By H. Abdur Raqeeb

General Secretary, Indian Centre for Islamic Finance, New Delhi

Dr. Muhammad Umar Chapra (February 1, 1933 – June 13, 2026) was a prominent economist, researcher, professor, and intellectual. During his student days, he was associated with Islami Jamiat-e-Talaba Karachi, and thereafter, throughout his life, he remained actively engaged in the field of knowledge and scholarship as a servant of Islam. As an author of numerous scholarly books and a creative thinker in Islamic economics, he left an indelible mark.

In 2007, the complex process of subprime mortgage defaults in the United States—where impoverished populations living below the poverty line failed to fulfil their housing loan repayments—brought major global capitalistic financial institutions and banks to the brink of bankruptcy. On the one hand, this crisis exposed the negative impacts and harmful consequences of the modern economic and financial system to the world. On the other hand, for the first time, it compelled the entire global community to seriously consider Islam’s economic and financial system and created an inclination to implement it.

Consequently, the Chairman of the World Economic Forum declared: “We have now reached the final point, leaving us with only one alternative: either we change our current approach or face continuous decline and suffering.”

The Pope at the Vatican presented the principles of Islamic finance to Western bankers as a solution to the global economic crisis, stating that the moral principles upon which Islamic investment is founded would bring banks closer to their customers and make it possible to achieve the true spirit of the services they render.

International Seminar: In July 2005, following the onset of the global financial crisis, a Reserve Bank of India Working Group was constituted under the chairmanship of Mr. Anand Sinha at the behest of the Indian government to draft a report on the practices used in Islamic finance.

History will bear witness that to draw the attention of India’s political and legal institutions toward Islamic economics and interest-free banking, Jamaat-e-Islami Hind organized an international seminar titled “The Message of Islamic Banking: Justice & Equity” in New Delhi in February 2006. This seminar was held under the supervision of Dr. Nejatullah Siddiqi and was attended by globally renowned Islamic bankers, economic experts, and leading intellectuals. Participants included Dr. Umar Chapra, Dr. Mabid Al-Jarhi, Dr. Monzer Kahf, Dr. Mansoor Durrani, Irfan Siddiqui, and Ismail Shariff. Dr. Fazlur Rahman Faridi delivered the keynote address, and the then-Amir of Jamaat-e-Islami Hind, Dr. Muhammad Abdul Haq Ansari, presided over the event.

The renowned economist, Dr. Umar Chapra, delivered a keynote address focusing on how interest-free banking can serve as a vehicle for socio-economic justice, the eradication of poverty, and broad human welfare. In fact, immediately following World War II, economic thinkers of Western capitalist thought set aside partnership models and made interest-based debt the foundation of growth, spreading a web across global financial markets.

In this regard, Professor Chapra highlighted the following key economic concepts:

1 – Eradication of Exploitation: The primary objective of prohibiting Riba (interest) is to prevent injustice and exploitation wherein a limited number of wealthy lenders take advantage of the borrower.

2 – Profit and Loss Sharing: Supported by data and evidence, he advocated for a fair financial system that establishes justice by emphasizing moral aspects and the principles of profit-and-loss sharing over the fixed-return, debt-based system prevalent in capitalism. In this model, the entity or individual providing financial resources acts as a business partner participating in profits and losses rather than just a lender.

3 – Equitable Distribution of Wealth: He explained that the Islamic financial system promotes the circulation of wealth. It supports charitable mechanisms like Zakat to reduce social inequality and empower poor and underprivileged classes.

4 – Broad Economic Transformation: Achieving true equality and justice requires a robust moral framework, effective corporate governance, and supportive socio-economic policies. This endeavour cannot be carried out by religious scholars (Ulama) alone; it requires the active participation of conscious intellectuals across society.

After attending this international seminar, Dr. Chapra visited Jaipur, Rajasthan. There, he addressed businessmen and influential members of society in an engaging, accessible language, detailing the importance of trade and the parameters of a business free from interest (Riba) and ambiguity (Gharar), which deeply impressed the audience.

The Islamic Concept of Development in Light of Maqasid al-Shari’ah: This key paper by Dr. Chapra was published by the Islamic Fiqh Academy. In it, he explained that the objective of the Shari’ah is to secure benefits for people and protect them from harm and corruption. Citing Imam al-Ghazali, he noted that al-Ghazali emphasized the protection of the five fundamental goals (Maqasid al-Khamsah): faith, life, intellect, lineage, and wealth. Nearly three centuries later, Imam Abu Ishaq al-Shatibi concurred with al-Ghazali in interpreting the goals of Shari’ah, adding other objectives indicated by the Qur’an and Sunnah, asserting that if these five are considered the primary objectives, all other goals can be subsumed under them.

