Khurshid Ahmed - The Father Of Islamic Economics

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In the contemporary world, economics as a subject has segregated itself from being a branch of Social Sciences and has emerged as an independent discipline. Particularly, the west has transformed the global economy by engineering economics to add maximum value to the self-interests of the people, but in the pursuit of such objective, the social-moral paradigms have been completely ignored. The notion that accumulating wealth and increasing income would bring bliss to one has been instilled in humans, and it affects a person from the time he is a child which in turn changes our perception of happiness. It is however true, that the advances in the economy through prevalent models like capitalism and socialism have been unprecedented, but it has also separated ethics from economics in doing so.

On the contrary, Islamic economics has set up its foundation by interlinking political, ethical and economical aspects. Therefore, the objective of Islamic economics is not only to formulate a framework for the welfare of individuals, but also affect the society by incorporating moral, ethical and social components. In formulating such a framework, Islamic economics has recognized the need of private ownership and market mechanism for efficient allocation of resources, but it doesn’t agree with the concept of free market wholly because of the fact that it is not beneficial for society as a whole. However, there are still differences among the Muslim intellectuals regarding the methodology that is the best for the society. So, they can be divided in four groups.

The first one of them are the Sufis whom are the religious scholars. The Sufis worked voluntarily and justified the interpretation of specific practices by drawing analogy from past events rather than by reasoning. The second are the modernists who accept that religion and socio-political life have separate paradigms. The modernists, as the name suggests, are influenced by the modern economical systems and so they attempted to revamp the systems by deriving an idea from the existing system and align it with religion. The third are the secularists who actively follow the contemporary western framework for each and everything.

The last are the Neo Revivalists whose major leaders were Syed Ahmed Sirhindi, Shah Waliyullah Dehelvi and Moulana Abul ‘Ala Mawdudi. They criticized the predominant structures and explicitly bolstered the involvement of Islam in every sphere of life. The point which is to emphasize on, is the influence of Moulana Abul Ala Mawdudi on Khurshid Ahmed. Khurshid, also known as Father of Islamic Economics, was born on 23 march 1932 in Delhi. His father, Nazir Ahmed Qureshi was Muslims’ activist and advocated the Muslim League’s independence movements. He was also a close friend of Moulana Abul Ala Mawdudi and this relationship played a significant role down the road. Khushid Ahmed completed his early education in traditional Islamic studies Delhi before migrating to Pakistan where he obtained two Masters Degrees from University of Karachi in economics and Islamic Studies. Even before migration, he was greatly influenced by the activities of his father and had even gotten elected as President of Children’s League in Delhi. Along with excellence in academics, he also depicted great leadership skills as he led protests for the purpose of Pakistan’s independence.


In 1949, he joined Islami Jamiat e Tulaba (Student wing of Moulana Mawdudi’s party), where he understood the philosophy of Moulana Mawdudi and the importance of Media to propagate the ideologies of individuals. This was the point where Khurshid’s beliefs began to be impacted by Moulana Mawdudi’s notions. During this time, he launched books, articles, newspapers to enlighten the Muslim world with Islamic perspective on all matters of life. Furthermore, he became the director of Islamic Foundation in Leicester, England. Therefore, his ideas and beliefs aligned with the Neo Revivalists as he attempted to change the socio-political and economical infrastructures with the guidance of Islam.This is the reason why I have chosen Khurshid Ahmed to write on as he is one of the few who marked an important era in the development of Islamic Economics as an applied discipline. Although, he didn’t write as extensively as other Islamic scholars and economists, his work did set up the basis of what is today known as Islamic Banking. The practical implications of his work are numerous.


Khurshid Ahmed stands for cooperation between the West and Muslims as he doesn’t refute all the values of international political and economical systems keeping in mind the pros and cons of them. However, he, as an advocate of Islamic philosophy, considers Islam to provide superior methodologies for humans to retain a balanced life, and stands firm on his belief that if Islam is to be completely opposed by following the current norms then no feasible ground for cooperation can be achieved. The prevalent Western models, Capitalism and Socialism, are based on two main economic drivers which are the market and government. In the former, the private forces prevail in the economy as efficient allocation is achieved through market forces of demand and supply. Compared to this, the latter offers a dominant government and public sector role along with a minor private sector role to guide the economy. In both of these models exist flaws which have time and time again have depicted negative consequences.

