Overlapping utility, between globalization and Islamic thought with special references to Economic.

Febryan Mujahid Panatagama



This paper strives to acknowledge all readers that it is difficult to face globalization without a deep understanding of what the meaning of globalization is. Globalization is a challenge for all civilization especially for Islamic civilization. In my understanding of Islam, globalization has many contradicted values with Islamic thought involving sociocultural, economical, technological, and political values. But globalization is also needed in order to spread Islamic thought all over the world. The wrong perspective about Islam on the western world has to be neutralized. In the first part, I define about the meaning of globalization and the influence of Islamic civilization on it. In the second part, I explain about the history of Islamic finance since the era of Muhammad (pbuh) up today. Then, I explain about the development of Islamic banking in Indonesia and the identification of permitted and prohibited transaction based on the Islamic Jurisprudence. After that, I explain about Bait al-Maal wa al-Tanwil (BMT as the microislamic financial department) in decreasing poverties of Indonesia. In the last point, I define about the failure of globalization especially in global economical and technological progress gives an extra space for Islamic Economic.

Keyword: globalization, Islamic civilization, Islamic thought, Islamic finance, Islamic jurisprudence, Islamic economic.

Introduction to globalization and it’s relation into Islamic civilization.

Globalization refers to “global” means universal. Globalization describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and exchange. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through tradeforeign direct investmentcapital flowsmigration, and the spread of technology. However, globalization is usually recognized as being driven by a combination of economic, technological, sociocultural, political, and biological factors. The term can also refer to the transnational circulation of ideas, languages, or popular culture.[1]

Generally globalization assumed as the results of interconnection of global nations. But, the word globalization does not have an exact meaning yet, I consider that Islamic civilization contributes a huge influence in globalization.  The beginning of globalization is debatable but, there are some mainstreams in term of globalization.

  • First, in the Islamic golden ages in the 7th-15th century. The history said on 9th up to 15th century   artists, engineers, scholars, poets, philosophers, geographers and traders in the Islamic world contributed to the arts, agriculture, economics, industry, law,  literature,  navigation,  philosophy,  science, sociology, and technology, by preserving and building upon earlier traditions and by adding inventions and innovations of their own color.
    • Second, in the rises of Chinese civilization in the 13th century. It was popular phrase “pens vs brushes”. Pens refer to Islamic civilization and brushes refer to Chinas civilization. The Umayyad of al-Andalus were also major intellectual centers with cities such as Cairo and Córdoba rivaling Baghdad,  and another central of science such as Egypt.
    • Third, Andre Gunder Frank, an economist associated with dependency theory. Frank argued that a form of globalization has been in existence since the rise of trade links between Sumer and the Indus Valley Civilization in the third millennium B.C. Critics of this idea point out that it rests upon an overly-broad definition of globalization.
    • Fourth, the early of globalization is in the trade links between the Roman Empire, the Parthian Empire, and the Han Dynasty.
    • Fifth, in the rises of international trading as the result of establishing of the commercial centers of the Middle East and China, greatly facilitated travel along the Silk Road.
    • Sixth, in the rises of colonialism in the 15th century.
    • Seventh, in the rises of multinational company after the rise of maritime European empires, in the 16th and 17th centuries, first the Portuguese and Spanish Empires, and later the Dutch and British Empires.
    • Eighth, in the rises of Britannia economic supremacy and it colonialization in the 19th.
    • Ninth, in the global expansion of US and European Multi National Corporations in the 20th century.

Today, in this 21st century I assume that Islamic civilization starts to influence the globalization. The first step of this process is the Islamization of global economics starting from 3 decades ago and still in the developing today.

The Islamic Economics short preview.

Islam refers to an Arabic word “salima” means save, peace and self surrendering. Islam means humans surrendering into the only one God “Allah”. As explained in the holy qur’an chapter Al-imran verse 19:

¨bÎ) šúïÏe$!$# y‰YÏã «!$# ÞO»n=ó™M}$# 3 $tBur y#n=tF÷z$# šúïÏ%©!$# (#qè?ré& |=»tGÅ3ø9$# žwÎ) .`ÏB ω÷èt/ $tB ãNèduä!%y` ÞOù=Ïèø9$# $J‹øót/ óOßgoY÷t/ 3 `tBur öàÿõ3tƒ ÏM»tƒ$t«Î/ «!$#  cÎ*sù ©!$# ßìƒÎŽ|  É>$|¡Ïtø:$# ÇÊÒÈ [2]

The Religion before Allah is Islam (submission to His Will): nor did the people of the Book dissent there from except through envy of Each other, after knowledge had come to them. but if any deny the Signs of Allah, Allah is swift In calling to account.