Dr. Umar Chapra states: “It is necessary for human beings to continuously strive to expand upon both primary and secondary objectives so that their well-being continuously improves. Changes in needs and circumstances affect not just individuals, but society as a whole. Times have changed, needs have evolved and grown, and taking all of this into account, these objectives require ongoing discussion and debate.” (Islamic Economics Bulletin, Jan–Feb 2003, pp. 1–3)

Similarly, he gave an interview to Dr. Shariq Nisar, which was published in the Islamic Economics Bulletin (January–February 2003). In it, he emphasized that Islamic economics needs to adopt a more comprehensive model compared to conventional economics. We should draw guidance from Ibn Khaldun, who presented a holistic, dynamic model based on the interdependence of various societal factors.

To date, very little work of an empirical nature has been carried out. Without it, we can neither understand the true state of the Muslim world nor propose an effective strategy for the future. It is necessary to articulate the Islamic strategy clearly. This is not limited merely to reforming the financial system; rather, it encompasses the reform of human beings and all the social, economic, political, and other factors that influence human behaviour and well-being. Consequently, our focus will not remain confined solely to religious beliefs and values, but must also incorporate social, economic, financial, political, and historical factors.

Dr. Chapra states: “Islam is a complete code of life, capable of resolving the problems not only of Muslim countries, but of all humanity. Jurists (Fuqaha) have hitherto rejected options and derivatives, even though these are not necessarily rooted in speculation but are also utilized for risk management. If we do not accept them, we must find alternative methods for managing risk. Islamic economics requires a great deal of creative thinking to promote human welfare.” (Dr. Umar Chapra: Prohibition of Riba, Publisher: Fiqh Academy, India)

Prohibition of Riba — Unviable in the Modern Era?

Dr. Umar Chapra’s 60-page paper, Prohibition of Riba, consists of Urdu translations of three of his scholarly articles and stands as a masterpiece. Dr. Mahmood Ahmad Ghazi was so impressed by this work that he wrote in its introduction: In the history of Islamic economics, Dr. Muhammad Umar Chapra holds the same stature that Imam al-Ghazali and Imam al-Razi hold in the history of Muslim philosophy and theology.

Is interest truly prohibited in Islam? Conflicting views are still expressed on this question today. The reason is that certain Muslim intellectuals claim that what Islam prohibited was not interest (Sood), but Riba, and that interest and Riba are not the same thing. There are two main grounds given for this view:

Narrated by Abu Hurairah (RA), the Messenger of Allah (peace be upon him) said: “A time will surely come upon people when no one will remain who does not consume Riba (interest). Even if one does not consume it directly, its vapor or dust will reach them.” (Sunan Abi Dawud)

This implies that within the pervasive nature of such an exploitative financial system, even if a believer attempts to avoid interest directly, the effects or dust of an interest-based economy will inevitably touch everyone’s daily life.

Furthermore, the Rightly Guided Caliph, Umar (RA), mentioned that the verses regarding Riba (interest) were among the last revealed in the Holy Quran, and the Messenger of Allah (peace be upon him) passed away before fully explaining all their fine details and applications. Therefore, as a matter of caution, Umar (RA) advised: “Leave what makes you doubtful for what does not make you doubtful.”

Allama Abdullah Yusuf Ali noted in his commentary that modern bank interest is not Riba.

Dr. Chapra thoroughly examined Riba al-Nasi’ah and Riba al-Fadl, clarifying that all forms of interest are prohibited in Islam. In doing so, he cleared up this confusion and rendered an immense service to the Ummah.

Maulana Mawdudi’s Contributions to Islamic Economics: Writing about Sayyid Abul A’la Mawdudi’s contributions, Dr. Umar Chapra noted that Mawdudi was not a professional economist, but primarily a reformer. It would be unfair to expect him to have engaged in detailed theoretical and practical economic debates. Mawdudi’s core objective was to guide humanity onto the path of success while keeping the higher goals of Islamic Shari’ah in view. Thus, he analyzed human problems and offered solutions in light of Islamic teachings.

Dr. Chapra further writes: “To meet basic needs and rapidly improve the economic condition of the poor, Maulana Mawdudi placed the greatest emphasis on transferring resources from the rich to the poor. In his early period (1941), he posited that an immediate solution could be achieved by encouraging wealthy individuals to adopt the lifestyle of the early Muslim community—fulfilling their genuine needs and distributing their remaining income (not total wealth) among the poor, termed Al-Afw in the Quran.

However, later, as he likely realized the practical difficulties of implementing this approach in modern societies—which lacked the selflessness of early Muslims—he softened his stance. His revised position allowed individuals to secure their remaining funds and invest them in business, provided they fulfilled their reasonable needs and paid their obligated Islamic duties (Zakat and Ushr). Nonetheless, he continued to emphasize living a simple lifestyle and distributing as much excess income to the poor as possible. He also advocated for setting up cooperative institutions and ensuring that deceased individuals’ estates were distributed equitably according to Shari’ah guidelines, alongside Zakat and Ushr.”