Firstly, Capitalism is based on principles which only benefit a few rather than the society as a whole as everyone has his/her own aim of obtaining the maximum benefit. Moreover, the contemporary form of such model is promoting the extension of financial assets rather than the physical ones. The usage of financial assets doesn’t add value in the creation of physical assets and along with this it only benefits the affluent, thereby widening the gap between the rich and poor. As a result of this, financial instabilities occur in a numerous magnitude and frequency, and the burden of rescuing a failing economy rests on the shoulders of the ordinary people. In contrast to this, the dominant role of government acts for the benefit of the society, but it demotivates the people with the stringent restrictions.


Being a modern Islamic economist, Khurshid Ahmed attempted to integrate morals and ethics described by Islam with the economic policies. Therefore, it aims to provide a socio-ethical model to resolve the problems faced in the world. The foundation of such economics is based on three principles which are the following: Firstly, Islamic economics is a subset of the religion Islam, hence it derives the rules and regulations from Islam. Secondly, it aims to resolve all economic matters and activities just as the conventional systems do. Lastly, it has defined the domain of principles in accordance with Islam, which everyone should refer to before making their choices. Moreover, the following Islamic concepts are the core of this model. The first is Tawheed. The second is Rububiyyah (that Allah is the sole provider and sustainer).

The third is khilafah (that man exercises delegated power on behalf of Allah and is also accountable in front of him). The last is Tazkiyah (sacrifice, charity). These axioms elucidate how the world and its resources are not for the benefit of individuals rather than they are to be used in a way to collectively benefit the people. To further elaborate upon it, all of these axioms are correlated with each other. Tawheed means the belief that Allah is one and omnipotent creator of everything. Therefore, all of His creations are equal which is linked with Rubbubiyyah in the sense that Allah provides for His Creations. Moreover, since the resources are all from Allah, the people have to use them for the joint goodwill (khilafah) rather than for materialistic purposes and also make sacrifices to move towards equal growth opportunities. Therefore, the aim of Islamic economics is that people hold themselves responsible for their actions and use the concept of trusteeship given by Allah to act in a way confined by Islamic boundaries.

Khurshid, however, doesn’t condemn the objective of personal profit as in the case of capitalism, but restricts it so that a situation of abnormal profit doesn’t arise. So, for his model, a three-sector economy is the way forward. The three-sector economy consists of the private sector, the altruistic sector and the public sector. Khurshid means to draft a whole new framework within the Islamic domain for each and everything such as education policy, patterns of consumption, economic policy, taxation, fiscal and monetary policies, judiciary and law. In a nutshell, it is essential for every sector to work within the Islamic parameters for this model to perform. For this to work, it is necessary for the political and reigning authorities to implement Islamization from top to bottom. Ahmed also commended the Islamic Ideology Council’s idea of profit and loss sharing and considered it much superior compared to the interest-based system.

The concept of Zakat also holds a lot of significance in this model as Islam stresses for unbiased distribution of income. Thus, the rich have to give out the poor a part of their income. However, Zakat consists of other components like Ushr, Khums, Kharaj and other charges which could be used to facilitate fiscal policy. As stated earlier, the ideal economy in the perspective of Khurshid Ahmed consists of three sectors. So, the state, although performing a caretaker role, has more power to resolve issues than the state we see in the typical mixed economy. The state can takeover the idle assets or ask the affluent to contribute more for the welfare of the people, given that the disparities between the standards increase vastly. The state, therefore, is encouraged to use the tools of zakat and other levies to uphold the equality.

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Ahmed has also condemned the modern interest-based economy which is globally prevalent. He asserted that the interest acted as a tool for those in control to take more control by giving them debt. According to him, the poor nations who have relied on this system have not been able to improve their situation. He took the example of Pakistan, that the loans and foreign aid haven’t helped the cause of the country. The foreign aid comes with strings attached which coerces the country obtaining aid to fulfill the demands of the other party. The impact of such conditions is direct interference in the affairs of the country. Hence, he called for a self-sufficient system in which the countries would be able to use their domestic resources with complete autonomy. His ideal self-sufficient system relies on having complete faith in Islamic principles as he further reiterated his philosophy that Muslims desire to have their own system rather than depending on the ones created by non-muslims.

The autonomy and self-sufficient theory don’t mean that Khurshid Ahmed has refuted the concept of globalization. According to him, phenomena of globalization interconnects every country which hinders complete isolation; nevertheless, the pride and sovereignty of a country is a necessity in order to truly achieve the well-being of people. In December 1990, a committee was formed whose aim was to form a feasibility report on self-reliance for not only in economics but also all other sectors. Khurshid Ahmed was appointed as the Chairman of the committee, and the committee concluded that the foreign aid is more harmful than beneficial. Ahmed also suggested to eliminate riba completely from the system and pointed out that all the past attempts had serious issues which made them futile.