Although, many people consider Islam their religion, they have not surrendered completely to Allah; they are not included as the people who are safe under Islam. Islam considers human life in this world is the small part of the entire human life, because there will be eternal life in the hereafter. Therefore the eternal human life in hereafter really related into human life in this world. It is explained in the prophetic tradition (hadist): “Al-dunya mazra’ at-akhirah” which means: the world is the place for human to prepare for the hereafter life. Here are the contributions of Islam as the guidelines of human life in the world. Islam contributes the guidelines of human being to live safely based on Islamic rules and regulation toward human victory in here and hereafter. The consequences are, Islamic thought is not limited in the vertical relation between human and their creator (Allah), but it also involves their relation with another human being or even with another God creations. So Islam is the way of life which guides all aspects of human life.

Islamic thought consists of faith (Aqidah), Islam (Syariah), and Ethic (ihsan). The creed refers to the truth of Islam, syariah refers to the justice/regulations of Islam, and akhlaq refers to the beauty of Islam. Aqidah refers to the principles foundation of Islam that contributes to the strong faith of Allah. Islamic thought is not only the belief of Allah but involves the rules and regulations consisted of several commands and prohibitions of Allah for entire human being in order to relate all human being into their God. It is called syariah or Islamic laws. In Islamic thought, aqidah and syariah have to be completed by akhlak/ihsan (ethic). Akhlak means, human consideration that they worship Allah as well as possible as though, they face Allah directly, even if they do not face Allah directly, their worship is in Allah sight. Therefore, human beings are supported to do Allah commands and avoid his prohibitions correctly.

Ihsan (ethic)
Islamic laws


Faith (aqidah)

Aqidah, syariah, and akhlak are an entity that is related to another. Such as illustrated bellow:

Figure 1.1 the concept of Islam.

The illustration explained aqidah, syariah, and akhlak as a house. Faith (aqidah) is the foundation of human religion to be a better personality. The strong faith causes into a civilized personality. And the religion will not be perfect until human being applies the Islamic laws in their daily life.

Islam and Syariah Banking

After a brief definition about Islam, It can be concluded that Islam is the way of life and regulates all aspects of human life, including the economic aspect. Islamic economics is close with financing and banking. Islamic finance and banking may become the majors’ issues of the world economic development nowadays. After the global economic crisis in 2008, the world is emphasized on looking for another alternative economic system as a replacement for capitalist system. In this modern era Islamic financing and banking is chosen to be one best alternative for economic world. This condition is proved by the vast development of Islamic banking, and many Islamic financial products are applied all over the world.

In fact, to apply Islamic thought in the contemporary economic issues is quiet simple. The first step is identifying the principles and the basic philosophies of Islamic thought in economics, and then identifying the permitted and unpermitted things in the Islamic laws. After these two steps we can widely innovate and create (ijtihad) contemporary economic issues, especially Islamic banking issues.

Before doing something base on Islamic jurisprudence (usul fiqh)/ijtihad in Islamic finance, it is necessary to differentiate the new concept of banking and the concept that already existing concept of Islamic finance. If the banking concept is definitely new for Islamic perspective, it means that ijtihad should be begun from the very fundamental level. Otherwise if the banking concept is already known by Islamic civilization and the functions of bank already applied in the Islamic civilization. The ijtihad process will be simpler.

Complicated (from the lowest level)
Simpler process
New concept

Figure 1.2 the kinds of Ijtihad

Banking in Rasulullah (pbuh) Era.

Globally, a bank has three main functions; those are for saving, lending, and transferring money. In the Islamic economic history, the appropriate financial transaction was become a tradition since the era of Muhammad (pbuh). The transactions such as saving, lending, and transferring money for business or consumptions were generally applied in our prophet Muhammad era.   Therefore, the modern banking functions such as deposits, money lending, and money transferring became the ordinary tradition of Islamic civilization since prophetic era.

