I. Introduction

Islamic economics as a social science is a new discipline in the making. It reflects the Islamic outlook and offers Islamic solutions to economic problems. The economic principles and doctrines have long been researched by Muslim scholars. The convening of the First International Conference on Islamic Economics in 1976 marked a turning point in the development of this new discipline. This Conference triggered the interest of a large number of economists, bankers, Ulema and scholars in the Muslim world. Since then, a number of International Conferences, Seminars, Symposia, Workshops etc. have been held on various themes of this discipline. These intellectually directed efforts have led to the publication of a sizable amount of literature bringing out the Islamic view point in scientific and systematic way in many areas of economics in general and banking and finance in particular.

In spite of substantial growth of literature the questions relating to definition, nature and scope of Islamic Economics have not yet been satisfactorily answered. Most of the attempts on the question of definition are abstract. They also fail to connect the economic problems to the violations of particular economic injunctions. Similarly the discussions on the nature and scope of Islamic Economics do not cover the whole spectrum of the issues involved. There is thus, a need to review these issues with a view to focusing the attention of Muslim economists on efforts to remove these deficiencies and for general acceptance of Islamic Economics. The review is organized in two sections. The literature on clef and nature of Islamic Economics is reviewed in Section two while Section three examines scope of Islamic Economics. Section IV presents concluding remarks. 

II. Definitions and Nature of Islamic Economics

The literature on the issues of nature and scope of Islamic Economics is scanty. Few writers have addressed these issues. Their views can be classified into two categories. The first category includes opinions of the minority group, which regard Islamic Economics as a branch of general science of Economics. From their point or view Islamic Economics should not be considered an independent discipline. They, therefore, recommend that a Muslim Economist should try to explain how exogenously given, ends can he realized within the framework of scarce means and unlimited ends. His job is to explain the behaviour of economic agents and processes as they emerged in the market place. The analysis is to be carried within the framework of relative scarcity and concomitant efficiency. The laws of Economics are eternal and even moral transformation of economic agents is unlikely to change their behaviour. Laliwala, Haq, and Siddiqui are the main exponents of this viewpoint.

Laliwala is an important advocate of this viewpoint. In his writings he has endeavored to integrate Islamic Economics with the secular science of Economics. He holds that “Economic literature insists on the acceptance of Islamic goals, its Godly, Universal, brotherly vision, and its specific terminology like Zakah, Sadaqah, Infaq, Waqf, Shirkah, Modaraba, Riba etc. Islamic definition of economics should not be separated from the general definition of economics. The laws of Islamic Economics remain the same; even the behaviour of economic agents become moral and is not found to be selfish and self given in the Islamic society. The centralization of Islamic values will not change the laws of science of Economics.”1 

The above to capture the essence of the economic teachings of Islam. Islamic Economics is aimed at operationalising the value system of Islam. It visualizes economic problems essentially in terms of unlimited wants rather scarcity of means. Transforming of wants in terms of needs of’ man restores the balance of supply and demand for goods. Moreover, the outlook, taste, and evaluation criteria of economic agents are essentially different from those of secular agents. Hence, Laliwala’s contention that economic behaviour is independent of ethical values is incorrect. Similarly, his recommendation of unqualified adoption of the secular framework is flawed because of the difference in underlying assumptions. 

This is a dubious’ recommendation because of’ the facts that mainstream Muslim economists do not agree to both secular concepts of scarcity of means amid excess of wants. Similarly, the substitution of ’Islamic values are most likely to affect the thinking process of the economic agents leading to a different economic behaviour. 

Haque views the new disciplines as a fruitless effort of the Muslim Economists because he finds a clear dichotomy between religion and modern sciences. The progress of science critically depends upon formulation of testable and refutable hypotheses while religious faith implies absolute certainty of final truth. Hence, he contends that efforts to develop the new discipline cannot succeed. He says, “This seems to be the reason that Islamic Economics, in spite of the scholarly efforts of Islamic Economists, governmental support, and the rapid progress of its literature, has not flowered into a scientific discipline in the sense of a modern social science”2 

It is not difficult to see the erroneous conclusion of Haque because Islam is not a religion in the sense understood in the West it is a complete Deen which guides all aspects of human life including rituals, social, political and economic. Both fixity and flexibility features are built into all aspects of life. The material part of life is amendable to temporal adjustments on the basis of observations and experimentation’s in the light of Islamic teachings. Haque traces the origin of Islamic Economics in the political, process of Pakistan during 1977-88. He notes that “Islamic Economics emerged as a discipline separate from the general science of economics in the wake of the political process of Islamization of Pakistani society and economy during 1977-88”3. This again is incorrect as efforts to develop Islamic Economics were underway much earlier both inside and outside of Pakistan. In fact, the First International Conference on Islamic Economics which marks the turning point in the history of the discipline was held in 1976 in Makkah. 

