Current state of Islamic Economics

Current State of Islamic Economics and Direction of Future Research 1

By Muhammad Akram Khan2 Working Paper Last updated 27 March 2017 Abstract Islamic economics as a subject has deep historical roots. However, the present body of knowledge known as ‘Islamic economics’ originated in the second half of the last century. During the last four decades, a lot of literature has appeared. However, most of it can be accepted as ‘Islamic economic teachings’ and not ‘Islamic economics’ as a social science. Based on this literature a beginning can be made in developing Islamic economics as a social science. The paper presents a tentative proposal for doing this.

1. Introduction Islamic economics as we know today has its roots in early history of Muslims. Besides, the Qur’an and hadith1, the two primary sources of Islamic economics, which have always ignited the imagination of the Muslim scholars, we have reliable information on various treatises on public finance, distribution of war booty, zakah administration and land management.

However, some writers of later centuries wrote about trade and markets as well. The most prominent of these books are Kitab al-Kharaj by Abu Yusuf (113-183 AH), and another with the same title by Yahya b. Adam al-Qarashi (d. 203 AH), Kitab al-Amwal by Abu Ubaid al-Qasim b.

Sallam (d. 224 AH), Kitab al-Kharaj by Qudama b. Ja’far (d.337 AH), Ahkam al-Sultaniyyah by Abu al-Hasan al-Mawardi (d.450 AH), Siyasat Nama by Nizam al-Mulk Tusi (d. 485 AH), Ihya alUlum al-Din by Abu Hamid al-Ghazali (d. 505 AH ), Kitab al-Isharah ila Mahasin at-Tijarah wa Marifat Jayyid al-A’rad wa Kadiiha wa Ghush-ush al-Mudallisin fiha (A Guide to the Merits of Commerce and to Recognition of Both Fine and Defective Merchandise and the Swindles of Those Who Deal Dishonestly) by Abu al-Fadl Ja’afar al-Dimashqi (12th century AD), al-Hisba fil Islam and al-Siysah al-Shari’yya by Ibn Taymiyya (1263-1328 AD), Al-Muqaddima by Ibn Khaldun (1332-1404 AD), Hujjat Allah al-Baligha (The Profound Evidence of Allah) by Shah Waliullah (1703-1762 AD). Earlier writers focused on public finance but later ones, particularly Ibn 1

An earlier version of this paper was presented as Keynote Address at 1st Gadjah Mada International Conference on Islamic Economics and Development (Gama ICIED) To be held on Thursday 12th May 2016 at Faculty of Economics and Business, Universitas Gadjah Mada, Yogjakarta, Indonesia.

2

makram1000@gmail.com

Khaldun and Shah Waliullah, discussed the question of rise and fall of nations and development of civilization over long period.

After these earlier works, the Muslims went into intellectual slumber from fifteenth century and by advent of the nineteenth century the entire Muslim world was subjugated to the West.

With political subservience came intellectual stupor. We do not find any significant contribution

by Muslims while the West was experiencing the Renaissance. The torch of knowledge passed on from Muslims of Spain to the Christian West. On political front the Muslims were losing ground to colonialists around the world.

In nineteenth century when movements for political freedom started in various parts of the Muslim world, some thinkers raised voice for going back to our roots for intellectual inspiration.

The immediate concern was that the Western knowledge with its anti-religious and secular outlook would drag the Muslim ummah away from its primary sources. Most prominent of these thinkers were Syed Ahmad Khan (1817-98), Muhammad Abduh (1849-1905), Jamaluddin Afghani (1839-1897), Rashid Rida (1865-1935) and Muhammad Iqbal (1877-1938). They raised voice for a critical look at the Western knowledge. However, none of them actually used the term ‘Islamic economics’, although they criticized capitalism for its injustices.

The twentieth century saw gradual freedom of Muslim lands from the colonialist rulers. That inspired some bright intellectuals of the Muslim world who invited people for revival of Islam both at the level of state and at individual levels. This movement was spear-headed by religious such scholars as Hasan al-Banna (d. 1949), Syed Qutb (d. 1966), Muhammad Rafiuddin (d.

1969), Abu al-‘Ala Mawdudi (d. 1979), Muhammad Baqir al-Sadr (d. 1980), and Isma’il Raji alFaruqi (d.1986). These scholars emphasized need for Islamic economic system and Islamization of knowledge. Their powerful writings inspired many Muslim scholars, professionals, and economists who felt need for developing Islamic economics as a social science. Most prominent of these scholars are M.N. Siddiq, Khurshid Ahmad, Umer Chapra, Anas Zarqa, Monzer Kahf, Fahim Khan, Ma’abid al-Jarhi, Murat Cizakca, Mehmet only a few of them. Joining of economists like Asutay, Kabir Hassan, Munawar Iqbal, Abbas Mirakhor, Zamir Iqbal, and Hasan Askari, to mention a few of them, in the revivalist movement gave strong impetus to the development of Islamic economics as a social science. People started hearing the slogan of Islamic economics as panacea for economic ills of capitalism and socialism.

The watershed came in 1976 with the First International Conference on Islamic Economics held in Makkah (Saudi Arabia) under the auspices of King Abdulaziz University, Jeddah. Several hundred Muslim scholars, economists, bankers and academicians gathered and asserted their will for creating ‘Islamic economics’ as social science. It led to establishment of Centre for Research in Islamic Economics (now re-named as Institute of Islamic Economics).

Simultaneously, the movement for Islamic revival created an impetus for interest-free finance, since interest was perceived as source of all economic ills of the capitalist system. Again, Saudi Arabia played leadership role in establishing Islamic Development Bank in 1975. The Bank also

set up its think-tank in the form of Islamic Research and Training Institute. Both these Institutes are still leaders in Islamic economics, although several others have sprung up in various parts of the world. Most prominent objective of these organizations is to develop alternative academic discipline in the name of Islamic economics.

The main objective of this paper is to present a bird’s eye-view of state of the art in Islamic economics, assess the present status and suggest a tentative program for future research.

Section two below gives a summary of achievements; section three summarizes failures of our aspirations and what could not be achieved; section four assesses the present status; section five analyzes causes of the present stagnation in the field; section six suggests a possible course of action in developing Islamic economics as a social science; section seven presents a tentative defense of the suggested strategy and the last section consists of concluding remarks.

2. State of the art: Achievements Despite lapse of four decades since the Makkah conference (1976-2016) there is no centralized data base on Islamic economics, though there are some good initiatives. In 2013, the present writer published his research on the status of Islamic economics (Khan 2013, 4-10). An updated summary of the research is as follows: During the last four decades, there have been significant developments in the production and circulation of research documents, books and journal articles on Islamic economics and finance.

In 1995, with efforts of Nazim Ali (2008) Harvard University started Islamic Finance Project (IFP) Databank. The project came to end in 2014 with the departure of Nazim Ali. By then the databank had over 9000 documents. At the time of writing in April 2016, there are 15 research journals exclusively devoted to Islamic economics and finance2 besides at least 17 websites which host research material on Islamic economics3.

Several universities around the world have completed or registered PhD dissertations on Islamic economics and finance. For example, Ali (2008: 157) mentions 484 research projects and 75 PhD dissertations in universities of 10 countries including the US, the UK and Germany.

Besides, the IFP Databank contains information on 200 PhD dissertations completed at different universities of the world (Ali 2008: 164). There are now 19 research and training institutions exclusively devoted to Islamic economics and finance4. Hasan (2015, 94-95) says there are at least 154 universities in the world which have introduced Islamic economics and finance at undergraduate or postgraduate level.

Several institutions are offering courses and degrees in Islamic finance5. A number of bibliographies pertaining to literature published in English, Arabic, Urdu, Bhasa Malaysia, Turkish and other regional languages have come out. Every year scores of conferences and seminars take place around the globe mostly on Islamic finance. Ali (2008: 164) mentions that the IFP Databank contains a record of the proceedings of 1500 conferences.

