Those Who Spread Islam to Indonesia Were Skilled Merchants

Consistent with the narrative above, combining economic activity with the propagation and development of the faith was a lifestyle adopted by many of the preachers who introduced Islam to the archipelago. They were simultaneously merchants, preachers, and religious teachers. The “Wali Songo” (Nine Saints) also followed this practice; their economic activities were not driven solely by profit but were oriented toward dakwah (religious outreach). Conducting business ethically and profitably was also among the lessons they imparted to the community at the time.

It was merchants who spread Islam throughout the archipelago—specifically, knowledgeable merchants who acted as religious teachers (ustadz) alongside their trade. Muslim merchants arrived and conducted business at coastal trading hubs. Malacca and its surrounding ports—such as Perlak and Samudra Pasai—served as key transit points for merchants during that era. They would reside in these locations for extended periods, waiting for the seasonal winds to change. It was during these waiting periods that intermingling occurred among merchants of diverse nationalities and with the local population. This fostered an exchange of customs, cultures, and even religions—facilitated not only through trade but also through assimilation via marriage.

Among these merchants were individuals from Arabia, Persia, and Gujarat, the majority of whom were Muslim. Consequently, settlements of Muslim merchants began to flourish along the coast. These ports served as gateways and centers for the dissemination of Islam across Indonesia. This explains why the major cities of Islamic kingdoms were typically situated along the coast or at river estuaries—examples include the kingdoms of Perlak, Samudra Pasai, Palembang, Banten, Sunda Kelapa, Cirebon, Demak, Jepara, Tuban, Gresik, Banjarmasin, Gowa, Ternate, and Tidore. History records that since the beginning of the Common Era, traders from India and China have maintained trade relations with the people of Indonesia. Many historians, relying on Chinese accounts from the Tang Dynasty era, believe that Islam arrived in Indonesia during the 7th century. There are varying opinions regarding exactly when Islam entered Indonesia—with some citing the 7th century, others the 11th, and some the 13th—each supported by different forms of evidence.

Some argue that Islam came to Indonesia from India, others from China, and still others from Arabia; however, the vast majority of historians agree that the bearers of Islam to the archipelago were traders. This conclusion stems from the fact that, prior to the arrival of Islam, trade connections already existed involving Arabs, Persians, Indians, and the Chinese in Aceh, Sumatra, and the surrounding regions. Evidence of the presence of Gujarati (Indian) traders includes Gujarati-style tombstone carvings and traces of Indian Islamic cultural influence. The presence of Persian traders is evidenced by the use of the title "Shah" among Indonesian kings.

One theory, known as the "Mecca Theory," posits that Islam arrived in Indonesia directly from the Middle East via Arab-Muslim traders around the 7th century CE. This is supported by the fact that many Arab traders settled along the coasts of the Indonesian archipelago. As early as 916 CE, Al-Mas’udi encountered Arab communities from Oman, Hadhramaut, Basra, and Bahrain in Sumatra, Java, and Malacca. The emergence of "Arab Quarters" (Kampong Arab) and the presence of Arab traditions within local society are also considered strong evidence.

Meanwhile, the role of Chinese traders is evidenced by the accounts of merchants and naval figures—such as Ma Huan and Admiral Cheng Ho—who introduced Islam to the coastal and inland areas of Java and Sumatra.

A different manifestation of the role played by local merchants in the development of Islam can be seen in the Sarekat Dagang Islam (SDI)—or Islamic Trading Association—which later evolved into Sarekat Islam (SI). Indigenous batik merchants felt marginalized and disadvantaged by the overwhelming dominance of overseas Chinese traders in the sale of batik materials. To address this, batik merchants from Solo, led by H. Samanhudi, established the SDI in 1911. Its objectives were to advance trade, counter the monopoly held by Chinese merchants, and promote Islam.

The organization grew rapidly due to its nationalist and religious character, as well as its support for improving economic networks. The groundwork for the organization had been laid as early as 1909, with Muslim merchants uniting to compete against foreign traders—such as those of Chinese, Indian, and Arab descent. However, the organization subsequently weakened after being infiltrated by groups harboring ulterior motives and engaging in politics.

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HALAL AND HARAM FOOD in ISLAM

 

In simple terms, food in Islam is divided into "halal" (permissible), "haram" (not permitted or prohibited), and also "makruh".

Halal Food

The Word of Allah SWT: "And eat food that is halal and good from what Allah has provided for you, and fear Allah in Whom you believe in" (Al-Ma'idah: 88). "O you who believe, eat of the good provisions We have given you" (Al-Baqarah: 172). "O people, eat what is lawful and good from what is on earth" (Al-Baqarah: 168).

"What Allah has permitted in His book (the Qur'an) is halal, whatever He has forbidden, the law is haram, and whatever Allah has kept silent/did not explain the law, is forgiven. For this reason, accept His forgiveness, because Allah never forgets anything" (HR Al-Hakim). The original law regarding something is that it is permissible as long as there is no final argument that forbids it.

