[8] Early forms of capitalism are thought to have been developed in the Islamic Golden Age,[9][10][11] starting from the 9th century, and later became dominant in European Muslim territories like Al-Andalus and the Emirate of Sicily.
In addition to Quran and ahadith, sometimes other sources such as al-urf (custom), or al-ijma (consensus of the jurists) are employed,[57] to create laws that determine whether actions were forbidden, discouraged, allowed, encouraged and obligatory for Muslims.
[61] (However even with the "quarters" division of fiqh topics mu'amalat would not include inheritance or wedding dower (mahr) (which at least often comes under marriage and family law),[62][63] or calculation of alms (zakat, which comes under al-`Ibadat)).
[67] According to economist Muhammad Akram Khan the "main plank" of Islamic economics is the "theory of riba", while "another landmark" is zakat, a tax on wealth and income.
Riba, ensures each transaction is conducted at a fair price, not allowing one party to benefit exceedingly, which shares a parallel philosophy with Karl Marx "Das Kapital": seeking a greater outcome for the community.
[69] Classical scholars in the Muslim world did however, make valuable contributions to Islamic thought on issues involving production, consumption, income, wealth, property, taxation, land ownership, etc.
A significant event was the creation of Muslim India's Fatawa 'Alamgiri, compiled by Mughal Emperor Aurangzeb Alamgir and Shah Waliullah Dehlawi's family, through which the Indian subcontinent surpassed Qing China to become the world's largest economy, valued 25% of world GDP, while the region of Mughal Bengal entered a period of proto-industrialization,[83][84][85] making direct contribution to England's first Industrial Revolution after English dominance was established following the Battle of Plassey.
[18][19][20] According to Turkish-American economist Timur Kuran, "not until the mid-twentieth century" was there any body of thought that could be called "Islamic economics", that was "recognizable as a coherent or self-contained doctrine".
Mohammad Baqir al-Sadr and also cleric Mahmoud Taleghani developed an "Islamic economics" emphasizing a major role for the state in matters such as circulation and equitable distribution of wealth, and a reward to participants in the marketplace for being exposed to risk or liability.
Sunni cleric Taqiuddin al-Nabhani proposed economic system (Nidham ul-Iqtisad fil Islam (The Economic System of Islam) by Taqiuddin Nabhani (1953)) combined public ownership of large chunks of the economy (utilities, public transport, health care, energy resources such as oil, and unused farm land), with use of the gold standard and specific instructions for the gold and silver weights of coins, arguing this would "demolish ... American control and the control of the dollar as an international currency.
Hosein is notable for being among a faction of Islamic scholars with a strict interpretation of riba prohibitions in the Qur'an, with the general definition of interest being as broad as money increasing over time for a single purchase.
[102] In the 1980s and 1990s, as the Islamic 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.
Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on usage of money with modern concepts of ethical investing.
[105][106][107][108] In 1998, Javed Ahmad Khan compiled Islamic Economics and Finance: A Bibliography, and listed 1600 items published over 20 years, including books, articles, dissertations, theses and conference papers.
[125][126] Despite its start in 1976, as of 2009, 2013 Islamic economics was called still in its infancy,[112][113] its "curricula frames, course structures, reading materials, and research", "mostly" anchored in the "mainstream tradition",[113][125] "lacking sufficiency, depth, coordination and direction," with teaching faculties in many cases ... found short of the needed knowledge, scholarship, and commitment.
"[130] Islamic economic institutes are not known for their intellectual freedom, and according to Muhammad Akram Khan are unlikely to allow criticism of the ideas or policies of their founding leaders or governments.
[133] Some Muslims believe that the Shariah provides "specific laws and standards regarding the use and allocation of resources including land, water, animals, minerals, and manpower.
The Qur'an extensively discusses taxation, inheritance, prohibition against stealing, legality of ownership, recommendation to give charity and other topics related to private property.
Maliki and Hanbali jurists argue that if private ownership endangers public interest, then the state can limit the amount an individual is allowed to own.
It was "charged with responsibility of carrying out the spirit of the system, setting conditions that preserve and enhance the public health and interests, protect the consumers, solve business and labor disputes, promote good market behavior, and ensure their observance.
[145][146] In the contemporary era, Pakistan has attempted to re-create this institution, although it has jurisdiction only over the administrative excesses of the federal government departments and agencies, not provincial ones or private companies.
[147] Three necessary conditions for an operational market are said (by Nomani and Rahnema) to be upheld in Islamic primary sources:[147] Another author (Nima Mersadi Tabari) claims that the general doctrine of fairness in sharia law creates "an ethical economic model" and forbids market manipulation such as "inflating the price of commodities by creating artificial shortages (Ihtekar), overbidding for the sole purpose of driving the prices up (Najash) and concealment of vital information in a transaction from the other party (Ghish)".
[56] Further, "uninformed speculation" not based on a proper analysis of available information is forbidden because it is a form of Qimar, or gambling, and results in accumulating Maysir (unearned income).
Muhammad condemned this practice since it caused injury both to the producers (who in the absence of numerous customers were forced to sell goods at a lower price) and the inhabitants.
The only financial institution under Islamic Governance (Prophethood and Caliph Period) was Baitulmaal (public treasury) wherein the wealths were distributed instantly on the basis of need.
He also carried census during his caliphate; and provisioned salaries to Government employees, stipend to poor and needy people along with social security to unemployed and retirement pensions.
Hybrid approaches, which applies classical Islamic values but uses conventional lending practices, are much lauded by some proponents of modern human development theory.
[163] Islamic economics has been criticised for In a political and regional context where Islamist and ulema claim to have an opinion about everything, it is striking how little they have to say about this most central of human activities, beyond repetitious pieties about how their model is neither capitalist nor socialist.
Journalist John Foster, quotes an investment banker based in the Islamic Banking hub of Dubai on the practice of "fatwa shopping", We create the same type of products that we do for the conventional markets.
With the elimination of interest being both the basis of the industry and impractical, shari'a scholars have become "entrapped in a situation" where they are forced to approve transactions fundamentally similar to conventional loans but using "hiyal" manipulation to "maintain an Islamic veneer".