A long article, but very informative. You may agree or disagree with what the author says.
Timur Kuran, "The Genesis of Islamic Economics: A Chapter in the Politics of Muslim Identity, Social Research, Vol. 64, no. 2 (Summer 1997)
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The twentieth century has witnessed the emergence of an economic doctrine that calls itself “Islamic economics.” Of all economists of the Muslim faith, only a small minority, known as “Islamic economists,” identify with some variant of this new doctrine. Yet the doctrine is socially significant, if only because it advances the sprawling and headline-grabbing movement known as “political Islam,” “Islamic fundamentalism,” or simply “Islamism.”
The declared purpose of Islamic economics is to identify and establish an economic order that conforms to Islamic scripture and traditions.(1) Its core positions took shape in the 1940s, and three decades later efforts to implement them were under way in dozens of countries.(2) In Pakistan, Malaysia, and elsewhere, governments are now running centralized Islamic redistribution systems known as zakat. More than sixty countries have Islamic banks that claim to offer an interest-free alternative to conventional banking. Invoking religious principles, several countries, among them Pakistan and Iran, have gone so far as to outlaw every form of interest; they are forcing all banks, including foreign subsidiaries, to adopt, at least formally, ostensibly Islamic methods of deposit taking and loan making. Attempts are also under way to disseminate religious norms of price setting, bargaining, and wage determination. And for every such initiative, others are on the drawing board.
From these developments one might infer that Islamic economics arose to advance an economic agenda. In fact, the doctrine emerged in late-colonial India as an instrument of identity creation and protection; at least initially, the economics of Islamic economics was merely incidental to its Islamic character. The purpose of the present paper is to substantiate this claim.
Almost no research exists on the origins of Islamic economics. Part of the reason, no doubt, lies in the rhetoric of the doctrine: Islamic economics claims to reflect the fixed, transparent, and eternal teachings of Islam, thus making questions about its origins seem equivalent to investigating the origins of Islam itself. By this account, Islamic economics has existed since the dawn of Islam, and the role of the modern Islamic economist has simply been to rediscover forgotten teachings. Whatever the exact connection between the substance of Islamic economics and the precepts of Islam, this view is fallacious. Some of the economic ideas and practices that are now characterized as inherently Islamic are new creations; and others, while not new, acquired religious significance only recently. Moreover, even the concept of Islamic economics is a product of the twentieth century. So it is hardly obvious why the doctrine exists, to say nothing of why it has generated Islamic norms, banks, and redistribution systems.
Compounding the puzzle about the existence of Islamic economics is the Islamic world’s generally low level of economic development, at least relative to Europe and North America. Given the prevailing pattern, it is not self-evident why Muslims, however devout, would look to Islam for solutions to their economic problems. True, the heritage of Islam offers principles, policies, and practices of relevance to modern economic problems; and in the religion’s early centuries Muslim-ruled lands made remarkable economic progress. But if these scarcely disputed facts justify and explain Islamic economics, why did the doctrine not emerge earlier? If the answer is that it is the Islamic world’s persistent underdevelopment that has led to a search for alternative economic programs, there is the point that the Islamic world passed its economic prime almost a millennium ago. The need for economic reforms has bean present for many centuries, yet Islamic economics is barely a few decades old.