Rasulullah is (pbuh), well know as Al-Amin, a trusted man by Mecca citizen. He was trusted by the citizen to save some properties. Therefore, before rasulullah moved to Medina, he instructed Ali bin Abi Thalib r.a. to return all the existing deposits into the owners.[3] In this case, the keeper of the properties was unable to utilize the deposits. In another case Ibnu Abas r.a. ever transferred amounts of money to Kufah and Abdullah bin Zubair r.a. ever transferred amounts of money to his brother Mis’ab bin Zubair r.a. in Iraq. The functions of bank in prophetic era are illustrated bellow.

Money transferring
A people apply a function
Deposits of properties
Function of Bank in Prophetic era
Money saving

Figure 1.3 the functions of bank in prophetic era.

The usage of check was also popular on the development of trading among Syam and Yaman country, at least twice in a year. Indeed, in the period of Umar bin al-khattab r.a. Caliphs use a check to pay any charity for the poor cavils. Check also used for taking any imported wheat from Egypt in baitul Mal.[4] Another case the capital lands based on sharing profits, like mudharabah, muzara’ah, musyaqah, was well known since the early of Muhajirin and Anshar civilization.

It is defiantly proved that banking and other financial products were known or even applied by Islamic civilization in the early of Islam. Moreover, some modern banking term refers to Islamic thought, such as “credit”, “credo” (greek) refers to an Arabic word “qard”. Credit means to lend some money, credo means the trust, and qard according to Islamic law means to lend amounts of money based on trust. Another term is “check”, “cheque” (France) refers to an arabic word “suq”. Suq means a market and check is the exchange tool in market.

Banking in the Caliphs Period. (Abbasid and Umayyad)

Neither probably, the term Bank is unknown in Islamic jurisprudence. The term bank is unknown nor in the era of Muhammad (pbuh), nor the period of caliphs (Abbasid and Umayyad). But, the functions of bank were completely applied based on the Islamic jurisprudence since the early of Islam.

In the era of Muhammad (pbuh), the function of bank applied by single individual and usually an individual was supposed to do no more than one function of bank. This application runs until the Abbasid caliphs. The banking system is developed when a lot of currencies were established in that era, so the expertise to differentiate those money units is extremely needed. This condition happens because each money units has different exchanges values. The people who has such of this expertise called naqid, sarraf, or jihbiz. This activity becomes the origin of money changer.

In case, the term bank is unknown in Islamic jurisprudence but, the “bank” in the early Islam has similar meaning with jihbiz. Jibhiz itself was known since the era of Muawiyah caliphs (661-680 C) as the personal banker. The roles of personal banker (jibhiz) is popular while the Abbasid caliphs under the government of caliph Muqtadir (908-932 C). In his era almost of ministers have their own banker, such as Ibnu Furat was chosen Harun ibnu Imran and Joseph ibnu Wahab as his personal banker. Ibnu Abi Ishak was chosen Ali ibn Isa, Hamid ibnu Wahab chooses Ibrahim ibnu Yuhana, Moreover Abdullah al-Baridi has three bankers.

The development of bank performances at that time was indicated by the usage of check commonly in the market exchange. Moreover the function of banker involved three aspects of banking; receiving deposits, lending money, and transferring money. In this time money could be transferred from a country to other countries without physical removing of money. And most of money chargers built their own office in most of developing countries and began to use check for transferring money and other transactions. In the Islamic banking history, Syaf al-Dawlah al-Hamdani is recorded as the first people who published a check for clearance between Bagdad (irak) and Aleppo (spain). The simple illustration about jibhiz is drawn bellow. [5]

Money saving


Money Transferring

Runs by an institution
Money saving


Money Transferring

Runs by single individual

Figure 1.4 the differences between Jihbiz and Bank.

Banking in the Europe.

