History of Islamic economics

These ranged from areas of production, investment, finance, economic development, taxation, property use such as Hawala: an early informal value transfer system, Islamic trusts, known as waqf, systems of contract relied upon by merchants, a widely circulated common currency, cheques, promissory notes, early contracts, bills of exchange, and forms of commercial partnership such as mufawada.

The transfer of debt, which was "not permissible under Roman law but became widely practiced in medieval Europe, especially in commercial transactions", was due to the large extent of the "trade conducted by the Italian cities with the Muslim world in the Middle Ages."

Recently, a collection of documents was found in an Egyptian synagogue shedding a very detailed and human light on the life of medieval Middle Eastern merchants.

According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case of a disaster or famine occurs.

According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case of disaster or famine.

[31] Arabic silver dirham coins were being circulated throughout the Afro-Eurasian landmass, as far as sub-Saharan Africa in the south and northern Europe in the north, often in exchange for goods and slaves.

[32] This helped establish the Rashidun, Umayyad, Abbasid, Ayyubid and Fatimid Caliphates as the world's leading extensive economic powers in the 7th-13th centuries.

[35] However this is disputed by other scholars, who claim cultivation and consumption of staples such as durum wheat, Asiatic rice, and sorghum, as well as cotton, were already commonplace centuries before,[36] or that agricultural production declined in areas brought under Muslim rule in the Middle Ages.

[20][31][44] Early Islamic commerce applied a number of concepts and techniques, including bills of exchange, forms of partnership (mufawada) such as limited partnerships (mudaraba), and early forms of capital (al-mal), capital accumulation (nama al-mal),[20] cheques, promissory notes,[21] trusts (see waqf), transactional accounts, loans, ledgers and assignments.

Practices employed by the Karimis included the use of agents, the financing of projects as a method of acquiring capital, and a banking institution for loans and deposits.

According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a disaster or famine occurred.

By the 11th century, every province throughout the Islamic world had these industrial mills in operation, from al-Andalus and North Africa to the Middle East and Central Asia.

[59] By the early 10th century, the idea of the academic degree was introduced and being granted at Maktab schools, Madrasah colleges and Bimaristan hospitals.

[63] There was a significant increase in urbanization during this period, due to numerous scientific advances in fields such as agriculture, hygiene, sanitation, astronomy, medicine and engineering.

The two senior representatives of municipal authority were the qadi and the muhtasib, who held the responsibilities of many issues, including quality of water, maintenance of city streets, containing outbreaks of disease, supervising the markets, and a prompt burial of the dead.

Through donations, the waqf owned many of the public baths and factories, using the revenue to fund education,[citation needed] and to provide irrigation for orchards outside the city.

[65] To some degree, the early Muslims based their economic analyses on the Qur'an (such as opposition to riba, meaning usury or interest), and from sunnah, the sayings and doings of Muhammad.

[66] Iranian philosopher Nasir al-Din al-Tusi (1201–1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of his Ethics: "the study of universal laws governing the public interest (welfare?)

[70] However, in 1964, Joseph Spengler's "Economic Thought of Islam: Ibn Khaldun" appeared in the journal Comparative Studies in Society and History and took a large step in bringing early Muslim scholars to the attention of the contemporary West.

But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use deficit financing, use taxes to encourage production, the use of credit instruments for banking, including rudimentary savings and checking accounts, and contract law.

[80][81] Ibn Khaldun wrote on economic and political theory in the introduction, or Muqaddimah (Prolegomena), of his History of the World (Kitab al-Ibar).

In the 1980s and 1990s, as the Iranian revolution failed to reach the per capita income level achieved by the regime it overthrew, and Communist states and socialist parties in the non-Muslim world turned away from socialism, Muslim interest shifted away from government ownership and regulation.

In Iran, it is reported that "entered-e Islami (meaning both Islamic economics and economy) ... once a revolutionary shibboleth is indubitably absent in all official documents and the media.

Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on the usage of money with modern concepts of ethical investing.

In reality, this boils down to a set of prohibitions—on paying interest, on gambling with derivatives and options, and on investing in firms that make pornography or pork.

[102][103] One issue "generally absent" from contemporary Islamist economic thought (except Sayyid Qutb) and action "whether moderate or radical" is the question of agrarian reform.

[104] At least one observer (Olivier Roy) believes this is primarily because it would "imply a reexamination of the concept of ownership", and in particular "throw into question the Waqf, endowments whose revenue ensures the functioning of religious institutions.

"[104] In the Islamic Republic of Iran, for example, waqf holdings are very large (in Khorasan Province, "50% of the cultivated lands belong to the religious foundation Astan-i Quds, which oversees" the Imam Reza shrine in Mashhad).

Islamic bonds, or sukuk, use asset returns to pay investors to comply with the religion's ban on interest and are currently traded privately on the over-the-counter market.

In late December 2009 Bursa Malaysia announced it was considering enabling individuals to trade Shariah-compliant debt on its exchange as part of a plan to attract new investors.