Haram Food

1.     All foods mentioned in the word of Allah, Surah Al-Maidah verse 3 and Al-An'am verse 145, where it is forbidden to eat carcasses, blood, pork, the flesh of animals slaughtered in the name of other than Allah, those that are strangled, those that are beaten, those that fall, those that are gored, and those that are torn apart by wild animals, except those that you have time to slaughter, and those that are slaughtered for idols.

2.     What is forbidden according to the hadith is everything that has fangs, himar, everything that has claws, and animals that eat dirt.

3.     All food that is vile, that is, that is dirty, disgusting.

4.     All types of food that can harm the soul, body, mind, morals and faith. Khamr, namely something that is intoxicating.

5.     Parts in the form of meat, bones or anything that is cut from a living animal. "Meat that is cut from an animal that is still alive, then what is cut is considered a carcass" (HR. Ahmad).

6.     Food obtained through illegal means such as theft, plunder, corruption, usury and other methods prohibited by religion. "And do not eat food among yourselves falsely" (Al Baqarah: 188).

On top of all this, there is what is called a food emergency, and it is permitted. "Whoever is in a state of compulsion and does not want it and does not (also) exceed the limit, then indeed your Lord is Forgiving, Most Merciful" (Al-An'am: 145)

Haram Drinks

The types of drinks that are haram can be divided into three types. Firstly, all drinks that are intoxicating or when drunk cause harm and damage the body, mind, soul, morals and faith, such as wine, wine, and the like. For wine and gambling: "In both of them there is a big sin and several benefits for humans, but the sin of both is greater than the benefits" (Al-Baqarah: 219). "O you who believe, indeed (drinking) liquor, gambling, (sacrificing to) idols, drawing lots of fortunes with arrows, are heinous acts including those of the devil. So stay away from these acts so that you may gain good luck" (Al-Maidah: 90). "Something that is intoxicating in a large amount is still haram in a small amount” (HR An-Nasa'i, Abu Dawud and Turmudzi).

Next, what is forbidden are drinks from unclean objects or objects that are unclean, as well as drinks that are obtained in ways that are not halal or that are contrary to Islamic teachings.

All intoxicating drinks are haram, whether made from wine, wheat or other ingredients. "Grapes can be made into wine, dates can be made into wine, honey can be made into wine, and soybeans can also be made into wine" (HR Abu Daud, Turmudzi, An-Nasai and Ibnu Majjah). Likewise, Islam firmly rejects treatment that uses alcohol. "Khamr is not a medicine, but wine is a disease" (HR Muslim).

Bad Consequences of Haram Food and Drinks

In essence, everything that is permitted in religion has extraordinary benefits, as do things that are forbidden in religion because they contain things that are very dangerous, physically and spiritually. "Every flesh that grows from a haram thing, hell is more appropriate to it" (HR. Tirmidhi).

Consuming haram food, drink or clothing will result in a person's worship activities being rejected by Allah Ta'ala. "Indeed, for Allah Ta'ala, several angels above Baitul Muqoddas call every night, whoever eats haram food will not accept obligatory or sunnah worship from him" (HR Sayyidina Abdullah Ibnu Abbas RA).

Consuming haram food will eliminate the good deeds that a person has done, even though the amount of worship he has done is great. "On the day of Qiyamat, some people will be brought with them who have virtues like Mount Tihamah, so that when it is brought to them everything becomes useless and then they are thrown into hell. It was said, O Messenger of Allah, how did that happen? He answered, they used to pray, fast, give zakat and make the Hajj, only in fact, when they were shown something that was haram, they took it and their deeds were abolished."

Yes, I remember the famous ustadz Zainuddin MZ once reminded me that in worship, we must first abandon what is haram before doing what we are commanded to do. So, a person who spends ill-gotten wealth for good is like a person who washes clothes with urine.

Apart from that, other consequences include not having prayers answered, eroding the perpetrator's faith, throwing the perpetrator into hell, hardening the perpetrator's heart, and having his good deeds rejected. Forbidden food and drink—especially alcohol—can corrupt the soul; they diminish intelligence, induce forgetfulness, drive one toward negative actions, foster a tendency for isolation and daydreaming, sap one's work ethic, endanger health, squander wealth, breed hostility and hatred, and hinder the remembrance of Allah.

“Indeed, Allah the Almighty is Good and accepts only what is good; and indeed, Allah has commanded the believers just as He commanded the Messengers... ‘O you who have believed, eat from the good things with which We have provided you’” (Narrated by Muslim).

In the language of the Quran, food and drink are referred to as tha’am. However, in Surah Al-Baqarah verse 249, the terms syariba (to drink) and yath’am (to eat) are used in relation to drinking water.