Haque is also critical of the religious-legalistic approach of Islamic Economics because it does not help in understanding the operation of modern economy. He says, “For example, interpretation of the terms Riba, Zakat etc. will vary from feudal to modern times as over-all economic conditions have changed’. He also considers Riba, Mudaraba, etc., as medieval categories having no relevance ‘in modern times. As a matter of fact, he is doubtful about the efficacy of Islam in providing a viable solution to the economic problems of human beings. 

A dominant majority of Muslim economists have offered more plausible views about the concept and scope of Islamic Economics. Mannan, Khurshid, Hasanuz Zaman, Akram Khan and Arif are articulate advocates of this group. Mannan defines Islamic Economics as a “Social Science winch studies the economic problems of people imbued with the values of Islam”.4 Mannans definition tries to bring back the focus of Islamic Economics to the right direction. In his conception, this new discipline studies economic behaviour in the ordinary business of life of the Islamically inspired and practicing Muslims. This definition, however, creates unnecessary boundaries of practicing and non-practicing Muslims. Another deficiency which ties in his definition relates to identifying economic problems in the same way as in secular economics. i.e., as relationship between unlimited wants and scarce means.

Ahmad considers Islamic Economics as a nascent social discipline whose concern is to reformulate economic Principles and propositions in accordance with Islamic values and ideals. He notes, there is a new quest to discover the true meaning and message of Islam by drawing upon the original sources of Islam—the Quran and the Sunnah of the Prophet (Peace be upon Him) and upon the historical experience of the Muslim people. Efforts are being made in almost every area of individual and social life to assess the relevance of Islam and to find out ways and means of transforming this consciousness into socio economic reality. The nascent social discipline of Islamic Economics represents one such creative response from the Muslim economists and Ulama”5 

Ahmad stresses on the interdisciplinary character of Islamic Economics. However, he does not expound the principles as providing building blocks to the new discipline. Additionally, he has not sharply articulated the subject matter with the result that the discipline remained deficient of scientific rigour. 

Hasanuz Zaman has suggested a tentative definition of Islamic Economics. According to him, “Islamic Economics is the knowledge and application of its functions and rules of Shariah that prevent injustice in the acquisition and disposal of material resources in order to provide satisfaction to human beings and enable them to perform their obligations to Allah and the society”.6 This definition suffers from certain limitations Firstly, it reduces economic problem to acquisition and disposal of resources -which may broadly be interpreted as production and distribution activities. In other words, it does not cover the consumption and exchange aspects of economics. Secondly, the terms, ‘acquisitions” and “disposals are inappropriate phraseology. Thirdly, this definition does not include those situations of economic activities which can be generalized from Islamic history through inductive reasoning. Fourthly, it tends to limit the overall scope of the science of Islamic Economics. 

Chaudhry emphasizes on the social aspects of Islamic Economics in which individuals interact on the basis of Islamic ethics. He identifies Taqwa (i.e. God consciousness) and Ibadat (i.e. worship) to be the key element influencing the micro-economic behaviour of the individuals which can be aggregated to form an Islamic Economy. He writes: ‘When these two fundamental elements (i.e. Taqwa and Ibadat) of individual Islamic behaviour are fully understood at the micro economic levels, and are fully mobilized by certain basic micro and macro economic instruments peculiar tint to the Islamic economy, then an integrated general equilibrium Islamic system can be formulated”.7) Chaudhry goes a step further to formulate the micro-economic framework of Islamic Economics within Islamic ethical system. His analysis, however, is deficient on the question of causation and ingredients of economic problems at the micro level. He does not elaborate the ethical values which transform the market behaviour of the consumers and producers and particular shape of preferences and their implications. Answers to these questions are vital for the scientific understanding of Islamic Economics. 