In the development of Islamic banking, the single function which was applied by a single individual (jihbiz) was converted into an institutional work as a “bank”. When the European began to establish a bank and ran it by the high interest rates system, it resulted in the complicated problems in the banking system itself. Interest was definitely prohibited in Islamic jurisprudence. This condition widely spread after The King Henry VIII in 1545 permitted an interest in transaction and prohibited in-excessive usury (riba). After his death King Edward VI completely prohibited any interest transactions. And after his death, The Quen Elizabeth I  permitted the interest transactions again.[6]

When the European civilization is developed and the effect of renaissance or  the period in Europe during the 14th, 15th and 16th centuries when people became interested in the ideas and culture of ancient Greece and Rome and used these influences in their own art, and literature.            The European began to explore and colonize almost countries all over the world. Therefore the European was succeed to dominate the global world and also in the global economic. In that period the Islamic civilization was decreasing and decreasing. One by one, the Islamic countries were conquered and colonized by the European. Then, all the Islamic Economic institutions were eliminated and replaced by the western economic institution. This condition is continuing up today. Therefore, almost all banking institutions in the Islamic countries were reminds of European banking institutions which are run by the interest motive.

Islamic Banking in the modern Era.

Interest is definitely prohibited in Islamic jurisprudence and assumed as usury (riba). After the era of colonization and when Muslim countries had their independence, the spirit to establish some non-interest motive financial institutions grew. The first modern effort to find non-interest motive financial institution was found in Malaysia in the middle of 1940, unfortunately that effort was failed.[7] Another modern effort to establish the same institution was found in Pakistan on the end of 1950.

Otherwise, the modern efforts succeed in establishing an Islamic banking was found in the Egypt on 1963 by the founding of Mit Ghamr Local Sacing Bank. This Islamic bank received a warmly acceptance in the Egypt, particularly from amounts of farmers and villagers. This condition lasted only for about 4 years, only since 1963-1967 because of political confusion on that period of years. In 1967 the operational of Mit Ghamr was replaced by National Bank of Egypt and The Central Bank of Egypt. After this replacement, the interest motive banking operation was gradually growth, and really left. In 1917, under the governance of Sadat Nasser Social Bank was established, and the major purposes of this bank were to apply Mit Ghamr financial concept again.

The succeed of Mit Ghamr inspired Muslim civilization all over the world and resulted into the general awareness of Muslim that the Islamic principles spirit in economy is available, acceptable, and suitable to be applied in the modern business. When OKI was already established, many international conferences were held. One of the major purposes of those international conferences was to establish an Islamic bank. Those conferences resulted on International Development Bank (IDB) which was founded in October 1975 with 22 Islamic countries as the founding fathers. IDB was aimed to provide a financial helps for the development of its members, to help all member to establish an Islamic Bank, and have a major roles in economics, banking and financial researches. Today, IDB is centralized in Jeddah-Arab, and has more than 43 countries member.

In the era of 1970’s, the spirit to establish an Islamic financial institution was gradually spread on the world. Some countries such as Pakistan, Iran, and Sudan, change their financial system into Islamic financial system based on Islamic jurisprudence entirely. Therefore, all financial institutions in those countries were operate based on Islamic jurisprudence and refused an interest motive operation. Meanwhile, in other Islamic countries such as Malaysia and Indonesia non-interest banks operate beside others conventional banks.

Nowadays, the development of Islamic banking become so vast and spread on the world entirely, including in the western world. The Islamic Bank International of Denmark recorded as the first Islamic bank operated in Europe, in about 1983 in Denmark.[8] Today, some major banks in the western world such as City Bank, ANZ Bank, Chase Manhattam Bank, and Jerdine Fleming were strive to provide any financial products and services based on the Islamic Jurisprudence.

An individual, even a prophet or caliphs operate a function of bank
An individual begins to operates the three functions of bank in a single work
A financial institution begins to operate the three functions of bank

The picture bellow tries to conclude the development process of Islamic Banking since the era of Muhammad (pbuh) up today.

Figure 1.5 the development process of Islamic Banking.

In the conclusion, the development of financial and banking activities in the Islamic civilization was developed from a single individual operates a function of bank, then it was developed to the profession of jihbiz, finally those functions and activities was adopted by the European civilization in the middle of century by leaving all Islamic jurisprudence and practicing an interest system. Because of, the decline of Muslim civilizations and the western colonization in the Islamic countries, the development and application of Islamic financial system was stopped for some centuries. Just at the end time in 20th century after almost Islamic countries have their own independency, the Islamic financial institution have been developing in many countries and God willing it will be always be developed.

The Development of Islamic Banking in Indonesia.

