13 Islamic Economics: A Survey of the Literature Part III

The Role of Islamic Institutions

True piety does not consist in turning your faces towards the east or the west —

but truly pious is he who believes in God, and the Last Day, and the angels, and

revelation, and the prophets; and spends his substance — however much he

himself may cherish it — upon his near of kin, and the orphans, and the needy,

and the wayfarer, and the beggars, and for the freeing of human beings from

bondage; and is constant in prayer, and renders the purifying dues; and [truly

pious are] they who keep their promises whenever they promise, and are patient

in misfortune and hardship and in time of peril: it is they that have proved

themselves true, and it is they, they who are conscious of God (Qur’┐n 2: 177).

There are certain uniquely Islamic institutions, based directly on Islamic law

and/or well-established historical Islamic practices, which have a strong

influence on economic structures within an Islamic society or state. Many of

these institutions became defunct or marginalized in a long and complex

historical process of decay. The ‘modern’ expectation that all societies will

travel along the same path, so that the Islamic heritage is only of historical

value, has proven to be unfounded. An active search to rediscover the spirit of

Islamic institutions and revive them is going on in the Islamic world (the

Qur’┐nic verse cited above shows that the spirit of piety is of the essence while

the forms can vary). There is also the challenge of adapting them to

contemporary requirements, or creating new institutions which conform to

Islamic laws while meeting modern needs. It is the tension between Islamic

ideals and goals and the existing unsatisfactory mélange of colonial/

modern/Islamic structures which gives impetus to Islamic movements all over

the world. Below we treat Islamic financial institutions, insurance, waqf (trusts