Islamic injunctions put huge emphasis on making best use of the resources provided by Allah. Cultivating barren land and dignity of labor is given significant value and regarded as virtues. In an Islamic economic framework, the demand for economic resources, i.e. land, labor and capital is driven by the interest free and productive asset/activity based voluntary exchanges in a market economy.
With higher levels of investment, circulation of wealth and competitive markets, innovation and quality enhancement will be the only means of sustaining the edge for firms in an Islamic economic framework. Hence, there will be more focus on innovation, customer satisfaction and hence speed of innovation and productivity is expected to increase. The supply side of innovation, which is the human capital, will also be incentivized through employment creation as a result of removing concentration and idleness of wealth.
Opportunity cost is a useful concept in economics. This article tries to explain how this concept is used to justify interest. Then, the article also highlights the problem with this approach.