The Quran places great emphasis on food. It identifies food sufficiency and the establishment of security as two primary reasons for worshipping Allah: "So let them worship the Lord of this House (the Kaaba), who has provided them with food to relieve their hunger and secured them against fear" (Quraysh: 3–4).

In the Quran, various forms of the word denoting the act of "eating" do not merely mean "ingesting something"; in a broader sense, they encompass "all forms of activity." This implies that every activity requires calories derived from food. Surah Quraysh verses 3 and 4 state that Allah provides food to alleviate hunger and liberate people from fear.

One should not eat to excess. Surah Al-A’raf verse 31 states: "O Children of Adam, wear your beautiful apparel at every place of worship, eat and drink, but do not be excessive."

Overeating overfills the stomach, preventing gastric acid—which is essential for digesting carbohydrates—from functioning optimally. Polysaccharides may fail to break down into disaccharides; consequently, the food cannot be absorbed in the subsequent stage within the small intestine and is ultimately wasted. Even if the body is forced to digest it fully, the process requires a significant amount of time and energy.

Scientific findings indicate that consuming carrion is akin to introducing disease into the body. Carrion has already undergone decomposition by microorganisms such as bacteria and fungi, which are pathogenic to humans.

Why is the consumption of blood prohibited? Because blood is a fluid that serves a vital function in the body's transport system. In addition to nutrients and oxygen, blood also contains metabolic waste products such as carbon dioxide, toxins, viruses, and bacteria.

Food influences a person's character

"You are what you eat!"

This is a valid saying. Dietary habits can indeed influence a person's behavior. Several studies have proven a connection between the digestive tract and the brain; the digestive tract "thinks," too. The food we consume and the bacteria within our digestive tract play a significant role in shaping human behavior. Therefore, a healthy digestive tract fosters healthy behavior.

The types of food consumed alter the microbiome—the bacterial biota living in the digestive tract. The human digestive tract is home to colonies of bacteria and microbes that aid in digestion and nutrient absorption. The body requires beneficial bacteria (such as probiotics), so their numbers should exceed those of harmful bacteria (like E. coli). Changes in the microbiome have a profound impact on brain chemistry. An altered gut microbiome can release various substances that disrupt brain function; for instance, a stomach upset caused by consuming the wrong foods can lead to anxiety or even depression.

The same applies to children. While a child's character and behavior stem from genetic information passed down by parents—a blend of traits from both—environmental factors also play a decisive role. It is not unusual, then, for a child to be rude, short-tempered, or prone to tantrums, even if their parents do not exhibit such traits.

Parental eating habits can affect their children. For example, long-term consumption of haram (forbidden) foods forces one's DNA to continuously produce proteins that do not align with the individual's physiological needs. This results in a buildup of proteins that causes physical and mental health issues. It can even lead to mutations—alterations in genetic organization—within the DNA. If a gene is repeatedly copied and used as a blueprint for protein synthesis, it can wear out and sustain damage.

Clearly, haram food is unhealthy. Consuming haram (forbidden) food triggers the activation of scotophobin, leading to a rise in cortisol levels. This hormonal surge induces anxiety, which disrupts the body's micro-electrical systems and creates chaotic fields; consequently, ion transport at the cellular level is altered, throwing subatomic particle reactions into disarray. These "agitated cells" then transmit and spread this fear and anxiety throughout the entire body. According to Dr. Alexis Carrel, the full extent of how chemical compounds in food affect the human psyche and mind remains unknown due to a lack of adequate experimentation. Nevertheless, there is no doubt that human emotions are profoundly influenced by the quality and quantity of the food consumed.

Another aspect involves psychological factors. Consuming haram food—while knowing it is wrong—robs us of peace of mind and can even instill fear. Over the long term, this leads to chronic anxiety, causing the body to produce excessive amounts of cortisol, scotophobin, and adrenaline. This state alters metabolic and other biochemical processes, thereby inhibiting many healthy biological functions.

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ISLAMIC GUIDE TO EATING AND DRINKING

 

“Tell me what you eat,

and I will tell you what you are” .

 

Yes, what we eat shapes who we are. That's why Muslims are prohibited from eating pork, one of the reasons is because pigs are dirty, dirty and smelly. His stomach and body were full of sources of disease.

In general, everything, whether in the form of plants, fruit or animals; it is halal to eat, unless it is forbidden by the Koran or hadith. Something is definitely forbidden because there is harm or danger in it. "O people, eat what is lawful and good from what is on earth, and do not follow the steps of the devil; for indeed the devil is a real enemy for you" (Al-Baqarah: 168).

Food that a Muslim may eat must meet two conditions, namely: halal and good (thaib). "Halal" means permitted to be eaten and not prohibited by Sharia law; while "good" means the food is nutritious and beneficial for health.