With establishment of the Islamic Development Bank Jeddah and Islamic Bank Dubai, a movement of Islamic finance has emerged. Data on the number of Islamic financial institutions and capital invested varies almost daily because of its dynamic nature. Just to give a tentative view we quote Feisal Khan who says on the authority of UK Trade Investment, Opportunities for Islamic Finance in the UK (2013)6.

[There are] 716 Islamic banks in 61 countries worldwide. By 2012 the world’s Islamic financial assets were around $ 1.3 trillion, 90 percent of this is Islamic banks, having grown 150 percent since 2006 [The Economist 2012] and …thirteenth fold from 2000 when they were paltry $ 100 billion.

There have been serious efforts to organize the Islamic finance industry on sound foundations.

Gradually necessary regulatory infrastructure is coming up. Accounting and Auditing Organization for Islamic Financial Institutions, Islamic Financial Services Board, International Islamic financial Market, Islamic Interbank Money Market, Liquidity Management Centre, International Islamic Liquidity Management Corporation, International Islamic Rating Agency, Islamic Indices, Islamic Interbank Benchmark rate are providing the necessary support system to Islamic financial institutions. (Khan 2013, 309-315)

3. What could not be achieved: A case of failed aspirations?

The enterprise of Islamic economics had a promising start. The religious scholars presented ‘Islamic economic teachings’ but erroneously termed it as ‘Islamic economics’. The professional economists, who took up the task of developing a social science, adopted these compilations of economic teachings as raw material7. Somehow, instead of developing a social science they started re-writing these teachings in economic jargon. This was a laudable task but far short of the avowed objective. In general, social sciences study the social reality and develop hypotheses which predict outcomes in the future. The hypotheses are presented in a format and with conditions which can be tested for validity considering actual data. However, Muslim economists did not undertake this task. Instead they remained content in producing and rewriting the material initially presented by the religious scholars. However, they kept on calling their output as ‘Islamic economics’ although they had not taken even the first step toward developing a social science. Thus, there is a complete absence of any theory in the entire literature of Islamic economics. I think this is the gravest failure on our part.

Islamic economics has not become a going concern although thousands of documents have been published, hundreds of conferences and seminars taken place, several journals and magazines are publishing and several organizations are offering educational programs on Islamic economics and finance. However, the sum of these efforts is insignificant as compared to economics. Out of hundreds of documents being published in the field, those pertaining to Islamic economics per se are dwindling. Most of the literature being produced is on Islamic finance, which is a subset of Islamic economics. Out of thousands of universities and

educational institutions around the world, and hundreds of these located in Muslim lands only 19 are exclusively devoted to Islamic economics and finance (mostly on IF). Out of hundreds of research journals on economics, we publish only 15, and not all are refereed. Out of thousands of economists in the world, less than a hundred, that too overwhelmingly Muslims, are writing on Islamic economics and finance. Only a few non-Muslim economists, who can be counted on finger tips, have shown some interest in this area. That makes the whole effort trivial in the global context. We cannot say with confidence that the world community of economists have recognized Islamic economics as a branch of knowledge or as a sister discipline. That should not be surprising. Our contribution to the understanding of the world economic problems is insignificant.

There are heaps of literature on economic problems in capitalist economies but we hardly find any contribution by Muslim economists from the Islamic perspective. Whatever we have written on economic problems is conceived in the perspective of ideal Islamic society that does not exist and could not be foreseen in near future. How would the world understand and appreciate our role in solving the human problems if we do not make any contribution on subjects of their concern? In fact, the literature on Islamic economics has not adopted solution of current economic problems as part of its research agenda.

A fundamental shortcoming is that we have not yet arrived at a generally accepted definition of Islamic economics. Several authors have presented definitions with different focuses. However, there is no consensus yet. Some of us say that we mainly study application of the Shari’ah in economic matter. Others think Islamic economics studies only the conditions of Muslims. Still others require some sort of faith in Islam before a person contributes to Islamic economics.

Another problem is that we could not decide our ultimate objective. We have not rigorously reflected on the question: “What business are we in?” Are we going to develop a social science or we are in the business of spreading Islam? Though we aimed at developing an independent academic discipline, a social science parallel to conventional economics, with its own definitions, terms, methodology and scope, we did not proceed any further than the work of da’wah being done by hundreds and thousands of Muslims around the world. In fact, this has been a continuous activity of religious activists during the last 14 centuries and there is not much now to be done through the forum of Islamic economics. We do not need to reinvent the wheel of Islamic reformation.

We only quote one example to show that this has been our predominant concern in developing Islamic economics. Chapra (2014, 87-88) has pointed out that some economists have realized that the anti-religion stance of economics was a mistake. However, he thinks that this realization is not sufficient. It would require transformation of the whole society on principles of brotherhood and fraternity where individuals are morally conscious. He says: It lies rather in reorganization of the whole society and the economic system in such a way that there is transformation of the individual from the ‘economic man’ to a morally conscious human being who is willing to live up to the demands of brotherhood, socio-

economic justice, and family solidarity. Once this happens, Islamic economics and conventional economics will become very close to each other and together lead to the solution of several problems that mankind is now facing.

In brief, Chapra is visualizing the whole host transformation of the world societies in a manner that they accept the belief system and moral values of Islam. How realistic is this dream? Can we hope that in any time in future this is going to happen? Shall we be able to persuade the humanity merely on ground of verbal discussions and arguments that they should adopt the Islamic faith and values when we are unable to get a true adherence of these values even from the existing Muslims? We should realize that if we are in the business of transforming the whole world, we are only in an unrealistic business.

The scope of Islamic economics is not yet finally decided. We have not clearly defined the social phenomenon that is the subject of Islamic economics. We are yet unclear whether economic problems as defined by conventional economics is the focus of our study or whether we are studying some other social phenomenon. The literature traverses a wide range of subjects that includes the economic teachings of Islam as enunciated by the Qur’an, Traditions of the Prophet (pbuh) and Islamic jurisprudence, writings of scholars during the last 14 centuries, alongside subjects like macroeconomics, microeconomics, money and banking, public finance, microfinance, and so on. The boundaries of the subject are yet not clearly drawn.

Literature on Islamic economics presents a confused picture about the relationship with conventional economics. One approach is to reject everything that conventional economics offers. Another response is to develop Islamic economics on a basis like conventional economics by using the tools of the latter. Still another approach is to modify conventional economics by incorporating ‘Islamic’ assumptions. The issue is still far from settled.

4. Assessment of the current situation – methodological compulsions Once we became contented with rephrasing the ‘Islamic economic teachings’ and labeling them as ‘Islamic economics’ we soon realized that the primary sources of Islam – the Qur’an and hadith literature – do not contain a very large number of economic doctrines. The canvass of human life is much larger than what we read in these sources to be applicable directly to our economic situation. We turned our attention to the large body of fiqh literature and Islamic historical annals. Islamic economics now became an amalgam of economic teachings found in the Qur’an, hadith, fiqh, Islamic history and other writings of Muslim scholars over last 14 centuries relating to economic issues. The literature on Islamic economics termed all this as “Shari’ah”. It had several consequences, all of which became stumbling blocks on the path of developing Islamic economics as a social science. (a) Blurred concept of the Shari’ah: We confused the concept of Shari’ah by intermingling human thinking with the divine guidance. The Shari’ah consists of a small number of clear and unambiguous injunctions stated in the Qur’an or Traditions of the Prophet (pbuh) that require compliance but no interpretation. However, we treated human

interpretation of these injunctions as Shari’ah which created roadblocks for developing Islamic economics as a social science. The entire body of Islamic economic teachings consists of legal injunctions. If we treat all this as Shari’ah, there is no question of formulating hypotheses and testing them. The Shari’ah is for compliance and not for testing its validity. Thus the very body of knowledge which was supposed to be source of Islamic economics as a social science became an impediment. If we treat human thinking from the last 14 centuries as part of the Shari’ah, the question of formulating hypothesis and theories becomes irrelevant. (b) Ideal Islamic economy syndrome: Once we treated the ‘Islamic economic teachings’ as ‘Islamic economics’ we soon found we do not find injunctions in the primary sources which could be applied directly for studying the economic problem. That diverted our attention to elaborating ‘implications’ of the economic teachings. Thus, we landed to the insoluble position of assuming an ideal Islamic society with ‘homo Islamicus’ as its residents. It opened the way for making any type of assumptions that we liked since such a society did not exist and no one could challenge our assumptions. A lot of literature keeps on drumming the blessings and ‘superiority’ of Islamic economics, assuming an ideal Islamic society. The claim that Islam is panacea of all ills, despite being true, lacked rigor and precision of a science. Instead, we needed to show how Islam solves the economic problems of humanity. The problem-solving approach was displaced by a romantic vision of Islam which had a ready market of buyers in the form of believers8. This romantic vision created a barrier in the growth of Islamic economics as a social science. We never stopped to think that presenting beauty of Islamic economic injunctions and advocating its superiority was unnecessary had we contributed in solving the human economic problems. After all a physician who heals a patient does not need to show his credentials and degrees to the patient. It is superfluous.

