The State of the Art

If one compares the state of Islamic economics in 1979 with that in 1950 he would be impressed by the near explosion in the number of publications on the subject. Also a much larger group of people was now involved in Islamic economics. Further more, it was a much more diversified group than those who launched Islamic economics. Those who had something to say on Islamic economics did not comprise only academics. They now included bankers, insurers, merchants, dealers in real estate, moneychangers, even finance ministers!

The result was a lively debate at a number of forums, including the classroom, the research seminar, the press conference, the pulpit and the council of ministers. Though it remained necessary as always to separate the chaff from the grain, it gave a boost to the development of the theory of Islamic economics.

As we leave behind us the thirty years since the emergence of Islamic economics in the middle of 20th century, some important ideas contributed during the period can be noted:

1. Tempering self-interest by morality and maximization of private gain by a concern for public purpose as behavioral assumptions.
2. Two tier mudarabah as a model of banking, replacing fixed interest by profit sharing in depositor-bank and bank-business relationships.
3. Murabahah as a means of decreasing risk in the placement of funds by Islamic banks. The Business client requests bank to buy what it agrees to purchase from the bank adding a markup to purchase price, with deferred payment.

Source: Dr. Muhammad Nejatullah Siddiqi, Economics An Islamic Approach. Republished with permission.