In Indonesia, Bank Muamalah Indonesia (BMI) is the first Islamic bank that was established in 1992.  Even the development of Islamic banking in Indonesia was rather late; same as in the others Islamic countries the development of Islamic banking in Indonesia is so fast. Recorded in 1992-1998, there is only one Islamic bank in Indonesia. In 2005, the amount of Islamic banking is developed became 20 units consist of 3 conventional units and 17 units of Islamic banking. Meanwhile, the amount of Bank Perkreditan Rakyat Syariah (BPRS) in 2004 was developed up to 88 units.

Based data of Bank Indonesia, the prospect of Islamic banking in 2005 was estimated to become quite good. Islamic banking industries predicted were always highly developed. In November 2004, the values of Islamic banking institutions reached 14.0 billion rupiahs with 88.6% of the development levels and reached 1.1% of national banking values. In the end of 2005 the values of Islamic banking institutions reached about 20 billion rupiahs and reached 1.8% of national banking values.[9] These Islamic banking developments must be supported with the good human’s resources development in quality and quantity. Unfortunately, many Islamic banking in Indonesia use inexpert employees, academically and practically. Therefore, this condition quite influences the productivity and professionally of almost Islamic banking in Indonesia. This may become our consideration to maximize the humans’ resources especially for Islamic financial institutions; In order to create a conducive environmental system for Islamic finance.

Finally, after our short consideration in the history of Islamic banking, it can be conclude, even thought the Islamic jurisprudence did not know the terms of “bank”, but the history proved that the functions of banking was already known by Islamic civilization and even absolutely become a common tradition since the era of Muhammad (pbuh) and was developed and decreased as well as the developing or decreasing of Islamic civilization on the certain place and time.

Identification of Prohibited Transaction in the Common Economy.

There are two general Islamic laws (the origins of law) in the Islamic jurisprudence; First, regulate worshiping (ibadah) laws and second, regulate social relations (muamalah) laws. In term of worshiping, all worship is prohibited except, there is any instructions based on al-Qur’an and prophetic traditions (hadist). In term of social relations laws (muamalah) everything is permitted except, there is any proposition that prohibits it. These laws mean that any kinds of economic transactions are permitted except, there are implications of prohibited factors on it. In general, there are three factors caused into prohibited transaction:

1. Prohibited because of the thing itself (haram li-dzatihi).

This transaction is prohibited because the object of the transaction itself for instance, drugs, beer, or inappropriate meals (pig or dog) etc. This transactions is prohibited even the deal is based on Islamic jurisprudence.

2. Prohibited because of others factors (haram li-gairihi).

This transaction is prohibited not because its transaction objects but because of others factors, such as:

a. Violate the one principle of Islamic jurisprudence: “An Taradin Minkum”, indicated by any tadlis (fraud). In the Islamic jurisprudence every transaction is based on an equal willing between the two parties. Each party has complete and equal information. An asymmetric information or unequal information causes into any fraud (tadlis). Fraud in quality, quantity, price, and deliveries.

b. Violate the one principle of Islamic jurisprudence: “La Tazhlimu wal La Tuzlamun”, don’t hurt each others, for instance, tagrir (gharar) uncertain to both parties, market engineering on supplies (ikhtikar) and demands (Bai’ Najasy), Usury (riba), gambling (maysir), and Corruptions (risywah).

3. Inappropriate contract (akad).

The transactions that not categorized in haram li-dzatihi and haram li-gairihi transactions must be in appropriate contract (akad), in order to be an acceptable transaction based on Islamic jurisprudence. A contrac will be inappropriate if one or more these factors occurred:

1. Incomplete principles and requirement involved the parties, object (stuffs), and the agreement. 2. Ta’alluq is happens if a transaction results to another one transaction in required Bai’ al-Inah.

3. Two in one is happened if a transaction has double akad (contract), therefore caused into gharar (shafqatain fi al-shafqah).

The brief illustration explains that there are many inappropriate values that may be happen in the conventional economy. After an understanding of some factors that caused into prohibited transactions, hopefully, we are able to determine the prohibited and permitted transaction based on Islamic jurisprudence.

How BMT decreases the poverty in Indonesia.