Surprisingly, it did not occur to us that we could handle the problem from the reverse side by asking the following question: “What will happen if the economic actors deviate from the ideal Islamic economic conditions?” Data for such conditions were available easily around the world on almost all economic issues. For example, we could theorize about situations where interest was prevalent or zakah was being avoided or contracts were not honored or property rights were not respected, etc. Proceeding on this train of thought we could formulate hypotheses and test them in real life. However, we did not adopt this route. Alternatively, we could use some real-life conditions as proxies for our postulates. For example, the orthodox position on financial interest is that it is unlawful under Islamic law. We could take the real-life data of, for example, Japan where the effective rate of interest has been about zero now for several years. Similarly, we could use the real-life data of the global effective interest rate which has been declining for the last three decades and is now close to zero. Using such data, we could formulate hypotheses about results of zero or near-zero rates of interest and test them to sharpen our understanding about legality or otherwise of the financial interest rate. However, we did not follow this route.

(c) Social mismatch: Taking Islamic fiqh as a ready-made source for Islamic economics ignored social dynamism in human situations. The fiqh rules were developed over centuries but most of the treasure is about a millennium old. Inserting that stuff in the present situation created a mismatch but in our enthusiasm, we ignored that. For example, profit-loss sharing has been and is being trumpeted as the ideal and most pristine alternative for interest in commercial banking has severe limitations in application. We have discussed these limitations in detail in our book (Khan 2013, 275288). The approach led us to ignore our primary role of solving the economic problem of man. It displays lack of awareness of the fact that societies are not static organizations.

They keep on evolving and rules and regulations developed a thousand years ago, cannot be ‘inserted’ in the present-day economy as they are. (d) Audience of Islamic economics: Restricting Islamic economics to Islamic economic teachings narrowed down its message to Muslims only. Even when we referred to the Qur’an or hadith we selected those injunctions which addressed Muslims and ignored those which addressed the whole humanity. Not only this. Our presentation of the material on Islamic economics also made it an economics of the Muslims, by the Muslims and for the Muslims. Most often we are talking to each other to the exclusion of wider knowledge community. We use the idioms and jargon, the terms and phrases and the legal dicta that can be understood easily by Muslims only. This is evident from the fact that most of the serious literature on the subject includes glossary of terms (which incidentally has wide variances in different documents). Do we see such glossaries in books of economics? We have not been able to standardize our terminology nor have we adopted a style of writing that is comprehensible to ordinary economists, not Muslims only. (e) Improper comparison with other system: Another problem has been our occupation with comparison of Islamic economic system with capitalism and socialism and concluding that the Islamic system is superior to the other systems. Without going into merit of this conclusion, the methodology of such comparisons is defective. We have been comparing capitalism and socialism in practice with the non-existent ideal Islamic system, - a case of theoretical mismatch. We were trying to compare apples with oranges and without any qualms of conscience. How could such an approach be persuasive for the world community of scholars? Not only this. We freely borrowed the criticism of the capitalist or socialist economies from conventional economists. Thus, we were trying to score points which had already been scored. We tried to ‘use’ critical views of ‘others’ as our own views. That displayed a sort of inferiority complex. (f) Being out of step with historical developments: Our uncritical acceptance of the religious interpretation of the term riba as interest of all kinds and profit-loss sharing as the ideal alternative led us to insurmountable problems. When the Islamic financial institutions tried to implement this interpretation, they found it impracticable and resorted to infinite number of tricks and subterfuges (Khan 2013, 337-400). The superstructure of Shari’ah Supervisory Boards was commissioned to grant legitimacy to these tricks. Now we have ended up with a system of Islamic finance which is hardly distinguishable from the conventional finance. However, we are unwilling to review our

original interpretation of the term ‘riba’. With the passage of time it has become harder to do so. Vested interests of wealthy Muslim class and Muslim professionals and religious elite have coincided to continue this system without any qualms of conscience.

Even when the rates of interest have gone down to zero, and all the literature produced by us to condemn it has become redundant we are unwilling to review our interpretation. Our literature on interest is replete with its evils like unemployment, poverty, inflation, inequality of income and wealth and social disharmony, etc. The rate of interest has gone down to zero now for over a decade in the capitalist economies but the evils imputed to interest by us are still there9.10 We are unwilling to concede that we may have made a mistake in interpreting the term ‘riba’. This obstinacy and rigidity in knowledge has created an obstacle in developing Islamic economics as a social science.

The science always remains open to review its position considering fresh evidence. But we cannot do this because we have anchored our approach on an interpretation which, though human, has acquired sanctity of a divine verdict. We should be willing to accept that the Islamic finance has done little to better the fate of humanity. It has only helped the wealthy Muslim class. But it has done little to solve any problems of the world or even of the Muslim countries. It is because it is a poor caricature of the conventional finance. It comes at a higher cost, greater risk and lower efficiency. A wealthy Muslim class is trying to reap benefits from the love of ordinary Muslims for their faith.

In brief: The entire stock of knowledge produced during the last four decades consists of Islamic economic teachings. By itself it is a laudable effort. It was no mean task to present the knowledge contained in tafsir, hadith and fiqh literature in easy and comprehensible format.

Our younger generation could never have known what was lying buried in our historical archives. But all that is a collection of ‘Islamic economic teachings’ and not ‘Islamic economics’, which is supposed to be a social science. A social science studies the ground reality, understands and interprets it, derives hypothesis from it, and makes predictions for future events. The hypotheses are then tested for validity. The generally accepted method is to try to falsify the hypotheses. There is a lot of literature on the methodology of scientific method used in economics11. Just one example is sufficient to illustrate the point: Machlup (1955, 2) says: How is a hypothesis verified? The hypothesis is tested by a two-step procedure: first deducing from it and the factual assumptions with which it is combined all the conclusions that can be inferred, and second, confronting these conclusions with data obtained from observation of the phenomena concerned. The hypothesis is confirmed if reasonable correspondence is found between the deduced and the observed, or more correctly, if no irreconcilable contradiction is found between the deduced and the observed. Absence of contradictory evidence, a finding of non-contradiction, is really a negation of a negation: indeed, one calls a hypothesis "confirmed" when it is merely not disconfirmed. [pp.4]

If a hypothesis cannot be falsified, it is accepted as theory till such time when new evidence emerges that can falsify it. The process of examination in this manner continues until, the theory becomes law which is established as scientifically valid knowledge.

In case of Islamic economics, we did not enter this process to begin with. So far, we have not been able to take even the first step toward transforming the sum-total of our knowledge into a social science. The evidence is that we do not have any literature on Islamic economic theory.

Whatever titles have appeared in the name of microeconomic and macroeconomic theory of Islamic economics is nothing but modified versions of conventional economic theory with insertions of ideal Islamic society assumptions, which does not exist anywhere. Insertion of these assumptions enabled our writers to draw conclusions of their choice to present a highlyglorified picture of ‘Islamic economic system’. But that leaves the students more confused than before, wondering if all that is so true why the whole world is ignorant of this truth! This is a sorry state of affairs. We need to explore its causes before we go further to suggest a course of action for the future.

