© 2016

The Economic System of the Early Islamic Period

Institutions and Policies


Part of the Political Economy of Islam book series (PEoI)

Table of contents

  1. Front Matter
    Pages i-xxi
  2. Arabian Peninsula in the Eve of the Introduction of Islam

  3. Public Treasury and Public Finance

    1. Front Matter
      Pages 67-67
    2. Seyed Kazem Sadr
      Pages 89-133
    3. Seyed Kazem Sadr
      Pages 135-158
  4. Market and the Private Sector

    1. Front Matter
      Pages 159-159
    2. Seyed Kazem Sadr
      Pages 161-185
    3. Seyed Kazem Sadr
      Pages 187-207
    4. Seyed Kazem Sadr
      Pages 209-220
    5. Seyed Kazem Sadr
      Pages 221-243
    6. Seyed Kazem Sadr
      Pages 245-267
  5. Justice

    1. Front Matter
      Pages 269-269
    2. Seyed Kazem Sadr
      Pages 271-296
  6. Back Matter
    Pages 297-311

About this book


This book provides an economic analysis of the earliest Islamic society, focusing on the policies of the Messenger of Islam (Sawa) and his successors during the first four formative decades of Islam. Two institutions of great importance – the market and the public treasury (Baitul Mal) – and their roles in the development of the private and public sectors are particularly emphasized in this study. The first part of the book is devoted to the economic and cultural dimensions of life in the Arabian Peninsula during the pre-Islamic period, including an analysis of trade and financial relationships with the Roman and Persian economies; the challenges faced by the Messenger’s mission and the economic policies of the Messenger after the migration to Madinah are also examined in detail. The author then moves on to a devoted analysis of the nature and functions of the public treasury, its revenues and expenditures, as well as financial and fiscal policies. Also examined is the role of the public sector in maintaining equilibrium in the financial and real sectors, as well as in promoting economic growth and employment. Analysis of the institution of the market, its characteristics, and its functions during the earliest Islamic period constitutes the third section of the book. The behaviors of consumers, producers, and investors in an economy without an interest rate mechanism are also addressed here. The final section investigates the fundamental objective of Islam for human societies – that is, justice – within the context of discussions in earlier parts of the book. The author uses historical economic data, facts, and evidences that are reported from the period, both prior to and after the establishment of the Islamic State, to explore the economic relations, policies, and models that were in practice and applied at that time.


Islamic economics Economic systems Early Islamic Period Prophet of Islam Baitul Mal Market Institutes Interest free economy Public treasury Arabian Peninsula Messenger of Islam Medina Madinah Islamic treasury Early Islamic Era Consumption Theory Production Theory Muhammad Finance Ancient history

Authors and affiliations

  1. 1.INCEIF - The Global University of IslamiKuala LumpurMalaysia

About the authors

Seyed Kazem Sadr is Professor at the International Center for Education in Islamic Finance, Malaysia. He previously held the position of Professor at the Shahid Beheshti University, Tehran, Iran; he also has been a member of the Islamic Banking Drafting Committee and the Economic Curriculum Program in Iran. He is the author of several books and refereed journal articles on Islamic economics and banking, as well as natural resource economics. He received his PhD at Ohio State University, USA.

Bibliographic information

Industry Sectors
Finance, Business & Banking


“Seyed Kazem Sadr has made a great analytic contribution to the study of economic policies of the earliest period of Islam. The depth of knowledge and experience of the author has made the book a valuable, highly rigorous presentation of these policies and their impact. The book establishes the benchmark against which the performance of economic and social policies of Muslim societies can be measured. This is a must-read for anyone interested in understanding the devastating, accumulated adverse impact of the path-dependent divergence from the spirit and letter of the policies implemented by the Messenger. Immensely valuable also is the set of policy recommendations that flow from the superb coverage of economic analysis of the intentions of policies implemented by the Messenger.” (Abbas Mirakhor, First Holder Chair in Islamic Finance, INCEIF - The Global University of Islamic Finance, Malaysia)

“Seyed Kazem Sadr’s book is invaluable and scholarly, affording unique insight into the Islamic economic system in its purest form, as established by the Prophet in Medina. It will help Muslims question, debate, and engage their teachers, and in turn rediscover their own religion. While the Prophet’s interpretation of the Quranic economic system is indispensable, there is very little scholarly work on the subject. Sadr has made a major contribution by affording the world a rare glimpse into the birth of Islam in the Arabian Peninsula. It is a must-read for anyone wishing to learn about how the Islamic system should be practiced.” (Hossein Askari, Iran Professor of International Business and International Affairs, George Washington University, USA)

“We should be thankful to Seyed Kazem Sadr for sharing the fruits of his painstaking research on the economic system of the early Islamic period. This valuable research sets the stage for understanding the theory at work for and insight into laying the foundation of an Islamic economy. This book is definitely one of very few authentic and significant works on the topic and is an invaluable resource for the researchers of Islamic economics and finance, and policy makers interested in the introduction and implementation of an economy based on Islamic principles.” (Zamir Iqbal, Head, World Bank Global Islamic Finance Development Center, Istanbul, Turkey)

“This book is not just a descriptive exposition of the economic system which prevailed in the early Islamic period. It drills into the underlying concepts and theories that are familiar in the economic discipline, such as consumption, production, savings and investments, markets, public treasury, and the administration of justice and efficiency. It is a very significant and useful addition to the literature, not only as a reference but even as a text for Islamic Economics, a discipline that is gaining more ground globally by the day.” (Datuk Dr Syed Othman Alhabshi, Deputy President Academic, INCEIF - The Global University of Islamic Finance, Malaysia)

"Most Islamic economists ignore Islamic economic history and therefore fail to understand how Islamic economies actually functioned in the past. Seyed Kazem Sadr is one of those rare scholars who combines Islamic economic history and Islamic economics. In this book you will find an excellent explanation of the economic conditions prevailing in the Arabian Peninsula before Islam, the formation of the Islamic state, as well as the measures adopted to develop its economy. Fiscal and monetary policies of the early Islamic era are explored. The author then moves on from these historical analyses to develop a theory of modern Islamic economy. In short, the emphasis of the book evolves from how it was to how it should be. As such, this is an indispensable book for all those who wish to understand Islamic economic history and modern Islamic economics." (Murat Cizakca, Emeritus Professor, INCEIF - The Global University of Islamic Finance, Malaysia; and Adjunct Professor of Islamic Finance, University of Luxembourg)