Akram and Arif offer quite similar interpretations of the subject matter of Islamic Economics. Akram says that, “Islamic Economics, aims at the study of human falah achieved by organizing the resources of earth on the basis of cooperation and participation”.8 Extending the same strand of thought Arif notes, “Islamic Economics is the study of a Muslims behaviour who organizes the resources which are a trust, to achieve falah”.9 both of the above definitions center around the Quranic term, falah which basically refer to the salvation of aI-Akhira (i.e. hereafter The authors imply it in very restricted sense of economic/material welfare. In its true sense falah once achieved can never diminish and hence cannot have any trade-off. Moreover, adoption of falah measuring the value of economic activities raises an important question of assignment of weights. This will lead economic agents to assign infinitely larger weights to choices relating to al-Akhria. It is also riot clear how this term can be applied in the negative sense in which Case it involves trade-off and not alternative status. For example, how we will evaluate the behaviour of a consumer motivated by utility maximization rather than falah. Considerations. Likewise the question of individual choices is limited due to the requirement of social integration and cooperation. Therefore both the definitions fail to bring into focus basic causes of economic problems and the role of individual choices in it. 

Iqbal discusses in detail the Islamic approach towards the economic problem. He opines that secular approach towards this problem focuses on easing the ‘supply constraint’ to satisfy unlimited human wants. On the other hand, the Islamic approach focuses on both supply and demand factors. He writes, “Economic problems arise because of lack of effort or mismanagement of God-given resources on the one hand and unbridled human wants on the other. Islam ensures a permanent solution for the problem through its two pronged attack”.10 This view is broadly shared by Muslim Economists. However, very few of them would claim that economic problem would be solved permanently once the Islamic economic system is put in place. Rather they would say that its severity and pervasiveness could be reduced considerably in Islamic economy. Moreover, he does not offer any workable Islamic economic proposition based on its value system. 

Chapra notes that without Islamic values the ideal pattern of behaviour becomes one of conspicuous Consumption and. ostentatious life style which demands ever increasing command over resources. With the help of the banking system, it becomes possible to live beyond one’s means thus causing economic frictions and poverty. The active role of the moral factor tends to conserve scarce resources and makes it possible to satisfy needs of all in spite of their scarcity. He writes,”... Such an attitude creates a voluntary restraint in ‘the use of scarce resources —— a restraint that minimizes unnecessary claims and makes it possible to satisfy the needs of all in spite of scarcity, thus meeting the dictates of human brotherhood’.

Baqar al-Sadr makes an important contribution in delineating the nature of the subject matter of Islamic Economics and the identifying causes for the economic problems. Islamic Economics, in his opinion, is an integral part of the overall Islamic way of life. Therefore, it is intimately connected with socio, cultural, moral, and political aspects of life. The Islamic teachings in these areas feed, into the structure of Islamic Economics which in turn reinforces the processes in these areas. He opines that economic life consists of two actions: Production and distribution. Both of these activities give rise to a particular relationship; in production man confronts the physical world and benefits from it and in distribution he has to deal with other individuals. He notes that economic problems arise due to in justice and blocks in production .He says that, “Allah has filled the whole universe with the matter and provisions for utilities which are sufficient to cater to the need of man but he has lost these opportunities and has turned aggressor and unthankful. This means that unequitable distribution of wealth and in optimal exploitation of productive resources are two basic causes of all types of economic problems” Besides his keen insight about the nature of Islamic Economics, Sadar has not any proposed definition of this discipline. 

III. Scope of Islamic Economics

Most of the Muslim economists have proposed relatively wider scope for Islamic Economics on the basis of comprehensive and integrated viewpoint of human life. According to Ahmad, the scope of Islamic Economics is wider because it treats cultural factors like attitudes, tastes, motives, and social customs as amenable to policy manipulations. He writes, “The scope of Islamic Economics is wider than that of secular economics. Its approach has to be more global and holistic. The widening of the scope takes place at both levels, Horizontal as well as vertical or inter- temporal”. 