5. Causes of the present state of affairs Our inability to achieve the objective of developing a social science known as Islamic economics is due to several reasons as stated below: (a) Inattention to the Qur’an: We did not pay due attention to the Qur’an. If I say that we discarded it, it would not be an exaggeration12. In most cases, we adopted the interpretation of the Qur’an that was done by our able forefathers. We used the exegetical literature indiscriminately and in most cases verbatim. We did not realize that the world has vastly changed over centuries and is continuously changing. The change has brought forth new compulsions, new necessities and new opportunities for fresh thinking on the Qur’an. Instead of having a fresh look on text of the Qur’an we were complacent to rely on what the earlier scholars had said. Thus, we lost the great opportunity of discovering relevance of the Qur’an to the present age. Generally, we sifted some verses of the Qur’an that addressed Muslims only and made it basis for ‘Islamic economics’. The Qur’an is a book of guidance for the entire humanity. Besides guidance for Muslims, it addresses the humanity at large. The Qur’an discusses such economic subjects as creation and distribution of wealth, prosperity and misery of nations, corruption and destruction of environment, changes in the economic condition of individuals and nations, role of ethics and righteousness in economic well-being or economic deprivation, etc. These subjects address the whole humanity. You need not be a Muslim to consider the message of these verses. However, we did not pay much attention to these verses, which could open a floodgate of new knowledge for the whole world. We delimited our span of attention and remained content with a smaller

portion of guidance meant only for Muslims. Thus, we created a knowledge base where Muslims were talking to Muslims. We successfully banned the attention of non-Muslims to whatever we were producing in the name of Islamic economics! (b) Indiscriminate use of ahadith without reference to context: We adopted a similar attitude toward the great treasure of hadith literature. There is no doubt that we can benefit from the hadith literature in developing Islamic economics. However, the text of the ahadith is not as securely preserved as that of the Qur’an. Moreover, the question of context in which the Prophet (pbuh) said, did or approved something is quite crucial.

The question whether a hadith is applicable to the immediate audience of the prophet or to all generations to come is also relevant. For example, Iqbal (1989, 136) refers to Shah Waliullah’s view about applicability of the Islamic injunctions. Per Shah Waliullah, says Iqbal, “law revealed by a prophet takes especial notice of the habits, ways, and peculiarities of the people to whom he is specifically sent…The Shari’ah values (Ahkam) resulting from this application (e.g. rules relating to penalties for crimes) are in a sense specific to that people; and since their observance is not an end in itself they cannot be strictly enforced in the case of future generations.” No wonder, says Iqbal, “Imam Abu Hanifa, who had a keen insight into the universal character of Islam, made practically no use of the traditions (ahadith).” (ibid, p.137). In brief, instead of taking an incisive look into the text, context and audience of the ahadith we adopted them indiscriminately and tried to base Islamic economics on them. This was a short cut, though. But it did not enable us to develop a science that was relevant to our times. I would refer to Iqbal again and say the same thing which he said: “[an] intelligent study of the literature of traditions, if used as indicative of the spirit in which the Prophet himself interpreted his Revelation, may still be of great help in understanding the life-value of the legal principles enunciated in the Qur’an.” (ibid, p.137) (c) Immobility of fiqh: Since the number of Qur’anic verses and ahadith relating to economic matters were a few we resorted to fiqh as our mainstay. Fiqh is a valuable storehouse of human thinking but that was developed centuries ago considering socioeconomic circumstances of the day. For the last six centuries or so, when the doors of ijtehad were closed, there is hardly any fresh thinking on the issues discussed in our fiqh literature. It requires massive re-thinking and re-writing. This task has also not been taken up by any organization in the entire Muslim ummah13. However, we who took the initiative of developing a new social science adopted the easy route of adopting verbatim what was available in our fiqh archives14. Of course, some writers did tinker with minor details but they retained the basic framework intact. The approach closed our doors for further progress. A host of new questions in the present day require an Islamic verdict but the Muslim scholars are unable to present an answer mainly because the existing methodology does not take them far enough.

(d) Discarding the scientific method: We did not adopt scientific method, outlined above, for developing Islamic economics as a social science. Even when we were seeing that conventional economics and other social sciences are growing through application of the scientific method we did not take any cue from that. Such was our ability to focus on our own self that we kept on repeating legal injunctions and self-congratulating on having developed a new discipline under the nomenclature of Islamic economics.

Instead of adopting scientific method we adopted the legalistic method. That led us to take a procedural approach, ignoring the substance of the matters under discussion.

Look what we did in case of prohibition of riba. While insisting on equation of riba with all types of interest we took the route of profit-loss sharing as alternative and finding it impracticable we resorted to devising an inventory of tricks and subterfuges (hiyal). A legalistic approach, as compared to a scientific method, could not take us farther from that. Same happened in the case of zakah. We squeezed the whole robustness of zakah out of it and reduced it to a collection of procedures which ensured adherence to fiqh rules and ignored wide-spread poverty and inequality in our societies and everywhere around the globe. An institution which could be trail-blazer for fighting poverty and inequality for the whole humanity became victim of our procedural approach. The net result is that zakah being managed in the entire Muslim world is no match for the social security system of the non-Muslim West. That shows our expertise in minimizing the strength and vitality of our institutions! Instead of adopting a scientific method and developing theory of zakah we ended up in presenting an inventory of fiqh rules on zakah which had minimal appeal to the humanity, though we rejoice in having performed the feat!

6. Future Direction Should we close our shop?

The above scenario is quite depressing. Should we close our shop and wind up the business of developing Islamic economics as a distinct social science? The brief answer is: not all. The detailed answer is as follows. We only need to review our strategy. In this section, we shall discuss this strategy. (a) Role of revelation in knowledge Economics studies the economic problem of man arising from scarcity of resources in a market economy perspective. The economic analysis focuses on behavior of consumers, producers, business firms, and government and non-government organizations and so on. However, to keep analysis simple it treats many factors such as individual differences due to genetic and hereditary factors, environmental pollution, climate change, international legal developments, and political changes across the globe and so on as exogenous, although they influence the

economic problem. Economics considers the effect of exogenous factors on economic variables but assumes them away as ‘other things being equal’.

A recourse to revelation as a source of knowledge presents enormous possibilities for expanding the frontiers of economics. Besides the factors that are generally treated as exogenous several moral laws operate in the universe. Some of these laws affect the creation of wealth, distribution of income and state of material prosperity and deprivation. These moral laws influence nature of the economic problem. Without studying the influence of these laws, study of the economic problem remains partial and incomplete. Economics relies solely on inductive reasoning by applying human intellect to data collected through observation and experimentation. It does not recognize revelation as a valid source of knowledge.

By itself inductive reasoning is a valid method of inquiry but has its limitations. In fact, Muslims were the foremost founders of inductive reasoning. In early centuries of Islamic history, Muslim scholars followed the Qur’anic invitation of introspection, observation and experimentation to the natural phenomena and developed various physical sciences such as chemistry, physics, medicine, and astronomy. The beginning of the Renaissance, usually imputed to Francis Bacon (1561-1626), is in fact a continuation of the scientific development and knowledge creation process initiated by Muslims of earlier centuries15. Allama Muhammad Iqbal (1877-1938) has discussed in detail the founding role of Muslims in inductive reasoning and how it contributed to the Renaissance. However, since the inductive reasoning cannot directly analyze and understand the divine moral laws which affect the lives of individuals and societies, economics simply does not recognize any role for them.

