The earlier scholars provided application of Islamic juristic principles to derive and apply the Islamic teachings related to commerce, entrepreneurship and consumption. Muslim scholarship initially focused on public finance and its administration to deal with the practical problems of the newly formed state which expanded rapidly and required sound legal and administrative framework to legislate economic activities centred around agriculture and trade.
Regarding taxation, Islam has laid out clear guidelines: not only is excessive taxation sinful, but even when collecting taxes even from non-Muslims, there should be no element of hardship. For example, Urwah ibn Zubayr narrated that Hisham ibn Hakeem (RA) once saw a tax collector in Homs mistreating some Christian Copts by making them stand under the sun while collecting Jizya. He objected, citing the Prophet Muhammad (PBUH) who said: “Allah will punish those who torment people in this world” (Sunan Abi Dawood 3045).
The book compares Islamic and conventional economics in response to economic crises, both across countries and financial institutions and provides a brief analysis of financial crises from a theoretical point of view, examining various approaches. It discusses how the Islamic financial system could serve to mitigate the occurrence of a financial crisis, since the prohibition of Riba, Maysir, and Gharar transactions offers a solution to financial crisis from speculative bubbles and crash. It also discusses some of the challenges facing the Islamic finance industry.
Lack of awareness about Zakat rules is also an important barrier. A great majority of people are not aware of treatment of real estate, financial assets, receivables and debts. It is important to raise awareness and urgency about Zakat. It is a religious obligation and its effective mobilization and disbursement can improve social welfare of masses. Hence, it is critical to raise awareness using public broadcast media, awareness seminars, mosque sermons and other ways of engagement. A hotline and availability of scholar at district office can help the community in Zakat assessment as well.
March 2025 (Vol 5, Issue 3) issue of Moral Reflections on Economics features Article on Reforms in the Zakat System, Highlights of Global Risk Report 2025 by Muhammad Hammad,
Limitations in Mainstream Economics by Mohammad Afif Naqib, Muhammad Faiq, Muhammad Luqman, Muhammad Afi and Mohamad Syahid, IEP Public Poll results on Effects of USA’s Reciprocal Tariffs on Asian Exports, Book review of Islamic Economics and Financial Crisis edited by Prof. Erhan Akkas, Research paper in focus on Blockchain Technology in Zakat Management in India by Arfan Ghouse and Ibrahim Mohammed, Reflections on Lessons from Fasting in Ramadan and regular sections of market news, economic and financial indicators and call for papers.
Prof. Islahi argues that Muslim scholars made substantial contributions to economic thought, influencing both the development of Islamic economics and, indirectly, the foundations of modern Western economic theory. He challenges the notion that modern economics is solely a product of Western thought, highlighting the intellectual debt owed to earlier Muslim thinkers.
In a market following Islamic norms and values, the market forces will determine which Halal goods and services should be produced and offered at what price. Through private sector investment and production, resource markets and product markets will function to enable households to obtain purchasing power by providing rentable factors of production like labour services (Ijarat-ul-Ashkhas) or usufruct of a naturally existing or produced tangible asset (Ijarat-ul-A’yan) in the production process and earn compensation in terms of wage and rent, respectively.
In Harrod (1939)-Domer (1946) and Solow’s Growth model, the emphasis is on increasing savings and investments and that is supposed to lead to increased productivity corresponding to lower Incremental capital output (ICOR) ratio in Harrod (1939)-Domer (1946) model and hence higher rate of growth and to higher steady state level of output in Solow’s Growth model. Savings that result in investments contribute to growth. Essentially, what leads to growth is investment. Savings are only the source of investment funds.
The paper also cites several studies which discuss the social failure of Islamic banks. The results suggest that while Islamic banks may need to still improve their social performance, strong Shari‘ah governance only compliments that objective rather than appearing as a hurdle or substitute.
Authors argue that some nations are wealthier and more prosperous than others because of their political and economic institutions (e.g. government, market system). Good (inclusive) institutions enable investment and a sense of security in the government and the economic system and so nations prosper, but bad (extractive) institutions do not. Virtuous circles of innovation, expansion and peace are formed from inclusive institutions which form a cycle of increasing prosperity. Prof. Acemoglu and Prof. Robinson argue that exclusionary policies designed to enrich the elites and exploit the poor majority have prevented technological innovation, as the existing elites fought tooth and nail against anything that might endanger their privileges.
Islamic Economics Project 