Baitul Maal wat Tanwil (BMT) is a micro economical Islamic financial department operates by profit sharing system. BMT helps small business scale in order to decrease poverties by managing the collective capital from the investors. Principally, BMT was built based on salaam civilization the fair and peaceful social welfare.

The basic principles of BMT:

  • Ahsan (the best quality control), Thayyiban (the most suitable), Ahsanu ‘amala (the investors and the costumers satisfaction).
  • Barokah (fully interested and effective efficient), Transparency and responsibility for civil society.
  • Spiritual communication.
  • Democratized, participated, and inclusive.
  • Social welfare
  • Potential developing of local civic society.

BMT is a collective independent department purposed to develop social welfare by financing civil economic and decrease amount of poverty. The implementations of BMT principles become the most important factor to develop BMT itself.

Based on Indonesian statistic on 2009 the collective amount of poor civilization is 33.7 million of entire civilization, in the 4.5% of national economic development and 9% of inflation. [10]As BMT has become the most strategic department to reduce the poverty, it is proved that in 1995-2005, more than 3.300 BMTs were established and the assets reached more than 1.7 billion rupiah, served more than 2 million consumers, provided 1.5 million microeconomic credits, and employed more than 21.000 employees. Here is the list of developed BMTs in Indonesia:

  • BMT Dinar (karang anyar with 31 billion rupiah assets)
  • BMT Ben Taqwa (central of java with 30 billion rupiah assets)
  • BMT MMU (pasuruhan east java with 17 billion rupiah assets)
  • BMT Marhamah (wonosobo central of java with 13 billion rupiah assets)
  • BMT Tumang (boyolali central of java with 4 billion rupiah assets)
  • BMT Baitul Rahman (bontang east borneo with 6 billion assets)
  • BMT PSU (malang east java with 5,6 billion assets)[11]

BMT succeed to decreas the amount of poverty by applying social actions (baitul mal) such as zakah, shadaqoh, waqaf and another charities. This action has a direct impact to the poor society.  Starting with zakah, shadaqah, waqaf, BMT runs its function as the agent of assets distribution and as social economic healer. Social credit or (qardhul hasan) from social money is allocated only for the poorest social civils, because this social function is non profit oriented. It also creates a harmoniuos relationship among the rich and the poor ones.

BMT is also profit oriented, as the common Islamic bank, BMT also provides: mudharabah, musyarakah, ijarah, etc. This function includes financials and real sector function. Finally, these two functions support BMT to be the most effective and efficient department to decrease any poverty not only in indonesia but also the entire world. BMT is established as the agent of community development and the agent of asset distribution. BMT grows as an institution to increase social welfare, create a social econoic justice, create new job vacations, and create bussines network.

The failure of globalization gives an extra space for Islamic Economy.

Globalization ideas especially in capitalism may contribute high level of welfare but, it is only for the capitalist not for others. Capitalist system provides unequal economic welfare. The accumulation of this unequal economic welfare system exploded at that time. In 2008 an economic crisis stemming from the US financial market rapidly evolves into global economies, and influences the real sectors in many countries. Economic and financial bubble is accused to be the cause of the crisis. The crisis also spreads to developing countries such as China, Brazil, India, and Indonesia as well. However, the main sources of the crisis stems from the greed and acquisitive behavior of capitalism that allows a number of Islam-prohibited interest (riba), gambling (maysir) and unrealistic speculative behavior (gharar) takes place in the economy. Those elements create a financial bubble for accumulative purposes of the capital. Without ethical intervene, the crisis seems to continuously happen. It is time for Islamic economics that relies much on the ethical values to play more important roles, in order to establish an economic system based on the Islamic teaching.

The Prophet (pbuh) had laid down the foundation of economic teaching in Islam, for instance by establishing market, where prices are set by God, with little intervene from the government. In the market, people are encouraged to get involved in jobs and generate earnings.

Market provides two substantial notions in Islamic economic. First, mechanism behind the market is governed by an ‘Invisible Hand’, which in such a case much differs from Adam Smith’s unclear ‘invisible hand’. Smith fails to define who really the invisible hand as he conceptualizes is. On the other hand, Islamic concept of market clearly defines the Invisible Hand as God, Allah the Almighty, as clarified by the Prophet himself, when he got a request from the companions to take control following the case of price escalation. However, the Prophet is reported to have refused the proposal, by allowing God to run the mechanism behind human activities in the market. The concept that God’s Hand is in operation behind the market mechanism (yadullaha fawqa aidihim or the Hand of Allah is over their hands) seems to be adopted by Adam Smith using “unclear” invisible hand.