The nature of divine moral laws is such that they are not amenable to economic analysis in the usual manner. Mere human thinking cannot make them manifest. It requires divine guidance to understand the existence and operation of these laws. The Qur’an and hadith literature contains a wealth of information about these divine laws. However, this information requires further thinking, observation and experimentation to understand their application and relevance for the present age. The language of these divine laws is rarely so explicit as to be applicable directly to an economic problem. It is mostly in a style and format that is compact, subtle, symbolic, and even enigmatic. It consists of pointers, signposts and directions that require further in-depth study. It means these divine economic laws would require application of the usual method of inductive reasoning. The advantage of studying the divine economic laws is that it short-circuits human search for answers to economic problems. It reduces the hard work of arriving at truth through examination of hundreds and thousands of postulates and then arriving at the truth. It is in effect a route of knowledge development that economizes human effort.

The Qur’an indicates several moral economic laws which are in operation in the physical world.

They operate through the mechanism of cause and effect, yet human beings have paid little

attention to their operation. The operation of moral economic laws is like laws of natural sciences. For example, the law of gravity was operational in the universe even before Isaac Newton (1642–1727) discovered it. Bacteria caused infections even before Louis Pasteur (1822– 95) discovered their existence and the treatment of certain diseases caused by the bacteria.

Similarly, all developments in physical sciences explain various natural phenomena which existed even before they were discovered. Human beings struggled hard to unfold the mysteries of nature and understand the physical laws. In the process, various physical sciences have developed methodologies to confirm or refute hypotheses propounded by scientists.

Since it is not possible for human beings to discover the moral laws by direct observation, God has pointed to these laws in the Qur’an. Some of these laws have also been hinted at by the Prophet Muhammad (pbuh). These two primary sources of Islam refer to certain moral laws that affect our material well-being. However, the exact functioning of these laws is not yet known. We need to discover it by introspection, experimentation and dialogue. In brief, it is a process of proceeding from revelation and then applying reason for developing better understanding of the human economic problems. For example, the Qur’an points to the moral law of prosperity and misery but does not explain its exact operation in a cause-effect framework. Human beings must discover that relationship as they have discovered relationship of various facts in physical sciences. The task of discovering the exact operation of divine economic laws has yet to start in economics. This should be the main task before economists if they recognize revelation as a valid source of knowledge. But it is more complex than the search of physical laws because of several reasons: First, human beings are not quite aware of the moral laws that are operating in the universe.

These laws are difficult to discern by physical senses and material experimentation. They require divine guidance to begin with. If we do not accept revelation as a valid source of knowledge we cannot even take the first step toward discovery of these laws. Second, they are extremely complicated and have backward and forward linkages with the physical world. Disentangling cause from effect is quite a problem. Third, the divine time scale is much longer than the usual human time scale. The Qur’an mentions the length of one divine day as equal to one thousand years by our reckoning (Q. 22:47). The moral laws may have linkages with human behavior at points of time which are not discernible easily now. Fourth, the moral laws deal with human behavior, but changes in human behavior can also influence the operation of these laws. Thus, it is a two-way relationship. The moral laws influence and are in turn influenced by changes in human behavior. That complicates the situation further.

In brief, revelation is a second source of scientific knowledge. It can supplement our understanding of the human economic problem. It can offer insights for solving some of the economic problems which have defied solution through application of rational methods only.

The divine guidance of the Qur’an and hadith could thus help expand the frontiers of economics without compromising on the rigor and precision of economic analysis. The guidance in these

two sources would be a starting point for short-listing possible answers to various economic questions and then proceeding on usual method of observation and hypothesis testing. (b) Positive economic statements of the Qur’an Second pillar of the strategy is to concentrate on positive economic statements of the Qur’an and hadith. We present below some examples of these statements from the Qur’an. Although these statements have normative implications yet they provide basic material for developing Islamic economics a social science. A similar exercise can be done by focusing on positive economic statements of the hadith literature. i. Prosperity and misery at macroeconomic level The Qur’an discusses prosperity and misery in general terms. It refers to deeper, imperceptible and long-term currents of events taking place in the cosmos because of human actions and under the will of God. These currents affect the process of wealth creation in ways that cannot be explained easily in a simple cause-effect framework. The factors of production combine in the production process and create wealth. Over and above the visible cause-effect relationship of the factors of production there are moral laws which influence the ultimate result. These laws operate in response to certain traits of human character and behaviour which influence the state of prosperity and misery. A normative change in human behaviour can transform misery into prosperity and vice versa. The precise mechanism through which the laws operate is yet unknown because the meanings and interpretations of the Qur’anic texts on the subject require further thinking and deeper understanding.

The Qur’an visits the subject of human prosperity and misery at various places to draw attention toward God’s almightiness and invites human beings to adopt the path of righteousness. These statements address communities and societies as well as individuals. For example: 

Economic deprivation and prosperity are states of trial from God. [ Q. 2:155, 7:130, 7:168]



Following the divine guidance brings material prosperity. [ Q. 5:66, 7:96, 16:39, 24:55, 72:16]



Material prosperity accompanied by unethical behavior is short-lived and ends in misery. [Q. 6:6, 6:42-44, 7:96, 22:45, 22:48, 30:41, 34:15-17].



Transformation of economic well-being of a community into economic deprivation and vice versa is a consequence of changes in the ethical behavior of people. [Q. 8:53, 13:11].



Unethical behavior by majority of people brings economic misery and transforms prosperity into misery. [Q. 11:116, 89:15-20]



Persistent ingratitude by a community at macro-level transforms prosperity into poverty and brings insecurity in the long-run. [Q. 16:112]

ii. Prosperity and misery at microeconomic level Human beings require for their survival material resources such as income and wealth and nonmaterial resources such as good health, peace of mind, healthy children, knowledge, skills, social respect and harmony, and safety and security, etc. The Qur’an terms these resources as “rizq”. There are several positive statements relating to distribution of rizq among individuals.

For example: 

God has absolute power in distribution of the rizq. [Q. 2:212, 3:27, 3:37, 13:2629:62, 30:37, 34:36, 34:39, 39:52, 11:6, 29:60, 42:19]



Expression of gratitude for God’s bounties leads to increase in rizq. [Q. 14:7]



God deprives income from riba of all blessings. [Q. 2:276]



God has created all human being unequal to enable them create civilizations. [Q. 43:32]



Spending on others (infaq) is a loan upon God who promises to return it with manifold increase. [Q. 92:18-19, 2:195, 2:219, 2:245, 17:26-27, 25:67, 47:36-37, 57:11, 57:18, 64:17]



Infaq is a vehicle for an increase in wealth at the individual and social levels. [Q. 2:261, 2:265]



Infaq accompanied by God consciousness (taqwa) and ethical values lead to life of ease while miserliness, arrogance and unethical behavior lead to life of hardship. [Q. 92:5-10]



Compliance with divine injunctions while being God-conscious opens doors of ease.

Reposing trust in God during hardship brings unexpected financial help from God. [Q. 65:2-3]



An attitude of humility and willingness to make amends on past errors, termed as repentance (tauba) by the Qur’an, opens door-ways for material prosperity. [Q. 11:3, 11:52, 71:10-12



Patience in bearing adverse changes in economic well-being is a foreboding of increase in income and wealth. [Q. 2:155, 94:5]



God determines the rizq keeping in view an individual’s needs. God also considers the requirements of social balance while distributing income and wealth. [Q. 42:27]



Ethical behavior in economic dealings leads to prosperity. [Q. 72:16]



Some forms of unethical behavior lead to financial hardship. [Q. 89:15-20]

Both sets of statements regarding economic prosperity and misery are general indicators of the way the wealth and income are distributed by God among individuals and communities.

However, the exact mechanism how God implements His plan is yet unknown to us. (c) From positive economic statements to Islamic economics Third pillar of the strategy is to develop Islamic economics as a social science from positive economic statement of the Qur’an and hadith. For transmuting theological statements into a social science, we need to adopt the same methodology as that of conventional economics.

