The Evolution of Islamic Economic practice and thought

Broadly speaking, the evolution unfolded as follows. First, the era of Prophet Muhammad (PBUH) and the Rightly Guided Caliphs (7th century CE). During this period, fundamental principles of the Islamic economy—such as justice in wealth distribution and the prohibition of riba (interest)—were established and practiced, and the implementation of zakat (obligatory almsgiving) began.

Second, the Islamic Golden Age (8th to 13th centuries CE). Economic thought flourished alongside the advancement of Islamic civilization. Many Muslim scholars—such as Abu Yusuf, Al-Mawardi, and Ibn Khaldun—wrote extensively on economics and public administration. Under the Abbasid Caliphate, the Islamic economy expanded rapidly, with Baghdad serving as a major intellectual and economic hub. Prominent Muslim scholars like Al-Ghazali and Ibn Khaldun contributed significantly to economic discourse.

Classical scholars in the Muslim world made valuable contributions to Islamic thought regarding issues such as production, consumption, income, wealth, property, taxation, and land ownership. Among them were (along with their years of death): Abu Yusuf (798), Muhammad bin al-Hasan (805), Al-Mawardi (1058), Ibn Hazm (1064), Al-Sarakhsi (1090), Al-Tusi (1093), Al-Ghazali (1111), and Al-Dimashqi (805). 1175), Ibn Rushd (1187), Ibn Taymiyyah (1328), Ibn al-Ukhuwwah (1329), Ibn al-Qayyim (1350), Sayyid Ali Hamadani (1384), Al-Shatibi (1388), Ibn Khaldun (1406), Al-Maqrizi (1442), Dawwani (1501), Muhammad Aurangzeb Alamgir (1707).

Three, the Period of Decline (14th to 19th centuries CE). The development of Islamic economic thought stagnated due to the dominance of colonialism and the influence of Western economics.

Four, the Modern Resurgence (20th century to the present). Islamic economic thought began to revive with the emergence of Islamic banks and Sharia-compliant financial institutions. Academics and practitioners began developing more systematic and structured Islamic economic theories.

As a discipline, Islamic economics can be traced back to the first wave—which was more general in nature—in the early 19th century. Then came the second wave, entering the 20th century; for instance, the 1970s saw a surge in practices rejecting riba (usury). This second wave was characterized by scholarly developments that were more detailed, technical, and operational.

Some key events include:

1963 - Establishment of the first Islamic bank, Mit Ghamr Savings Bank, founded in Egypt by Ahmad El-Naggar. This marked the beginning of the modern Sharia banking system.

1969 - Formation of the Organization of Islamic Cooperation (OIC) to strengthen solidarity and economic cooperation among Muslim nations.

1975 - Establishment of the Islamic Development Bank. This bank was established to support economic and social development in OIC member countries in accordance with Sharia principles.

1976 - International Conference on Islamic Economics in Mecca.

1980s - The beginning of rapid growth for Sharia banking in Indonesia and globally, continuing to the present day.

 

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