“Islamic” Economics: Going Beyond Banks and Interest


Guest post by Dr. Jerry Hionis, Jr., PhD.

On the first day of any economics course that I teach – whether its introductory or advanced in nature – the question is posed: what is “economics”? The most common answer is that economics is the study of money. Let us suppose that this true (hint: it’s not).

What then is the study of money? Or better, what is money? In short, money is a store of value/debt. As barter systems grew larger and larger around the globe, trade of goods and services became more complex. The easiest way to facilitate day-to-day transactions was to assign value to some generally accepted note or coin, usually in the form of a precious metal like gold or silver. Over time, currencies, like gold coins, tend to depreciate in value and one needs to carry more and more around with them. This leads to very heavy purses which become easy to steal. Here enters the need for banks and paper currency. While this is a very simplistic summary, it should be clear that money is very illusionary and, from an economist’s point of view, only a means to an end. When one exchanges goods and services with any form of currency, he/she is really exchanging debt.

Therefore, while economists study money and its effects, it is only a very small aspect of the full analysis. Specifically, economics is defined as the social science of how individuals, groups, firms, governments and entire societies deal with the notion of scarcity, or the inability to satisfy all wants and desires. Since almost everything in the physical world is finite – especially time – an even shorter definition is that economics is the study of how people make decisions. That’s it. Period.

So when the term “Islamic” economics is brought up, it is a bit perplexing and disheartening to only hear about: Can I interact with banks?; How do I buy a house?; Can I engage in the stock market?; and so on. As Ustadh Marc Manley says, even the term “Islamic” Banking is problematic: banks are institutions that store wealth and supply loans in turn for interest payments. Both of these functions are not clearly in accord with the Prophetic tradition. Do loopholes and replacing English terms with Arabic names really work? These are all important questions whose answers are outside the scope of this small article, but the debates themselves show that many are not really buying it..

Instead, I believe that “Islamic” economics, or better yet, the economic theory for the muslim, should start to focus on the day-to-day decisions we as Muslims make. To present a small list of examples,

  1. Is it better to give all of one’s zakat and/or sadaqah to one charity/organization or split amongst many?

  2. Does Islam promote free-market pricing? To what extent is government assistance allowed?

  3. What is the role of contracts and bargaining? How should a Muslim, or a group of Muslims, negotiate? In fact, what is the role of unionized labor?

  4. What is the economic role of the masjid? How are the funds used and are they used in an efficient and transparent manner? Is the economic model in use today sustainable?

  5. Everyone knows what they cannot buy and sell, but what should they buy and sell?

  6. How are Imam contracts constructed? What are the standards of pay and benefits offered? What are the standards of an Imam’s responsibility?

  7. How should a Muslim conduct his business? What is the required relationship between employer and employee? What responsibility does a producer have on identifying the manner in which intermediate goods and services are produced; that is, can one trade knowing that the goods and services are made using exploited labor?

Unfortunately, I do not have all the answers to these questions. I would love to discuss these issues with credible scholars… except these questions do not get as much press. Instead, almost every book that is printed pertains to either banking or what is and isn’t haram. It is time for Muslims to go beyond banking and interest rates.

Dr. Jerry Hionis graduated from Saint Joseph’s University in 2004 with a degree in economics and philosophy. His post-graduate work includes both an M.A. and PhD from Temple University in  Mathematical Economics and Development Theory. Beyond teaching economics as an adjunct professor at a number of institutions in the Greater Philadelphia area, his research includes the theoretical study of civil wars and political conflict theory.

One Comment

  1. farhat
    July 29, 2013

    Such important questions raised. It is sad that our communities are not raising them and our children are going deeper into debt while we are worried about the next mega masjid.


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