However, we should take a fresh look over positive economic statements of the Qur’an and hadith. The injunctions of the Qur’an and hadith are divine and immutable but our understanding is not. We should be willing to formulate human understanding of the divine texts in the format of hypotheses which are amenable to validation and falsification. We have discussed the methodology of developing Islamic economics as a social science from the positive economic statement in the Qur’an and ahadith elsewhere (Khan 2013, 2014, 2014-a, 2014-b, 2016). At this place, we shall only present a summary of these discussions. For developing Islamic economics as a social science, we should proceed as follows: (a) We should take economic statements of the Qur’an or hadith as immutable and unchangeable. Since each of the verse or hadith dealing with divine economic laws can be interpreted in more than one way, our objective should be to understand the causeeffect or operational process of these statements. The challenge before us is to arrive at interpretations which can be tested and verified empirically or rationally. It is not that we need to test the Qur’anic or hadith statements. It is the human interpretation and explanation of these statements that we need to test empirically or rationally. (b) Based on our understanding of the statements in the Qur’anic or hadith we should develop hypotheses that propound to make some predictions. There could be several hypotheses for each statement or one hypothesis from several statements. The form and content of the hypotheses could change with passage of time as our understanding evolves. We should present various hypotheses in a format which can be either verified by empirical testing or cannot be falsified by facts and rational thinking16. (c) The hypotheses should be available for testing and verification in varied conditions. The results of hypotheses testing should be widely published inviting the world community of knowledge to examine and comment on this research.

After years of research and introspection operation of some of the moral laws would be discovered and we shall be able to present our understanding in a format that can be used in wider economic analysis. The suggested procedure will enable Islamic economics extend frontiers of the conventional economics. However, it will have a distinct research agenda for itself and have no dispute with the conventional economics. Both social sciences can

complement findings of each other and live side by side. One of the contributions of Islamic economics to human knowledge would be to develop a methodology for making the Qur’anic economic laws manifest in human situations. It will add a new dimension toward understanding and analyzing the human economic problems. (d) Developing statistical infrastructure Fourth pillar of the strategy is to develop statistical infrastructure for collecting and analyzing the data. Most of the required data would pertain to socio-economic behavior of people. In some cases, testing would require information on long-term basis. That should not discourage us. There are traditions of long-term research in other disciplines. For example, in health sciences, sociology, psychology and anthropology data are collected over long-periods on large numbers consisting of a variety of individuals, situations and assumptions. Information collection continues until the researchers can conclude on certain trends and hypotheses. Since the economic subjects in the Qur’an and hadith also deal with human behavior, in some cases data would be required for representative and unbiased samples (preferably for large numbers) over extended periods of time. In most cases, five years would be too short a period. We think that process of hypotheses building should take place at levels of institutions such as universities, academies and research institutions which should collect and analyze data over long periods of time. (e) Relationship with conventional economics: Fifth pillar of the strategy is to understand clearly and precisely our relationship with conventional economics. Islamic economics has no dispute with it as it does not replace, or modify it. The two disciplines have their own subject matters and can develop side by side.

The conventional economics studies the economic problem of man from purely material and physical angle. It focuses on the behavior of individuals, markets and organizations regarding resources produced, distributed and consumed. Islamic economics studies the economic problem of man regarding ethical and spiritual principles. Both these planes of discussion are complimentary and not mutually exclusive. While the invisible hand of markets determines supply and demand, the Invisible Hand of God acts in an over-arching manner and influences the operations of these very markets by influencing human minds and thoughts. God implements His grand scheme of distribution of income and wealth through markets and organization. Economics does not study this phenomenon. Islamic economics purports to do that. While doing that, it attempts to understand the moral laws of God in operation over and above the market laws. Thus, the two disciplines have no conflict. They only complement each other.

If we must develop Islamic economics as a social science, and we think it is a potentially feasible enterprise, we should not attempt to modify conventional economics from an

Islamic perspective. Instead, we should study conventional economics as it is but develop Islamic economics as a social science from its theological roots. It should not be an attempt to transform conventional economics into Islamic economics. We can use the methodology of conventional economics without any reservations. Islamic economics should not feel shy of adopting and using tools of analysis used by conventional economics or other social sciences. These tools are available in the present form after centuries of thinking and experimentation and are common heritage of the humanity to which Muslims had also contributed in their heydays. Islamic economics should make use of that heritage freely. (f) Focus of Islamic economics: Sixth pillar of the strategy is to define the focus of Islamic economics clearly. Islamic economics addresses whole of humanity. It is not a science that deals with the problems of Muslims only. Its study does not require faith in Islam nor does it require an Islamic society for developing its knowledge-base. Its postulates, hypotheses, theories and laws are valid for all societies and for all people. Islamic economics should come out of the problem of conceiving its postulates in the context of Islamic economy since it does not exist anywhere in the real world. Instead, it should deal with problems of the economies that exist in the real world.

7. In defense of the proposed strategy Since the strategy discussed above departs significantly from the path adopted by contemporary Muslim economists we think it necessary to present some thoughts in its defense. (a) Qur’anic verses 2:258-260 refer to three incidents which indicate God’s preference for empirical evidence. Verse 3: 137 invites people to ‘go around the world and see the fate of e those who rejected the Truth.’ Verse 10:36 says that ‘conjecture can never be a substitute for truth.’ Verse 17:36 advises people ‘never to concern themselves with anything about which they do not have sure knowledge’. These verses clearly indicate that all knowledge must be supported by indefensible evidence. (b) Without breaking from the past, the methodology opens new opportunities for having a fresh look at past understanding of the divine sources. The method owns and adopts the divine sources as supreme, which makes it a continuum of the past. At the same time, it permits people of the present age as well as future generations to review and reinterpret all that the past intellectual efforts have retained for us. In that respect, it opens immense possibilities for creating new knowledge. (c) The strategy adopts scientific method developed by social sciences over centuries of thinking and experimentation. It does not discard gains of the scientific knowledge. It only builds upon those gains. It adopts the now generally accepted method of formulating and testing hypotheses considering empirical evidence. It applies the

concept of falsification of hypothesis which would not be possible if we remain confined to Islamic economic teachings because venturing to test those teachings may be construed as blasphemous in the first place. The methodology goes a step further from Islamic economic teachings. It applies scientific method to human interpretation of the divine sources, avoiding all conflict with religious elite and social scientists. The method displays a unique situation of humility. On the one hand, it respects the divine sources and all that has been presented by religious scholars of the past. On the other, it adopts the scientific method developed by the social scientists. Thus with the humility and willingness to benefit from both streams of knowledge, it tries to integrate human understanding of the divine sources with empirical testing of that understanding.

Simultaneously, the method avails of the freedom to have a fresh look on the past religious thought. It provides a sort of dynamism to the religious thought and may become a vehicle for emancipating the fiqh knowledge from immobility of the past centuries17. (d) The method opens new vistas of interaction with other faiths. Once we can demonstrate the utility of this method we remain open to apply it to divine sources of other faiths like Judaism, Christianity, Buddhism, etc. It will provide corridors of hand-shake with the people of other faiths. The current environment of ‘Islamophobia’ would give way to new methods of borrowings from other faiths for Muslims as well as for people of other faiths. It will provide a forum for positive and fruitful inter-faith dialogue. (e) There is a realization among economists and finance professionals to bring ethics into mainstream branches of knowledge18. But aversion of getting sucked into a religious framework creates barriers against incorporating ethics in economics and finance. The method allows economists and finance professionals to embrace education and teaching of ethics without getting into the business of professing any specific faith.

8. Concluding remarks The existing literature under the nomenclature of ‘Islamic economics’ is actually a collection of ‘Islamic economic teachings’, most of which is in the domain of theology. However from this literature it is both necessary and also feasible that we develop Islamic economics as a social science. For achieving this objective, the paper proposes a strategy which is followed by most of the social sciences, conventional economics. The subject matter of Islamic economics is complimentary to conventional economics. By coming up with a theory relating to production, distribution and consumption of wealth derived from the divine sources of Islam we shall be contributing to world stock of knowledge. We shall be able to help the humanity in solving some of its nagging economic problems. Since a lot of guidance contained in the Islamic divine texts addresses the humanity at large, the Islamic economics, if developed as a social science, will not require any change of faith for the non-Muslims. They would be able benefit from it while remaining loyal to their own faiths.