This means that "halal" matters are related to Islamic law, while "good" is seen from health sciences. In Islam, halal food must include three conditions at once, namely halal substance, halal method of obtaining it, and halal processing. Even though the substance is good, it must be obtained correctly, slaughtered properly, and processed using good and correct ingredients. Rasulullah SAW said: "What Allah has permitted in His Book is halal and what Allah has prohibited in His Book is haram, and what is kept silent (not explained), then that thing is among those things that are forgiven" (HR. Ibn Majah and Turmudzi).

Halal food is all food that is good, not dirty and not disgusting; not prohibited; ...and does not cause harm, pose a danger, or damage one's intellect, morals, or faith. Meanwhile, halal (permissible) beverages are those that comply with Islamic Sharia—specifically, any type of water or liquid that does not harm the body, intellect, soul, or faith. Furthermore, they must not be intoxicating, must be pure (free from ritual impurity), and must be obtained through legitimate means.

Why must our food be halal? There are many benefits to consuming halal food and drink, including greater peace of mind, the preservation of physical and spiritual well-being, divine protection from Allah SWT, increased honesty in life, and the attainment of Allah SWT’s pleasure. Those who are mindful of what they consume will cultivate noble character. All forbidden foods inevitably carry inherent dangers.

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The Urgency of Implementing the "Giving Economy" to Manage Staple Food

From the beginning, economics was constructed on the basis of "mutual taking" transactions. The description of the Islamic Food Economy, especially for staple foods, shows that there is another option that has been implemented for a long time, namely "mutual giving" transactions. People instinctively enjoy sharing food. Any tribe and any religion. Even now, in the modern world, we still like to do it. When we meet old friends, our habit is to invite them to eat. Yes, share food.

Is it possible to construct and run a “sharing economy” or “giving economy”? Of course this is a spectacular change.

However, why not? Because the economic sector and the socio-religious and cultural elements attached to it are very varied. And we must be open to various fresh ideas that are more solutions. We have to put together a new structure for the world food economy, which until now has turned out to be incomplete.

In a somewhat similar form, recently the sharing economy has developed. Sharing economy is ".....a way of distributing goods and services that differs from the traditional model of corporations hiring employees and selling products to consumers". The forms include sharing a workplace (co-working platforms), helping each other with capital (peer to peer lending platforms), borrowing clothes from each other (fashion platforms), sharing freelance workers (feelancing platforms), also developing giving each other rides, sharing taxis, and so on. The platform is a sharing of resources, roles and profit sharing which is possible due to the availability of digital-based information technology.

In agriculture, Rhenald Khasali (management expert), gave an example of a land owner who saw that many other farmers needed to pass through his land. In a sharing economy, landowners will not ban or close roads, but instead offer farmers cooperation and share in the profits. The land owner, for example, will offer the farmer to look after his crops so that later they can share the results.

In fact, the attitude of sharing assets has been carried out for thousands of years. The emergence of the internet and the use of big data, has made it easier for asset owners and asset users to communicate with each other.

People in the Caliphate era usually implemented non-market mechanisms. When famine hit the Hijaz (Medina), Umar bin Khaththab wrote a letter to his guardian in Egypt Amru bin al-'Ash and ordered him to send supplies. Then Amru replied to the letter. "I will send camels full of food, whose heads will be in front of you (Medina) and whose tails will be in front of me (Egypt)."

With regard to food, as explained at the beginning, world food production is very sufficient, but it is our consumption patterns that make it seem as if food is lacking. So, control your tongue and stomach. As explained above, Islam provides a comprehensive solution to a problem. This means that in order for there to be enough food, it is necessary to manage both the supply side and the demand side at the same time. We all have to control our desires.

I am very curious: did food stalls exist during the time of the Prophet? I have tried asking many religious scholars about this, but have yet to receive an answer.

If we consider the concept of hospitality, a guest arriving at a home becomes the host's full responsibility for three days, receiving free meals and lodging. Extending this logic, if an individual or a group of guests arrives in a village, shouldn't it be the village's obligation to meet their needs? This was a common occurrence during the era of the struggle for independence.

If this practice were followed, there would be no need for a trade in staple foods. Or, even if such a trade existed, the aim should not be to amass wealth or conduct business for profit. God knows best.

Islamic economics does not aim to satisfy the boundless variety of human needs and desires. Spiritual reward—pahala—is the ultimate goal of life and of economic activity itself. If giving earns one a spiritual reward, why should one sell—whether at a low price or, worse, a high one? Thus, it is highly reprehensible for anyone to use food as a weapon to amass wealth, dominate others, or exert control over them.

Is buying and selling the most effective and fair mechanism? It may be effective, but not necessarily fair. In any transaction, we can never truly pay the full equivalent of the price we hand over—and this applies to services as well.

Why should food be viewed differently? I would argue that every object possesses unique characteristics and a distinct position within society; therefore, it is inadequate to understand these objects solely through general principles applicable to other things. Theoretical oversimplification fails to appreciate or make room for the unique nature of food.