Mohsin Khan like other writers also proposes a wider role f Islamic Economics. He writes, ‘it deals with a wide-ranging set of issues, such as property rights, the incentives system, allocation of resources, types of economic freedom, the system of economic decision-making and the proper role of government. According to him, it deals with both positive and policy areas with a view to achieving overriding goal of the Islamic economic system such as social justice and specific patterns of income and wealth distribution. He opines,” Aside from the issue of zero interest rate. Islamic Economics also offers fairly precise guidelines on, for example, tax policy and the orientation of government expenditure”. 

Mannan argues that in one sense Islamic Economics is more restricted one in other sense it is more comprehensive than modern economics. He writes” it is restricted because it is concerned only with those people who have faith in Oneness of Allah and His moral teachings as reflected in the Holy Quran and the Sunnah. It is also restricted because Islamic state cannot encourage any and every economic actively... It is comprehensive because Islamic Economics takes cognizance of non-economic factors like political, social, ethical and moral factors. Thus, the scope of Islamic Economics seems to become the administration of scarce resources in human society in the light of the ethical conception of welfare in Islam. Akram Khan also visualizes a broader scope of Islamic Economics. In his view, extension of the scope occurs, firstly, due to the inclusion of a high content of normative economics. He notes, “In a Muslim society, caring for others, preferring others over one’s own interest, looking after orphans, widows and invalids, hospitality to guests, mutual cooperation at moments of distress are great virtues and accepted as norms of behaviour.”15 Secondly, considerations for Hereafter extends the perspective of an economic agent to infinity. Arif restricts the scope of Islamic Economics to the studying of the behaviour of a true Muslim in falah maximizing framework. However, he precludes behaviour of non-practicing Muslims or non-Muslims from its scope. 

The foregoing discussion clearly shows extended boundary of Islamic Economics relative to secular economics. The extension has occurred through the introduction of normative, non-economic, and al-Akhira (Hereafter) factors into the subject matter. Of course, these factors are quite relevant for the individuals of an Islamic economy. Besides their identifications, their integration with one another and the economy is important task which still needs to be done. Additionally, their causative role needs to be thrashed out and developed in the form familiar to both economic profession and general readers. 

IV. Concluding Remarks

Islamic Economics is an infant discipline. Its relatively new material has not so far produced a concise definition truly reflect its subject-matter. A lot of confusion about the nature, definition, and scope of this discipline is prevailing in the literature. This confusion has cost heavily so far. Firstly, it has impeded the efforts to developing  a complete, coherent, and viable economic system provide solutions to contemporary economic problems. Existing efforts have mostly produced literature on interest-free financial system which is previously considered to be the Islamic Economics system. Hence an erroneous impression is generally prevailing that the former reflects major features of the latter— which in fact is not the case. Secondly, it has constrained the audience of the discipline by limiting its analyses and solutions to an Islamic economy. Therefore, there is an urgent need to reformulate the nature, definition, and scope of Islamic Economics in a form convincing to the economic profession and to general readers.

 Notes and References

89. 60  

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1 . Laliwala, I.J., “Islamic Economics: Some issues in definition and Methodology”, Journal of King Abdul Aziz University: Islamic Economics, Vol. 1, No. 1, Jeddah 1989, Pp. 129-131.

2 Haque, Zial: “Nature and Methodology of Islamic Economics: An Appraisal” paper presented to the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10, 1992, Islamabad’

3 Ibid (footnote 1). 

4 Mannan, Abdul (1986) Islamic Economics. Theory and Practice, The Islamic Academy Cambridge, p. 18.

5 Ahmad, Khurshid, (1981), Studies in Islamic Economics, Leicester: Islamic Foundation, p. xvi-xvii. 

6 Zaman, Hasanuz, SM. 1984, “Definition of Islamic Economics”, Journal of Research in Islamic Economics, Vol. 1, No. 2, (winter 1984). P.85. 

7 Choudhry, Masudul Alam, “The Micro-Economic Foundations of Islamic Economics: A Study in Social Economics”, Journal of Islamic Banking and Finance, Volume 5, No. 2, April-June 1988, pp. 33-47. 

8. Khan, Akram, M. (1983), “Islamic Economics: Nature and Need” Journal of Research in Islamic Economics, Volume 1, No. 2, p. 55 

 9 Arif, M. (19S5) I, ‘Towards a Definition of Islamic Economics: Some Scientific Considerations”, Journal of Research in Islamic Economics, Vol. 2, No. 2, p. 95.