References Ali, S. Nazim. 2008. Islamic finance and economics as reflected in research and publications.

Review of Islamic Economics 12(1):151-68.

Alrifai, Tariq. 2015. Islamic finance and the new financial system. Singapore: John Wiley & Sons Pte Ltd. Amsden, A. H., and A. Singh. 1994. The optimal degree of competition and dynamic efficiency in Japan and Korea. European Economic Review, Elsevier 38 (3–4): 941–51 Amsden, A. H. 1990. Why isn’t the whole world experimenting with the East Asian model to develop? Review of the East Asian miracle. World Development 22 (4): 627–33.

Blaug, Mark. 1980. The methodology of economics. Cambridge: Cambridge University Press.

Caldwell, Bruce. 1984. Appraisal and criticism in economics. Boston: Allen and Unwin.

Chapra, M.U. 2014. Morality and justice in Islamic economics and finance. Cheltenham, UK: Edward Elgar.

Cizakca, Murat. 2011. Islamic capitalism and finance: Origins, evolution and future. Cheltenham, UK & Northampton, USA: Edward Elgar.

Clough, Christine. 2013. Beneficial ownership transparency in the UNCAC. UNCAC. 13 November. http://uncaccoalition.org/es/learn-more/blog/295-beneficial-ownership-transparency-in-theuncac Dow, Sheilla C. 1985. Macroeconomic thought: A methodological approach. Oxford: Basil Blackwell.

Egri, Taha and Necmettin Kizilkaya, eds. 2015. Islamic economics: Basic concepts, new thinking and future directions. Newcastle upon Tyne, UK: Cambridge Scholars Publishing.

Eichner, A.S. 1983. Why economics is not yet a science? London: Macmillan.

Global Witness. 2009. Undue diligence: How banks do business with corrupt regimes. March. https://www.transparency.de/fileadmin/pdfs/Themen/Finanzmarkt/Undue_Diligence_Report_ Global_Witness.pdf Hasan, Abul. 2015. Islamic economics and its future. In Islamic economics: Basic concepts, new thinking and future directions, eds. Taha Egri, and Necmettin Kizilkaya, pp. 77-101. Newcastle upon Tyne, UK: Cambridge Scholars Publishing.

Hausman, Daniel M. 1984. The philosophy of economics: An anthology. Cambridge: Cambridge University Press.

Iqbal, Allama Muhammad. 1989. The reconstruction of religious thought in Islam. Edited and annotated by: M. Saeed Sheikh. Lahore: Iqbal Academy Pakistan and Institute of Islamic Culture.

Khan, Feisal. 2015. Islamic banking in Pakistan. London and New York: Routledge Khan, Muhammad Akram. 1984. Islamic economics: Nature and need. Journal of Research in Islamic Economics (succeeded by Journal of King Abdul Aziz University: Islamic Economics), 1(2): 51-55.

Khan, Muhammad Akram. 1987. Methodology of Islamic economics. Journal of Islamic Economics (now named International Journal of Economics, Management and Accounting), 1(1): 17-33.

Khan, Muhammad Akram. 1994. Introduction to Islamic economics. Islamabad: International Institute of Islamic Thought & Institute of Policy Studies.

Khan, Muhammad Akram. 2013. What is wrong with Islamic economics? Analyzing the present state and future agenda. Cheltenham, UK & Northampton, M.A. USA: Edward Elgar.

Khan, Muhammad Akram. 2014. Impediments in developing Islamic economics as a social science. Edward Elgar Blog. May 13. https://elgarblog.com/2014/05/13/impediments-indeveloping-islamic-economics-as-social-science-by-muhammad-akram-khan/ Khan, Muhammad Akram. 2014-a. Reconstruction of economics based on the paradigm of Tawhid: Present challenges and future prospects. Journal of Islamic Economics, Banking and Finance, 10(1): 10-31. January-March.

Khan, Muhammad Akram. 2014-b. Methodology for theory building in Islamic. Journal of Islamic Economics, Banking and Finance, 10(2): 11-37. April-June.

Khan, Muhammad Akram. 2016. Methodology for theory building in Islamic economics: Some more examples of hypotheses. Journal of Islamic Economics, Banking and Finance (forthcoming).

Khan, Muhammad Fahim. 2015. Revisiting the foundational concepts and thoughts in Islamic economics: Where Islamic economics should originate in terms of theoretical content? In Islamic economics: Basic concepts, new thinking and future directions, eds. Taha Egri, and Necmettin Kizilkaya, pp.12-57. Newcastle upon Tyne, UK: Cambridge Scholars Publishing, Khan, Muhammad Fahim. 2013. Theorizing Islamic economics: Search for a framework for Islamic economic analysis. JKAU: Islamic Economics 26 ( 1): 209-242.

Kizilkaya, Necmettin. 2015. Some considerations on the methodology of Islamic economics. In Islamic economics: Basic concepts, new thinking and future directions eds. Taha Egri and Necmettin Kizilkaya, pp.1-11. Newcastle upon Tyne, UK: Cambridge Scholars Publishing.

Klant, J.J. 1984. The rules of the game. Cambridge: Cambridge University Press.

Lagarde, Christine. 2015. Ethics and finance—Aligning financial incentives with societal objectives. Remarks at a "Conversation with Janet Yellen, Chair of the Board of Governors of the Federal Reserve System". Washington, D.C: International Monetary Fund. May 6. www.imf.org.

Machlup, Fritz. 1955. The problem of verification in economics. Southern Economic Journal. 22 (1):1-21. July.

Mahomedy, Abdulkader Cassim. 2013. Islamic economics: Still in search of an identity. Center for Islamic Economics and Finance, Qatar Faculty of Islamic Studies, Qatar Foundation.

International Journal of Social Economics 40 (6). www.emeraldinsight.com/doi/pdf/10.1108/03068291311321857 Maghrebi, N., Abbas Mirakhor and Zamir Iqbal. Intermediate Islamic finance. Singapore: John Wiley & Sons.

Pozuelo-Monfort, Jaime. 2012. Redefining capitalism: An ethical rating and its contribution to development. In Trust and Ethics in Finance: Innovative Ideas from the Robin Cosgrove Prize, eds. Cosgrove-Sacks, Carol and Paul H. Dembinski. pp. 257-267. Geneva: Globethics.net. www.globethics.net Schwartz, Mark S., and Archie B. Carroll. 2003. Corporate social responsibility: A three dimension approach. Business Ethics Quarterly 13: 503-30.

Sheng, Andrew and Ajit Singh. 2013. Islamic finance revisited: Conceptual and analytical issues from the perspective of conventional finance. In Economic development and Islamic finance, eds. Zamir Iqbal and Abbas Mirakhor, pp. 67-92.Washington: The World Bank.

Singh, A. 1995. Corporate financial patterns in industrializing economies: A comparative international study. IFC Technical Paper 2, International Finance Corporation, Washington, DC. Stiglitz, Joseph E. 2016. What is holding back the world economy? http://www.projectsyndicate.org. Feb 9.

Warde, I. 2000. Islamic finance in the global economy. Edinburgh: Edinburg University Press.

StĂźckelberger, Christoph. 2012. Economic ethics. In Encyclopedia of Global Studies. Ed. Helmut K. Anheier, Mark Juergensmeyer, and Victor Faessel. Thousand Oaks, C A: SAGE, pp. 450-55.

SAGE Reference Online. Encyclopediaofglobalstudies_Stueckelberger.pdf Wiles, Peter and Guy Routh. 1984. Economics in disarray. Oxford: Basil Blackwell.

Endnotes 1

Body of literature consisting of the sayings, actions and approvals of the Prophet Muhammad (pbuh).