While food is often categorized as a primary or staple good, this classification seems insufficient. It deserves a higher status—perhaps as a "fundamental necessity"—placing it above mere "staple goods."

Why does food require a different approach to management? Yes, because food is unique. It is produced from the land—whether directly or indirectly. There is no such thing as purely factory-made food.

And the issue is that the amount of land in this world is finite; it does not change. How can something like this be equated with other types of goods?

Furthermore, food production is not the same as manufacturing. Manufacturing involves transforming raw materials into semi-finished and finished goods.

Which foods qualify as "staple foods" or "primary foods"? Indeed, we need to define exactly which foods fall into this category. Every society must determine what constitutes its staple food. In my view, it is best to limit this definition to foods that are simply processed and sold at low prices.

In Islam—at least according to the Sirah Nabawiyah (biography of the Prophet) with which we are familiar—food preparation did not involve complex processes. Food was simply boiled, roasted, or perhaps fried, and consisted of items consumed on a daily basis. There were no exorbitantly expensive foods—such as those with sky-high prices resulting from elaborate preparation methods.

This aligns with the concept of food as a basic necessity—food intended to meet biological needs, rather than prestige foods served at elite gatherings.

What is the most fundamental food? A "staple food" is exactly that—a dietary staple. There are hierarchies of food; some are absolutely essential for survival. In Indonesia, rice is generally the staple, though in some regions, it might be sweet potatoes, for instance.

A staple food serves as the primary source of nutrition. Since staple foods do not usually provide the full range of nutrients the body requires, they are typically accompanied by side dishes to ensure nutritional adequacy and prevent malnutrition. Staple foods vary according to location and culture but generally come from plants—either cereals (such as rice, wheat, and corn) or tubers (such as potatoes, sweet potatoes, taro, and cassava).

Livestock products, such as meat and dairy, also count as food, but they are not staple foods. One can survive without consuming meat or dairy for a month. In Indonesia, many people encounter meat only twice a year: during Eid al-Adha and Eid al-Fitr. However, for traditionally hunter-gatherer societies—such as the Inuit (Eskimos)—meat and fish serve as the primary food sources. Why should food be treated differently? The poor spend the vast majority of their income on food, and it is the duty of the affluent to assist them. Food is a top priority; once food needs are met, resources can be directed toward more meaningful pursuits.

Rice is the staple food for the majority of Indonesia's population, making it a quasi-public commodity of strategic value across economic, environmental, social, and political dimensions. Consideration could be given to removing rice from standard market mechanisms. To enhance the efficiency and effectiveness of rice price stabilization policies, a comprehensive pricing strategy is required. Such a policy must harmonize relationships among all stakeholders—from farmers and processing industries to marketers and consumers—within an efficient supply chain that ensures fair returns for every party involved.

Is it possible to remove food
from market mechanisms?

 

It is difficult—undoubtedly so. The idea that food is an attractive, easy-to-sell commodity that always finds a market has become deeply entrenched in our mindset and daily behavior. Economists have long analyzed food primarily as an economic good. Food is produced for sale, transforming it into agribusiness; supplies are withheld when prices are low, waiting for them to rise; governments employ "food politics," and so on.

Yet, removing food from market mechanisms is not impossible. It could happen if there were a noble intent. Of course, this does not mean it would cease to be traded entirely; rather, if traded, the context would be humanitarian—prioritizing humanity over massive profits.

Food requirements are not actually vast, and the world produces a surplus. However, supplies are often hoarded or withheld. Market mechanisms fail to smoothly distribute wheat from surplus-producing regions to areas facing shortages. The primary obstacle is the high cost of production; payment is required to acquire it. Yet, if a region facing a shortage is designated a disaster zone, wheat is shipped immediately, without haggling over the source of funds. Indeed, a disaster scenario is often the prerequisite.

Food is not merely an economic commodity; it is a fundamental necessity and should not be equated with other goods or needs. Because it is essential, those who share it earn greater merit. People have a choice: to sell or to give. Giving is far superior.

If food were removed from market mechanisms, could it be managed entirely by the government? It is possible. The Baitul Mal (public treasury) system historically operated this way. Food could be provided free of charge, as production costs can be kept very low through the use of government land and inputs, while consumption remains aligned with basic biological needs rather than excess. Thailand is frequently cited as an example of a country where the government is deeply involved in the food sector. The government purchases the entirety of the farmers' harvested grain—and remarkably, at a price 50 percent above the market rate.

Furthermore, food distribution outside of standard market mechanisms already takes place at the community level; the sharing of raw ingredients and prepared meals is commonplace—and remains so today.

Does Islam treat food differently?

If so, why?

 

Yes, food holds a significant position in Islam and requires special treatment. Those who produce it (farmers) hold a special status, as do those who consume it, while those who trade in it must adhere to specific guidelines.

