Islamic Finance

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Estimates about the worlds total Muslim population range between 1.2 and 1.6 Billion. Most Islamic countries are, on average, less developed than non-Muslim countries. Less than 5% of all Muslims are living in Muslim countries which can be considered developed. The wealth of all these rich, developed Islamic countries depends largely on oil. Many Muslims living in developed countries live in Western non-Muslim countries. One-third of young Muslims in Kosovo (the most recently established Muslim State) are already looking to emigrate in search of fortune elsewhere (i.e. The West), 73% of their young being unemployed.[1]

Production in Muslim-majority nations

Many Islamic economies depend on agriculture, raw materials or textile products, with little or no production of sophisticated products. Sophisticated products are also rarely designed in Muslim nations

Malaysia is the only Muslim-majority country with a significant electronic industry. Most products produced in Malaysia derive from production facilities built by foreign manufacturers. Thus, capital and technology are imported from western or East Asian multinationals.

Economic influence of non-Muslim minorities

In some countries with a Muslim majority, such as Indonesia and Malaysia, minorities enjoy a significant influence on the national economy. Many Islamic governments are suppressing such minorities to keep limited their influence upon their national economies.

Haram (prohibited) institutions

Illegal trades

Alcohol, pork and gambling are agreed upon to be forbidden under Islamic law. Similarly prohibited is the charging and collecting of interest.

Interest-based practices

Of the economic practices prohibited by Islamic law, the prohibition on interest is the most consequential, since all banking, financing and investing in the world´s economy depends on interest.

Islam traditionally prohibited interest, as Muhammad feared usury leading to debt-slavery and other undesired social problems. However, modern laws increasingly prohibit and secure against debt-slavery, and it would appear that interest has a net-positive effect on the global economy today, as it enables every sort of loan.

Nevertheless interest remains forbidden in many Islamic countries and many small or medium sized companies cannot find any investor to expand their business.

Halal alternative institutions

There are also Islamic banks existing in many Muslim countries, however, many companies would prefer a western bank to fulfill their financial needs and stay independent from an investor who buys company shares - which is the alternative to interest commonly used in Islamic economies to secure investment/loans.

Economically detrimental realities


World Statistics reveal that many Islamic countries face serious problems regarding education. Many Islamic countries suffer from considerably high rates for illiteracy, with little hope that the picture might change. High population growth rates make public education unaffordable.

Many young boys do not attend school but only "Qur'an-Schools" where they are forced to memorize the Qur'an without understanding anything of it. Many Muslim women are illiterate as a result of patriarchal education laws that prioritize the education of Men. The result is that women cannot pass-on any knowledge to their children, worsening the situation further.

In other cases, Sharia-inspired laws do not allow even well educated women to work. In Saudi Arabia many women attend university, but never find a job because they are not considered desirable as workers.

Gender segregation

Islamic societies (for example, in Saudi Arabia, with only slight changes taking place recently) often fail to harness the economic power of the female half of their populations. Some common restrictions include:

  • Women cannot meet male teachers directly.
  • Women cannot move or travel anywhere alone.

Discrimination against non-Muslims

There are many difficulties for non-Muslims in Muslim-Societies, including the Jizyah “poll tax” for dhimmi's:

Fight those who believe not in Allah nor the Last Day, nor hold forbidden that which hath been forbidden by Allah and His Messenger, nor acknowledge the religion of Truth, (even if they are) of the People of the Book, until they pay the Jizyah with willing submission, and feel themselves subdued.

In Malaysia, the Chinese minority effectively controls the economy, but Chinese students have to attain higher qualifications on average compared to local people to acquire the same jobs and scholarships.

In addition to endemic instability, the discriminatory environment in many Muslim-Societies is not inviting for foreign investors.

Individual nations


The struggling economy of Iran does not have enough refined petroleum and regular results in protests. The economy is controlled by religious foundations, and small and medium sized companies wield little influence. The private sector underdeveloped, and key industries under control of the Islamic government. Businesses not related to the oil industry experience little if any success in this environment.

Due to dilapidated drilling rigs and pipelines, Iran can only produce 4.3 million barrels of oil/day out the 130 billion barrels of proven oil reserves.[2] Iran is also only able to refine only 40% of its oil consumption; it has to export crude oil and import refined oil for the other 60% of consumed oil.

Iran also struggles with High unemployment rates—15% according to the Iranian government [3]. Since the population is very young, the unemployment rate is expected to rise in the future. Many young Iranians want to emigrate[4].


Further readings

  • Iran's Economic Morass: Mismanagement and Decline Under the Islamic Republic, ISBN 978-0944029671

External links