The importance of Islamic economics in contemporary society

Observer

27-03-2025

Economy is one of the most fundamental aspects of any state, society, or civilisation. From the earliest days of human interaction, economic systems have been necessary for organising resources, trade and distribution of wealth.
Every religion and school of thought has addressed economic matters in some form. Islam, as a complete way of life, offers a comprehensive and ethical economic system, rooted in justice, equity and moral responsibility.
In this discussion, I aim to focus on the profound relationship between Islam and economics. If one wishes to truly understand Islamic economics, they must begin with the life and practices of Prophet Muhammad (peace be upon him).
Before he received prophethood, the Prophet was deeply engaged in trade and business. His integrity, honesty and fair dealings earned him the title of Al Ameen" (the trustworthy) among the people of Makkah.
His economic practices and business ethics are well documented in Islamic history and offer a foundation for understanding Islamic economic principles.
Trade, entrepreneurship and financial dealings are not marginal topics in Islam, they are core to the Prophet's life and teachings. Sadly, this critical aspect is often neglected in modern Muslim societies.
In today's world, it is essential for our educational institutions, colleges, universities and religious seminaries to give due importance to Islamic economics, which offers unique perspectives that contrast with contemporary models such as capitalism and socialism.
Modern economic systems have their advantages but also numerous drawbacks. Capitalism, for instance, has led to extreme income inequality, environmental degradation and exploitation. Socialism, while attempting to address inequality, has often resulted in inefficiency and lack of innovation.
In between lies the mixed economy, which tries to balance private and public interests. But what about the Islamic economy? Why is it seldom discussed in depth? Does it not offer alternatives? Can it not contribute to solving the economic crises of our times?
Islamic economics is based on the principles of justice (Aadl), equity (Ihsan) and prohibition of exploitation (zulm). It prohibits Riba (usury), promotes zakat (mandatory charity), encourages risk-sharing in business through Mudarabah and Musharakah and discourages hoarding and monopolies. The goal is not just profit, but ethical earning and fair distribution.
Prominent Islamic economists like Ibn Khaldun (1332–1406), who is considered a forerunner of modern sociology and economics, emphasised the importance of productive labour, fair taxation and the role of government in regulating markets without suppressing entrepreneurial freedom.
He wrote in his Muqaddimah that 'Commerce means the attempt to make a profit by increasing capital, through the purchase of goods at a low price and their sale at a higher price.' However, he warned against state interference that discourages trade and wealth creation.
In my view, there is a growing need to revisit the Seerah (biography) of the Prophet with a specific focus on his economic behaviour. We should re-study how he conducted business, treated partners and employees, managed risks and ensured fairness in transactions.
His dealings with Khadijah (RA), his involvement in caravan trade and his economic leadership in Medina offer timeless lessons.
It is time for scholars, educators and policymakers to integrate Islamic economic thought into curricula, public discourse and policymaking.
Raising awareness about the ethical and sustainable economic system Islam promotes could potentially provide solutions to many of the challenges our societies face today, poverty, inequality, corruption and economic instability.
Indeed, the path to economic revival in Muslim societies may begin with a return to our roots, drawing from the wisdom of the Holy Quran, the Sunnah and the intellectual heritage of our scholars. Let us engage, explore and educate others about the richness of Islamic economics not only as an academic discipline but as a living, practical guide for just and compassionate living.