The state, too, views food differently. It is a matter of life and death. People do not die from lacking a television, but the need for rice cannot be postponed. Therefore, it is highly improper for any party or nation to use food as a tool to dominate others; such conduct is truly uncivilized.

If you have a surplus of food, share it immediately. Why? Because a surplus serves no purpose, and food is generally perishable. This differs from shoes; owning a hundred pairs is not an issue, as they do not spoil.

Currently, with food subject to market mechanisms, those who deal in it amass immense profits and wealth. Profit margins are high, and their market dominance is substantial. Food has become a source of power—a process that begins with the large-scale acquisition of land through various means, driven by the understanding that land is the primary source of food production.

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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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The Global Development of Islamic Banking

 

The thesis that Islamic economic principles are inclusive is evidenced by the acceptance of Islamic banking among non-Muslims, both in Indonesia and abroad. Sharia-compliant banks are also expanding in countries with non-Muslim majorities, such as the United Kingdom. Sharia finance has been present in the UK since 1980, coinciding with developments in the London financial market. London is recognized globally—by both Muslims and non-Muslims—as a hub for Sharia finance. The Bank of England permits banks to operate based on Islamic Sharia principles and provides services such as the "Sharia-Compliant Facility," which was the first non-interest-based liquidity facility offered by a central bank in a Western nation. The central bank has also developed other facilities, including the Sharia-Compliant Open Market Operation.

The UK is home to five fully Sharia-compliant licensed banks, with combined banking assets of approximately US$4.7 billion. Sharia finance is considered attractive because, unlike conventional credit, Sharia financing does not charge interest. This type of financing is particularly well-suited for socially conscious or environmentally driven businesses.

Total Sharia-compliant banking assets in the UK—including Islamic financial products offered by major conventional banks—stood at approximately £4.1 billion in the first half of 2018. Global Sharia banking assets reached around US$1.7 trillion by the end of 2017, marking a year-on-year increase of 2.7 percent. In 2016 and 2017, the UK ranked as the 17th largest market for Islamic finance out of 48 countries.

Islamic finance appeals to the British public due to its underlying principles of equitable distribution and fair trade. Furthermore, Sharia banks are perceived as honest institutions that prioritize the well-being of society as a whole. Offerings include a range of Islamic financial products—spanning savings accounts, investments, mortgages, and insurance policies to Sharia-compliant student loans. Furthermore, the funds raised are invested in relatively safe assets such as real estate or precious metals—investments that strictly adhere to Islamic principles. They are not used for gambling, alcohol, pornography, weapons, tobacco, interest-bearing activities, or other speculative ventures.

As of November 2019, 126 countries worldwide had adopted and were developing Sharia banking systems. This reflects a positive impact of globalization: the acceleration of communication, enabling the rapid spread and exchange of knowledge, culture, ideologies, and more.

“Islamic financial institutions recorded a strong 2021 while continuing digital investments.” Moreover, the net profits of global Islamic banks rose by more than 50% in 2021, with banks in the Gulf region, in particular, achieving outstanding results. Customer deposits continued to grow, fueling the expansion of financing portfolios.

Beginning in the 2000s, European nations started to open up to the Sharia economy and adopt its economic concepts. Rapid growth in the sector became evident after 2004, when The Islamic Bank of Britain (IBB) was officially established as Europe's first Sharia bank. The UK economy is grounded in social welfare combined with a free-market approach; this compatibility may well explain why the Sharia economic system is a good fit for the country.

Sharia Financial Institutions in Indonesia Also Utilized by Non-Muslims

Bank Muamalat Indonesia (BMI) was the first Sharia bank in Indonesia, established on November 1, 1991. Alongside it, various other financial institutions developed—such as Sharia People's Financing Banks (BPRS) and cooperatives (like Kopontren in Islamic boarding schools)—that practice Sharia-compliant savings and lending.

As of early 2023, PT Bank Syariah Indonesia Tbk (BSI) was ranked as the sixth-largest bank in Indonesia. Bank Syariah Indonesia recorded a significant increase in assets from the previous year, rising from IDR 265.28 trillion to IDR 305.72 trillion. Among Sharia banks, the next positions were held by Bank Muamalat, followed by Bank Kepri Syariah, which is owned by the Riau and Riau Islands provincial governments.

Data indicates that approximately 15% of Bank Muamalat's customers are non-Muslims. One of the attractions is the availability of Sharia-compliant housing financing (KPR) products. Installment payments are lower and do not spike from year to year; the installment amount remains constant from the first month through the final year, in accordance with the agreed-upon loan term. It is transparent.

A similar situation exists in Bali. BTPN Syariah’s Bali area branch reported that 90% of its customers are non-Muslim. The key lies in explaining that Sharia banking is not limited to Muslims and in translating financial contracts (akad) into easily understandable language. The Balinese community remains interested, even after being informed that the businesses run by BTPN Syariah’s ultra-micro financing customers must be halal—meaning, for instance, they cannot trade in alcohol or pork.