The Islamic Development Bank’s IRTI journal Islamic Economic Studies; the King Abdulaziz University journal KAAU Journal: Islamic Economics; the journal of the International Association of Islamic Economics Review of Islamic Economics; International Journal of Economics, Management and Accounting (IIUM); Journal of islamic Finance (IIUM); Islamic banking and Finance Review, (UMT, Lahore); Journal of Muamalat and Islamic Financial Research (Malaysia); Journal of Islamic Accounting and Business Research (since 2010); International Journal of Islamic and Middle Eastern Finance and Management (since 2008); Journal of Islamic Marketing (since 2010); Journal of Islamic Economics, Banking and Finance (Bangladesh) Journal of Islamic Business and Management (Ripah University), ISRA Journal of Islamic Finance (Malaysia), International Journal of Excellence in Islamic Banking and Finance (Hamadan bin Mohammed Smart University, Dubai); al-Tamwil al-Islami (Egyptian Islamic Finance Association).

3 http://inceif.org;http://www.islamic-banking.com; http://www.netversity.org; http://financeinislam.com; http://www.islamic-world.net/economics/index.htm;http://scholar.google.com; http://alhudacibe.com; http://insif.org; www.iefpedia.com; http://www.wdibf.com; www.irti.org; http://www.iaie.net; http://www.isie.org; http://www.iiibf.org; http://www.bibf.com; http://www.ibfim.com; http://failaka.com 2

4

Islamic Economic Institute, KAU, Jeddah; Islamic Research and Training Institute (IRTI), Jeddah; International Institute of Islamic Economics, Islamabad (IIUI), now renamed as the School of Islamic Banking and Finance; Institute of Islamic Banking and Insurance, London; International Centre for Education in Islamic Finance (INCEIF), Malaysia; Islamic Finance Training, Malaysia; Ethica Institute of Islamic Finance, Dubai; Islamic Finance Academy, Dubai; Centre for Islamic Banking and Finance Training, Malaysia; Institute of Islamic Finance, London; Islamic Finance Advisory and Assurance Services, Birmingham (UK); Islamic Finance Institute of South Africa; Centre for Islamic Finance of Bahrain, Institute of Banking and Finance (BIBF); Centre for Banking and Financial Studies, Qatar.

Islamic society for Institutional Economics; International Institute of Islamic Business and Finance (online); Islamic banking and finance institute, Malaysia; International Research Centre for Islamic Economics and Finance at Istanbul Sabahettin Zaim University.

5 For example: Masters and PhD courses offered by INCEIF, Malaysia; Centre for Islamic Economics and Finance, Qatar Faculty of Islamic Studies; Postgraduate Diploma in Islamic Finance, Certified Islamic Banker, Certified Islamic Insurance Professional and Certified Islamic Investment Analyst programs by the International Institute of Islamic Business and Finance (IIIBF); Certified Islamic Finance Professional by the International Centre for Education in Islamic Finance (Malaysia); Islamic Finance Qualification by the Securities and Investment Institute of the UK; Certified Islamic Public Accounting, and Shari’ah Auditor Advisor Certificate by the Accounting and Auditing Organization for Islamic Financial Institutions, Bahrain; Islamic Finance Program by the Oxford Centre for Islamic Studies; Islamic, Centre for Islamic economics, finance and banking of Institute of Business Management, Karachi, etc. Some universities in the UK, such as Cass Business School, Reading University, Durham University, Loughborough University and Surrey University, International Islamic University, Islamabad (Pakistan) and Ripha International University, Islamabad (Pakistan) offer courses in Islamic economics and finance and also conduct regular research in these fields. The universities of Harvard (USA) and Bochum (Germany) have launched departments or programs for the study of Islamic economics. Universiti Teknologi MARA, Malaysia (UiTM), University Utara Malaysia (UUM) and Yarmouk University, Jordan offer bachelor’s courses in Islamic economics.

Imam Muhammad University of Riyadh offers courses on Islamic economics as part of its courses on conventional economics. On 4 July 2011, Durham University (UK) launched a new doctoral training centre named the Durham Centre for Islamic Economics and Finance (DCIEF). Istanbul Sabahettin Zaim University offers Masters and PhD degrees in Islamic economics and finance.

www.gov.uk/government/news/opportunities-for-islamic-finance-in-the-uk. accessed 9 Dec 2013): 6

7

The yearning for developing an independent discipline is echoed recently by Mohamedy (2013, 10) who concludes his paper with these words: “Islamic economics needs a conceptual framework formulated based on its worldview; and then, to develop its content and form on its own terms and using its own distinct categories, if necessary.” Also, see: Khan, Fahim (2013).

8

One latest example can be seen at Khan, Feisal (2015, 87) who quotes Warde, I. (2000, 21) who quotes el-Najjar: “…’an equity-based system once fully implemented, would automatically give us a world where ‘no inflation, no unemployment, no exploitation and no poverty exists’. [Ahmed el-Najjar] 9

Stiglitz (2016); Cizackca (2011, 77, footnote 52) says: “The Japanese interbank interest rate reached zero rate of interest already in 1999. Japan was followed by several other western nations during this crisis. On July 30, 2010, the London interbank offered rate on three months’ dollars was fixed at 0.46563 per cent. [See for detail Uwe Vollmer and Ralf Berbenroth, Policy Reactions to the Financial Crisis in Japan: Lessons from 1990s. Discussion Paper series RIEB, Kobe University, DP2010-16 May 7, 2010.]; Sheng and Singh (2013 ,72) say: “…many successful economies have used subsidies—indeed, negative interest rates—for long periods of time as an important part of their industrial policies during the course of economic development. This has certainly been true of Japan, which provided negative real interest rates to its favored corporations for much of the postwar period of its most rapid industrialization (1950–73) (see Amsden and Singh 1994; Singh 1995). Subsidies and directed credit were also central features of the Republic of Korea’s highly successful industrial policy during the previous two decades, as Amsden (1990) notes.

10

BBC News 11 March 2016 reported that the European Central Bank (ECB) cuts its main interest rate from 0.5% to 0% and its bank deposit rate from minus 0.3% to minus 0.4%. The ECB forecast is that the interest rates were going to stay at this level for an extended period.

11 For a detailed explanation of the process followed in theory building see: Some of the works which give a comprehensive view of the methodological debate are: Mark Blaug (1980); Bruce Caldwell (1984); Sheilla C. Dow (1985); A.S. Eichner (1983); Daniel M. Hausman (1984); J .J. Klant (1984); and Peter Wiles and Guy Routh (1984).

12

It seems to be a situation depicted in the Qur’an itself where the Prophet (pbuh) complaints to Allah on the Day of Judgment: “O my Sustainer! My people discarded this Qur’an.” (Q. 25:30) 13 We are aware of the international fiqh academies of Saudi Arabia, OIC countries and India. However, these organizations are strictly adhering to the framework devised by the imams of fiqh centuries ago. They are not relying on fresh thinking or trying to break-away from that framework or devising any innovative principles.

14 There is a growing awareness among Muslim economists about our excessive reliance on fiqh. For example, see the lament of Fahim Khan (2015, 13).

15 Iqbal (1989, pp.99-110) 16 It is interesting to note that the methodology of verification presented by Karl Popper (1902-1994) under the generally accepted thesis of falsification has its origins in the Muslim theological thought. Iqbal (pp.102) says: “It was, I think, Nazzam (775-845) who first formulated the principle of ‘doubt’ as the beginning of all knowledge.

Ghazali (d.1111) further amplified it in his ‘Revivification of the Sciences of Religion’ (‘Ihya al-Ulum al-Din), and prepared the way for ‘Descartes’ Method’.”

17 It is important that the Muslim scholars feel nostalgic about fiqh. They want to go back to the fiqh as it is, without any major fresh thinking. They think that the revival of Islamic economics should be made by anchoring the subject on the fiqh which is suffering from antiquated ideas for the last six centuries. See for a recent example introductory chapter by Kizilkaya (2015, 9).

18 See for example, Maghrebi et el (2016, 49); Lagarde (2015); Stückelberger (2012, 454); Schwartz and Carroll (2003, 512);