Continuing, Dr. Chapra writes: “Maulana Mawdudi firmly believed that eliminating interest would help establish a just social order. In his writings, he demonstrated how an interest-free financial system could be realized. In this regard, he emphasized implementing profit-and-loss sharing methods (Mudarabah and Musharakah) in finance. However, the practical development of the Islamic financial system has turned out somewhat differently. It includes a significant share of sales-based financing models (Murabaha, Ijarah, Salam, and Istisna), which generate debt—though these remain distinct from the interest-bearing loans of conventional banks. While Maulana Mawdudi did not classify the notable price mark-up between cash and credit transactions (found in certain sales models like Murabaha) as interest, he regarded it as doubtful income that should be avoided according to Hadith.

Dr. Chapra further notes: “At the same time, [Maulana Mawdudi] expressed in several other writings that economic, social, political, and historical forces constantly shape individual behaviour. Therefore, mere preaching and admonition cannot achieve the desired results. Muslims have been accustomed to sermons for centuries, yet routine preaching has brought no noteworthy change in their character. Hence, he emphasized the need for comprehensive socio-economic transformation.

In light of Islamic teachings and drawing from historic Muslim thinkers like Abu Yusuf (d. 798 CE), Al-Mawardi (d. 1058 CE), Ibn Taymiyyah (d. 1328 CE), Ibn Khaldun (d. 1406 CE), and Shah Waliullah (d. 1762 CE), Mawdudi did not focus solely on economic variables in financial matters. Contrary to conventional economics, he viewed the various aspects of individual and social life as interconnected, asserting that focusing purely on economic factors is insufficient to resolve economic issues because Muslim society requires broader systemic changes alongside economic factors.”

The Future of Economics: An Islamic Perspective: This landmark book by Professor Chapra raises critical questions regarding the theoretical and practical dimensions of mainstream economics and provides answers to them. One key question pertains to the fundamental purpose of economics. Is its role merely to analyse and predict, or to help a society realize its vision?

If realizing a vision is essential, the question arises: What is the difference between the vision of Islam and that of conventional economics? Is it possible for economics to help achieve the Islamic vision by considering only economic variables and analysing “what is” (like conventional economics), or is it necessary to discuss the moral, psychological, social, political, and historical factors that created the gap between the vision and present reality, while proposing a strategy to bridge this gap? Has Islamic economics succeeded in meeting this challenge, and if not, what needs to be done in the future?

Islam and the Economic Challenge: In this book, Dr. Chapra particularly draws the younger generation toward Islamic economics. The ongoing revival of Islam across almost all Muslim countries has created the need to present a clear and coherent picture of the program Islam offers to achieve the welfare it envisions, and to confront the various problems currently facing humanity, especially in the economic sphere. Of special interest is the strategy that helps bring macroeconomic and external imbalances within manageable limits—imbalances currently faced by most countries worldwide. Yet, it must enable them to achieve full employment, eradicate poverty, fulfil basic needs, and minimize income and wealth inequality. Can Muslim countries formulate such a strategy within the secular framework of capitalism, socialism, and the welfare state? Can Islam help them achieve their goals? If so, what policy package do Islamic teachings demand? This book is an attempt to answer these and other related questions.

Similarly, in Muslim Civilization: The Causes of Decline and the Need for Reform, Dr. Muhammad Umar Chapra examines the decline over recent centuries of a brilliant Islamic civilizational tradition that endured for ages.

Islam seeks to establish a global society pervaded by mutual compassion and cooperation. It does not want wealth to be concentrated in the hands of a few individuals or a specific class, as stated in the Qur’an:

كَيْ لَا يَكُونَ دُولَةً بَيْنَ الْأَغْنِيَاءِ مِنْكُمْ (Al-Hashr 59:7) “…so that it (wealth) does not merely circulate among the rich among you.”

The late Dr. Nejatullah Siddiqi predicted half a century ago that the era of Western dominance and exploitation was coming to an end, and global leadership would shift back toward the economic progress of the East. However, there is very little awareness of this among Muslim scholars and intellectuals. Today, the youth of the Muslim Ummah—both men and women—need to accept this challenge, just like Dr. Umar Chapra, Professor Khurshid Ahmad, Dr. Nejatullah Siddiqi, Baqir al-Sadr, and other towering figures. Along with the Maqasid al-Shari’ah, they must use the creative thinking emphasized by Dr. Umar Chapra to present the model of Islamic justice and equity (Adl wa Qist) to humanity while taking into account the challenges and opportunities of modern complexities.

May the Almighty and Glorious Lord be our Helper and Supporter. The promise of Allah is true, as He stated:

وَالَّذِينَ جَاهَدُوا فِينَا لَنَهْدِيَنَّهُمْ سُبُلَنَا وَإِنَّ اللَّهَ لَمَعَ الْمُحْسِنِينَ (Al-Ankabut 29:69) “And those who strive in Our cause—We will surely guide them to Our paths. And indeed, Allah is with the doers of good.”