Research conducted in North Sumatra found that non-Muslims become customers due to the positive image of Sharia banks, the quality of service, and the convenience offered. Economic reasons emerged as the primary factor driving non-Muslims to become customers. The majority of non-Muslim respondents cited the absence of administrative fees, low minimum balance requirements, and free interbank transfers as reasons for choosing to become customers of Sharia banks. Other research concludes that the interest of non-Muslim customers in Sharia banking is driven by perceptions regarding the benefits gained, flexibility regarding installment arrears, and low capital costs.

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SHARIA ECONOMY BELONGS TO ALL RELIGIONS

The syllogism for the inclusive nature of sharia economics is simple:

Premise 1 = all religions come from one God.

Premise 2 = Islam is the last religion that complements the teachings of previous religions

Conclusion = sharia economics brought by Islam applies to all religions

 

Yes, all (celestial) religions are Islam. All religions come from one God, namely Allah Subhana Wataala. Prophet Muhammad SAW continued the mission of the previous Prophets, and perfected it. Only Islam is a religion in the sight of Allah (QS Ali Imran/3: 19). The four religions I discuss in this chapter - Islam, Christianity, Hinduism, and Buddhism - are believed to be celestial religions, not ardhi religions.

The characteristics of divine religion are: its divine concept is absolute monotheism (tawhid), it is conveyed by a prophet or apostle as a messenger of God, it has a holy book that is clean from human interference, its teachings are permanent, and its truth is universal. Wallahu a'lam.

In the Qur'an it is read that the religion of all prophets and apostles is Islam. The descendants of Ya'qub, known as the Bani Israel are Muslims (QS Al-Baqarah/2: 133). The Hawari, the followers of Isa AS are Muslims (QS Ali Imran/3: 52). All divine religions come from the same source.

All prophets have worshiped at the Temple of the Kaabah in Mecca. However, another opinion states that there were two prophets who had not yet had time to perform the Hajj, namely Prophet Hud and Prophet Shaleh. Indeed, the Kaabah is very old, because it was built by angels, or by the Prophet Adam according to some scholars.

There are many books and references that confirm this. The arrival of the prophet Muhammad is written in the Torah and Gospel books. Surah Ash-Shu’ara (26), verse 196: “And indeed, the Qur’an is truly [mentioned] in the scriptures of the ancients.”

In Hinduism, this is mentioned in the Bhavishya Purana—specifically in Pratisarga Parva III, Khanda 3, Adhyaya 3, Shlokas 10 to 27: “Aryadharma will appear on this earth. The ‘religion of truth’ will lead the world. I am sent by Ishparamatma. And my followers will be those from that region who do not wear a tuft of hair on their heads; they will keep beards, listen to divine revelation, and heed the call to prayer (Adhan). They will eat anything except pork; they will not be purified by [rituals involving] shrubs or tubers, but will attain purity on the battlefield. They will be called ‘Musalaman’ (bringers of peace).”****

The Alignment of Sharia Economics and People-Centered Economics

Since Pancasila Economics aligns with Sharia Economics, and People-Centered Economics  ("Ekonomi Kerakyatan") aligns with Pancasila Economics, it follows that People-Centered Economics also aligns with Sharia Economics; the three operate in tandem. People-Centered Economics and Sharia Economics share several fundamental similarities, despite originating from different philosophical foundations. Both economic systems emphasize the importance of social justice—specifically through equitable distribution and community empowerment (in the case of People-Centered Economics). People-Centered Economics places the people at the heart of economic development.

Similarly, Sharia Economics encourages active community participation in economic activities, in accordance with Sharia principles. Both systems also agree on the need to avoid harmful economic practices; neither condones practices that disadvantage the public. People-Centered Economics stresses the importance of avoiding monopolies and exploitation, while Sharia Economics prohibits riba (usury/interest) and gharar (uncertainty) in economic transactions. Ultimately, the shared goal is the well-being of the community or the ummah (Muslim community), even if the methods and strategies for achieving this may differ slightly.

Another important point of convergence lies in the recognition that economic activities should serve broader social and moral objectives rather than merely maximize profit. People-Centered Economics views economic development as a means of improving human welfare, reducing poverty, creating employment, and strengthening social cohesion. Likewise, Sharia Economics regards wealth as a trust (amanah) that must be managed responsibly for the benefit of society. Economic success is therefore measured not only by growth and material accumulation, but also by its contribution to justice, human dignity, and social harmony. In both systems, economic policies are expected to produce tangible benefits for the wider community rather than concentrate advantages in the hands of a few.