Second, the concept of market also provides a great place for a mechanics of generating gains or profits, which can be shared among the contributors and market participants. On the other hand, Islamic market does not allow for any riba (forbidden gains such as interest), gharar (speculative), maysir (gambling), and zhulm (exploitative) transactions to take place. These four elements forbidden in Islam have become the core components in the development of capitalism since its inception. As far as current financial crisis is concerned, the second notion set up in the Islamic concept of market comprising the four elements is given emphasis in this paper. However, these elements are not of the interest of capitalism to adopt, as elaborated further in the following sections. This is because the spirit of seeking the material greed exhibited clearly in Smith’s notion of self-interest remains anchored in capitalism.

Global financial crisis may be not happened if, the capitalist concerns about Islamic values and avoid the four prohibited elements of Islamic economic (riba, gharar, maisir, and zhulm) . However, capitalism is not Islamic system. The failure of capitalist economic system provides more space for Islamic economy. Actually, the development of Islamic economy already began since four decades before on 1970-1980 eras. The climax of the development process realized after global economic crisis.

The capitalism may be failed but the globalization is on-going, capitalism only a small part of globalization. We consider that globalization is not only sudden event but, it was a long historical process. Globalization may give a bad impact but, globalization simplifies the interconnection among countries. The World Wide Web, internet, international flight, international export and import, international student exchange any many globalization product supported human mobility. I insist that globalization is only a human made; the impact of it just refers to the user.

This condition pushes international consideration to have an international conference. The first international Islamic conference was held in 1976 on Mecca. The result of that conference claimed as the birth of Islamic Economy. Since that first international conference many developments of Islamic economy happen. This process continued as the globalization runs, the other five international Islamic Economy conferences was held on Islamabad (1983), Kuala Lumpur (1993), Loughborough (2000), Bahrain (2004) and Jakarta (2005) involved a hundreds national conference, seminar, workshop, and symposium on the world. These kinds of compulsories must be concerning about the essential issues of economic.

Then there is no hesitation that, Islamic economy including Islamic finance and banking has a significant development since 30 years ago. But these development processes comes with many critics especially in the implementation of Islamic banking and finance. The early writing about Islamic economy on 1970-1980 was defined exactly about the importance of understanding Islamic worldviews and concepts to support Islamic economy. Other writing also defines that to develop the Islamic economy also refers to the modern economic today.

In short term Islamic economy is the elaborating result from the modern economic system which already contaminated by the western thought. There is a general statement in the western countries (US and Europe) of the development of science and technologies. So the development of capitalism as the product of secular economics and globalization really separates between science and God revelation. In the contrary of that condition Islamic economics tries to integrate among science and God revelation. In the Islamic perspective science and God revelation is an integrated entity. But, Islam doesn’t refuse the western science entirely. “No science has ever been integrated into any civilization without some of it also being rejected. It’s like the body. If we only ate and the body did not reject anything we would die in a few days. Some of the food has to be absorbed; some of the food has to be rejected.”  Or we can say that Islamic economic system is the result of modern economic evaluated by the critical Islamic concept and the assimilation of modern economic if necessary.

The effort and struggle of Islam to influence the world was starting now, day by day, the amount of Islamic citizen in the western county is increasing and increasing, and the secular western paradigm is gradually decreasing. Because of the international information exchange around the world really spreads the truly Islamic value all over the world. Eventually the world will accept the Islamic thought gradually starts for the economics. Islamic economics and finance was expensing world unfair economics system which already results a global financial crisis lately. Otherwise the understanding, evaluating, and the implementation of it are extremely needed.

