INTRODUCTION:

The Islamic Resurgence movement bas led to a call for Islamizing society and polity in several Muslim states. The declared rationale for this call is the view set forth by several Islamic intellectuals, theologians and statesmen that Islam is not merely a system of individual devotion and piety calculated to bring about spiritual salvation in life hereafter, but rather a complete way of life, a blue print of the good life in its totality including politics and economics. The concrete contours and details of this map, so they say, ought to be adjusted to the ever changing human situation with the concurrence of competent Ulema. Nevertheless the total map must be firmly based upon the Quran and the example of the Prophet.

The advocates of Islamic Resurgence hold that the Muslim liberals of the mid-twentieth century merely imitated Christian liberalism which viewed religion merely as a personal relationship between man and God without regulating human political and economic concerns. The advocates of Islamization hold that Liberalism, Socialism and Communism have all failed to cure human ills in the modern age and that the only hope for mankind lies in a return to the Islamic or Quranic system of economics and politics.

In the sphere of economics, the main thrust of the Islamic Resurgence movement is the literal implementation of the Quranic prohibition of usury/interest which is seen to be the root evil. It is claimed that ‘zakaat’ (the Islamic wealth tax) and the Quranic law of inheritance would suffice in an interest-free society to cure all economic problems. Zakaat, as a 2.5% tax on net wealth at the end of the financial year, was made a statutory tax about five years ago in Pakistan and is being regularly collected by the state directly from banks. In the case of all Sunni Muslims (who are the dominant majority in Pakistan) payment of bank interest on deposits and charging of interest on bank loans for industrial commercial purposes have been totally banned since early 1985, though the ban does not yet apply to foreign transactions. A new scheme of Islamic profit/loss sharing by bank depositors has recently been started for promoting investment and economic growth without the lever of interest. It is expected that these innovations would not adversely affect the rate of growth or health of the economy. On the other band, the abolition of interest is expected to promote social justice and general welfare and to remove several social or moral evils inseparable from various non-Islamic politics.

Whatever be the truth of the above claims, the fact is that no attempt has been made, to my knowledge, to present a historical and systematic theoretical analysis of ‘interest’ or an integrated theory of general economics to show how a totally interest-free world economy would or could work in an admittedly imperfect and ‘imperfect able’ world.

In what follows I shall analyze the basic concept of an Islamic economic system, as an integral part of the Islamic faith. I shall then examine the basic thesis that the abolition of interest is the root remedy for human socio-economic ills.

The Concept of an Islamic Economic System

1 begin with the Quran. Quranic verses dealing with fiscal or economic matters are (with literally two or three exceptions) in the nature of moral exhortations to do the right or the customary and not specific injunctions implying or even pointing to any 'economic system'. Thus, for instance, Quranic verses repeatedly enjoin believers to spend in the way of God, to help the needy, the traveller and the orphan, to avoid extravagance, pomp, avarice and the hoarding of wealth, to be just in weighing and measuring, to fulfill promises and contracts, to avoid bribery and cheating, to be lenient to the debtor, to give honest testimony even when it goes against one's kin, and so on. The only verses which state not mere ethical norms but rather economic rules or regulations are the verses dealing with zakaat (tax on surplus wealth) and riba (usury/interest).

Establish worship, pay the poor-due, and bow your heads with those who bow (in worship). 2:43.

Those who swallow usury cannot rise up save as he ariseth whom the devil hath/prostrated by (his) -touch. That is because they say: Trade is just like usury; whereas Allah permitteth trading and forbiddeth usury. He unto whom an admonition from his Lord cometh and (he) refraineth (in obedience thereto), he shall keep (the profits of) that which is past and his affair (henceforth) is with Allah. As for him who returneth (to usury)--such 'are rightful owners of the Fire. They will abide therein.2:75.

0 ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful. 3:130