Furthermore, both approaches acknowledge the strategic role of collective institutions in achieving inclusive development. Cooperatives, community enterprises, mutual-aid organizations, and other forms of collective action are central to People-Centered Economics because they enable communities to participate directly in economic decision-making and benefit-sharing. Similarly, Sharia Economics promotes institutional mechanisms such as zakat, waqf, Islamic cooperatives, and profit-and-loss sharing partnerships that strengthen social solidarity and economic inclusion. As a result, both frameworks offer complementary pathways toward a more equitable economic order—one that balances individual initiative with social responsibility, economic efficiency with justice, and material prosperity with ethical values.

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Similarities and Differences Between the Pancasila Economy and the Sharia Economy

The Pancasila Economy and the Sharia Economy share many fundamental similarities. For instance, both are grounded in the principle of social justice. The fifth principle (Sila) of Pancasila reads, "Social justice for all the people of Indonesia"; indeed, some writers regard this fifth principle as the core of the Pancasila Economy. Similarly, the Sharia Economy emphasizes justice—extending beyond mere wealth distribution to encompass the control of economic resources.

Mutual assistance—or gotong royong (communal cooperation)—serves as a fundamental tenet for both the Pancasila Economy and the Sharia Economy. Both systems share the same goal: achieving societal welfare. The Pancasila Economy strives to create equitable prosperity through economic equalization and social justice. The Sharia Economy likewise aims to achieve the welfare of the community (ummah) by avoiding harmful and unjust economic practices.

Both systems strongly avoid detrimental economic practices. The Pancasila Economy emphasizes the importance of preventing monopolies and exploitation, while the Sharia Economy prohibits riba (usury/interest) and gharar (uncertainty) in economic transactions.

"From the perspective of the Sharia economy, the Pancasila Economy is an economic system aligned with Islamic teachings; both aim to realize social justice and collective welfare by paying attention to the social conditions of the surrounding community to ensure equitable social justice for the people."

"...the concept of the Pancasila Economy and its principles do not conflict with the Islamic economy; while they differ in substance, the essence (fundamental nature) of Pancasila and Islam is not contradictory—in fact, they are in harmony." This approach is highly suitable for Indonesia. Both systems are believed capable of serving as models for realizing justice for all the people.

A Comparison between the Pancasila Economy and the Sharia Economy

Aspect	Pancasila Economy	Sharia Economy	Similarities / Notes
Philosophical Foundation	Based on the values of Pancasila, particularly the Fifth Principle: “Social Justice for All the People of Indonesia.”	Based on Islamic teachings (Sharia) and the objectives of Islamic law (Maqashid al-Shariah).	Both place justice as a central principle of economic life.
Concept of Justice	Emphasizes social justice, equitable development, and fair distribution of economic opportunities.	Emphasizes justice (‘adl) in wealth distribution, resource control, and economic transactions.	Both seek to establish a just and equitable society.
Economic Objective	To achieve shared prosperity and welfare for all Indonesian citizens.	To achieve the welfare (maslahah) of the ummah and society at large.	Both prioritize collective welfare over individual gain.
Social Solidarity	Promotes gotong royong (mutual cooperation) and social responsibility.	Encourages cooperation (ta’awun), solidarity, and mutual assistance.	Both value communal cooperation and social cohesion.
Approach to Economic Equality	Supports economic democratization and equitable access to resources.	Encourages fair distribution of wealth through instruments such as zakat, waqf, and charity.	Both aim to reduce inequality and strengthen social welfare.
Prohibited Economic Practices	Rejects monopolistic practices, exploitation, and economic injustice.	Prohibits riba (usury/interest), gharar (excessive uncertainty), and exploitative transactions.	Both oppose harmful economic practices that disadvantage society.
Role of Ethics	Economic activities should reflect moral values and social responsibility.	Economic activities must comply with Islamic ethical and legal principles.	Both integrate ethics into economic behavior.
Source of Norms	Derived from the Indonesian national ideology and constitutional values.	Derived from the Qur’an, Hadith, and Islamic jurisprudence.	This represents the primary substantive difference between the two systems.
Institutional Orientation	Adapted to Indonesia’s pluralistic and multicultural society.	Rooted in Islamic principles but applicable to broader society through universal values.	Both can operate within Indonesia’s socio-cultural context.

 

Scholarly Perspectives

Perspective	Statement
Compatibility View	From the perspective of the Sharia Economy, the Pancasila Economy is broadly aligned with Islamic teachings because both seek to realize social justice and collective welfare while paying attention to the social conditions of the community.
Harmony View	Many scholars argue that the principles of the Pancasila Economy do not fundamentally contradict Islamic economics. Although they differ in their normative foundations and certain substantive aspects, the essential values of Pancasila and Islam are considered compatible and mutually reinforcing.
Relevance for Indonesia	Both the Pancasila Economy and the Sharia Economy are viewed as suitable frameworks for Indonesia because they emphasize justice, welfare, social responsibility, and the common good.

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