Finally, I consider that ”globalization” is only a human made system. It refers to the animal of globalization. Globalization may contribute a terrible impact especially for moral and Islamic velues. It comes because of many contradict values in globalization with Islamic shari’a. But Islamic world have to realize and start utilize it as the human made tool to spearding the islamic thought.  “No science has ever been integrated into any civilization without some of it also being rejected. It’s like the body. If we only ate and the body did not reject anything we would die in a few days. Some of the food has to be absorbed; some of the food has to be rejected.” (Syyed Hossein Nasr). S.H. Nasr statement supposed to explain that in everything there is an overlapping culture between western and Islamic civilization. It means that not all what comes from west is bad/definitely wrong, but Islamic world cannot adopt it entirely. There must be elaboration of globalization that definitely separated itself with the God revelations. The wrong ideas of globalization have to be avoided and the right globalization ideas have to be utilized for Islamic development. Surely,   this elaboration comes with intellectual criticism, and Islamic jurisprudence approach.


Abdul Sami’ Al-Mishri., 2006, Pilar-pilar Ekonomi Islam, Pustaka Pelajar, Yogyakarta.

Afzalur  Rahman., 1995, Doktrin Ekonomi Islam , Dana Bhakti Wakaf, Yogyakarta.

Adiwarman A, Karim., 2, Bank Islam: analisis fiqih dan keuangan, PT. Raja Grafindo Persada,  Jakarta

Adiwarman A, Karim., 2001. Ekonomi islam: Suatu kajian kontemporer. Gema Insani. Jakarta.

Adiwarman A, Karim., Ekonomi Islam Suatu Kajian Kontemporer, (Jakarta; Gema Insani press, 2001) page. 63.

Adiwarman A. Karim, op.cip., page 72

Department of Islamic Banking, Bank of Indonesia., The development report of Islamic Banking 2004, (Jakarta: Bank of Indonesia 2004), page 65.

Erik Trolle-Schultz., “How the First Islamic Banking was Established in Europe,” in Butterworths Editorial Staff, Islamic Banking and Finance, (London: 1989) page. 43-52.




Islamia. thn I No 6,. 2005. Membangun Peradaban Islam Dari Dewestrenisasi Kepada Islamisasi     Ilmu Pengetahuan. Jakarta.

Kadim Sadr., Money and Monetary Policies in Early islam, in Abbas Mirakhor and Baqir Al-Hasani, Essay on Iqtisad: An Islamic Approach to Economic Problems, (Silver Spring: Nur Corp., 1989), page 202

Sami Hamoud, Islamic Banking, London: Arabian information ltd., 1985.

Sudin Haron, Islamic Banking: Rules and Regulations, (Petaling Jaya: Pelanduk Publication,. 1997), page 2. Samii Hassan Homoud, Progess of Islamic Banking, Islamic Economic Studies, vol.2. No. 1 December, 1994, page 71-80.

Sudin Harot, op.cit., page, 3.

Syed Hossein Nasr., “Islam and Modern Society” for Pakistan study group and MIT Muslim Students Association, Cambridge Massachusetts, USA.

Mashudi Muqorrobin., Capitalism and Global Economic Crisis. Islamic Economic Forum for Indonesian Development (ISEFID), Jakarta-Kuala lumpur.

Q.S. Ali-Imran (3):19

[1] http://en.wikipedia.org/wiki/Globalization

[2] Q.S. Ali-Imran (3):19

[3] Sami Hamoud, Islamic Banking, London: Arabian information ltd., 1985.

[4] Kadim Sadr, Money and Monetary Policies in Early islam, in Abbas Mirakhor and Baqir Al-Hasani, Essay on Iqtisad: An Islamic Approach to Economic Problems, (Silver Spring: Nur Corp., 1989), page 202

[5] Sudin Haron, Islamic Banking: Rules and Regulations, (Petaling Jaya: Pelanduk Publication,. 1997), page 2. Samii Hassan Homoud, Progess of Islamic Banking, Islamic Economic Studies, vol.2. No. 1 December, 1994, page 71-80.

[6] Adiwarman A. Karim, op.cip., page 72

[7] Sudin Harot, op.cit., page, 3.

[8] Erik Trolle-Schultz, “How the First Islamic Banking was Established in Europe,” in Butterworths Editorial Staff, Islamic Banking and Finance, (London: 1989) page. 43-52.

[9] Department of Islamic Banking, Bank of Indonesia, The development report of Islamic Banking 2004, (Jakarta: Bank of Indonesia 2004), page 65.

[10] http://nasional.kompas.com

[11] http://muamalatbmt.blogspot.com/2009/01