa yurbi al-sadaqaat). The verse mentions the decrease (mahq) caused by riba. infection even before Louis Pasteur (1822–95) discovered their existence and the examine the results. When does it become tabdhir? What are minimum conditions for hayat tayyeba? Until

Reconstruction of Economics Based on the Paradigm of Tawhid: Present Challenges... 31 such idioms and phrases are defined in measurable terms, IE will not come out of the References Sadr, S. M. Baqir al-.1971. Iqtisaduna. (Our economics). Urdu trans. Zeshan Haider. Lahore: fold of theology. For arriving at measurable definitions of these concepts, the above Maktaba Ta’mir e Adab. methodology should be used. It means, while interpreting these phrases, various Addas, Waleed A. J. 2008. Methodology of economics: Secular vs. Islamic. Kuala Lumpur: International Islamic University Malaysia Press. Online at http://mpra.ub.uni-muenchen.de/8264/ Seoharvi, M.Hifzur Rahman.1959. Islam ka iqtisadi nizam [Economic system of Islam].Urdu. postulates based on human understanding of these concepts should be formulated in a Delhi: Nadvatul Musanaffin. format which can be verified or falsified. In a long drawn process of thinking and MPRA Paper No. 8264, posted 05. May 2008 / 14:43. testing of the postulates in real life terms, we shall arrive at defensible definitions of Ahmad, Khurshid. 1980. Economic development in Islamic economic framework: Some notes Siddiqi, H. Z. 1950. Islam ka ma’ashiyati nizam (Economic system of Islam). Urdu. Lahore: these concepts. on the outlines of a strategy. In Studies in Islamic economics, ed. Khurshid Ahmad, pp. Kitab Manzil. 171-190. Leicester: Islamic Foundation. (c) Focus on economic problems Siddiqi, M. N. 2004. What went wrong with Islamic economics? Paper presented at Roundtable Ahmad, Sheikh Mahmud. 1952. Economics of Islam. 2nd ed. Lahore: Sh. M. Ashraf. on Islamic economics: current state of knowledge and development of discipline. IRTI & Arab IE should focus on economic problems that are plaguing the world economies. Planning Institute, Kuwait. May 26-27, Jeddah, Saudi Arabia. http://www.siddiqi.com/mns/ Conventional economics also addresses these problems. The source of knowledge for Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications. Siddiqi, M. N. 1970. Some aspects of Islamic economy. Lahore: Islamic Publications. conventional economics is human thinking and empirical data. IE has another source of Review of Islamic Economics 12 (1):151-168. knowledge that is based on human understanding of divine sources of knowledge. It means Boudjellal, M. 2006. The business of interest-free banking with special reference to Kuwait Siddiqi, M. M. 1955. Islam ka ma’ashi nazariya. (Economic concepts of Islam). Urdu. Lahore: IE addresses the human economic problem equipped with two sources of knowledge: (a) Finance House. M.sc dissertation. Herriot-Watt University, Edinburgh. Idara Thaqafat e Islamiyya. humanly acquired knowledge through rational thinking and experimentation; (b) human understanding of the divine sources of knowledge. Using these two sources, IE would Chapra, M.U. 2001. What is Islamic economics? Jeddah: Islamic Research and Training Uthmani, M.Taqi. 2008. Sukuk and their contemporary applications, http:// muftitaqiusmani.com/downloads/publications/articles/sukuk.pdf present understanding of the economic problem. Only if the IE is able to explain the Institute, Islamic Development Bank. economic problem in a more convincing manner on rational grounds it would be able to El-Gamal, Mahmoud A. 2007. Incoherence of contract-based Islamic financial jurisprudence in Yusri, A.R. 2002. Methodological approach to Islamic economics: its philosophy, theoretical attract the attention of the wider intellectual community. It means IE cannot expect to the age of financial engineering, http: www.ruf.rice.edu/~elgamal. contribution and applicability. In Theoretical foundations of Islamic economics, ed. Habib make a plausible case for acceptance of its interpretations merely by asserting that it is Ahmed, pp.20-60. Jeddah: Islamic Research and Training Institute, Islamic Development Bank. based divine sources. The IE presentation should be reasonable on rational terms. If IE is Gilani, S. M. Ahsan. 1947. Islami ma’ashiyat (Islamic economics). Urdu. Karachi: Sh. Shaukat Yusufuddin, M. 1950. Islam ke ma’ashi nazariye [Economic concepts of isloam]. Urdu. able to do so, it would enhance the human understanding of the economic problems and Ali and Sons. Hyderabad, Deccan: Matbaa’a Ibrahimiyya. would be a welcome addition to human knowledge. Haque, Z. 1992. Nature and methodology of Islamic economics: An appraisal. Paper presented Zaim, Sabah el-din. 1989. Islamic economics as a system based on human values. Journal of Concluding remarks at the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10. Islamic Banking and Finance 6 (2):13-21. Most of the literature on IE consists of explanations and interpretations of the Qur’anic verses, Traditions of the Prophet, Islamic law, Islamic history and Islamic public Hasan, Z. 1998. Islamization of knowledge in economics: Issues and agenda. IIUM Journal 6 policy during the last 14 centuries or so. There is no argument about the value of this (2): 1-40. literature, but most of it falls in the domain of theology and not economics. It is time Hasanuzzaman, S.M. 1989. Definition of Islamic economics. Journal of King Abdulaziz that Islamic economics comes out of the cocoon of theology and develops into a social University 1(2). science. The methodology suggested in this paper is a way forward. The future of Islamic economics lies in this methodology. Laliwala, I. J. 1989. Islamic economics: Some issues in definition and methodology. Journal of King Abdulaziz University: Islamic Economics, 1(1): 129-131 In the final analysis, IE must be able to enhance our understanding of the economic reality and provide more robust and sustainable solutions to the global economic Mannan, M.A. 1992. Islamic economics: Theory and practice. Cambridge: Islamic Academy. problems. Therein lays the secret of success for the new discipline. It would attract the Mawdudi, Abu al-‘Ala. 1969. Ma’ashiyat e Islam. (Economics of Islam). Urdu. Lahore: Islamic attention of world intellectual community. The ultimate objective of making the world Publications. aware of a divine source of knowledge that would help them lead a more prosperous life would be achieved. If IE does not achieve its final objective, it would be only a Qadri, G. Sarwar. 1978. Ma’ashiyat nizam e Mustafa. (Economics of the system of Mustafa). pastime of Muslim intellectuals, talking to one another and basking in the sun of Urdu. Lahore: Mustafa Academy. bygone glory. It would be a fun, though.