He devised two stages to eradicate interest. The first stage removes it from domestic economy and then the second stage does the same from external economy. Moreover, to facilitate this project, he came up with the idea of setting up “Debt Liquidation” mutual fund. Apart from this, the foreign debt was recommended to be cleared through renegotiating and restructuring the loans. To make achieve this objective, he also came up with the idea of using public finance and to form a ‘National Self-Relief Fund’. This idea was implemented but subsequently due to political chaos, it was overturned. These proposals and policies later on became the reason of Islamization in the Banking Sector.


The philosophy and influence of Khurshid Ahmed initiated since his early life. Though, the major impact started from 1968 when he, as a member of foreign relations of the party Jamaat e Islami, went to Great Britain and lived there for a decade. There, he invested his time on propagating Islamic values through various means including being a research scholar at University of Leicester (1969-1972) and as a member of executive council of Islamic Council of Europe. Aside from this, he travelled incessantly to promote Islamic ideologies in Africa, America and Europe. His efforts are evident as he took on different office positions such as being a member of advisory council of Centre For Study of Islam and Christian-Muslim Relations and as a Vice President of Standing Conference on Jews, Christians and Muslims in Europe. His turning point for efforts in Pakistan came when Zia Ul Haque took over Bhutto’s government and seized power. Bhutto was an advocate of Socialist form of government and was opposed by religious scholars and parties who wanted to introduce Islamic concepts in the administration.

Thus, when Bhutto was removed from power and Zia Ul Haque, who supported Islamic framework, proposed a system to align with Islam, gave the religious scholars an opportunity to work for what they believed in. On his return to Pakistan, Khurshid was made Federal Minister and also the deputy Chairman of Planning Commission. In this time, his philosophies became prevalent as he took over the responsibility of developing Islamic Economics and taught this discipline in universities. Subsequently, due to his active involvement in such affairs, he was made Chairman of International Institute of Islamic Economics and also a member of Advisory Board of International Centre for Research in Islamic Economics (Saudi Arabia).

Subsequently, Khurshid Ahmed received due recognition internationally. He laid out the foundations for Islamic Banking through development in economic mechanisms and concepts. For this, he received the first Islamic Development Bank accolade in 1988. Ahmed is still actively involved to fulfill the objectives he set out to achieve. As an example, he still holds the President’s office for International Association of Islamic Economics, a position he attained in 1986. His excellence and achievements for the development of Islamic world doesn’t stop here as in 1990 he was also honored with King Faisal International Prize which, in Muslim World, holds a similar stature to that of Nobel Prize. Later in 1998, American Finance House awarded him with their 5th Annual Prize for his services.


The title of Father of Islamic Economics is something which speaks volume on the diligence and efforts of Khurshid Ahmed. His economic model incorporates all aspects of human life rather than just materialism. His belief is that the development doesn’t only mean that humans achieve material success, rather it should be defined by the complete life humans live. Meaning, a life in which spiritual, moral and material aspects are merged and nurtured to achieve collective success for the society. This success is not only for this life, but also the life after death and this is what he conceived was achievable through Islam. As such, the economics he devised is only a part of the Islamic values and way of life.

The struggle to introduce such a new and different concept to the world was only possible through international involvement. He, therefore, conducted conferences in different countries. One of them was in Makkah in1976, where Ahmed elaborated upon his objectives and the solutions to the problems in contemporary world. This attempt to propagate his beliefs is widely recognized as the milestone which cemented the introduction of Islamization in the Banking and Financial sector. To carry on his work and research, Ahmed founded a distinct organization, Institute of Policy Studies, Islamabad, whose sole purpose is to find feasible solutions to the contemporary problems in economics.

On 6th January, 1981, the institute successfully carried out a seminar to pitch in their idea. They divulged a new approach for creating the monetary system for Islamic Finance. The pioneer of Islamic economics, Khurshid Ahmed, was successfully able to create a pragmatic effect through his philosophy. Although initially, what started as his major contribution in the name of Islamization Plan in Zia Ul Haque’s era didn’t achieve the limelight it was supposed to, it still didn’t stop Ahmed’s ideologies to carry on to the later generations.

Today, a strong sector of Islamic Finance and Banking exists as there are over 400 such institutions worldwide. According to the pioneer of such a system, Islamic Banking and Financial institutions shouldn’t be evaluated on the basis of the profit they generate but rather on the basis of the impact they create on the society. Still, a question arises as to why despite all the efforts through literature, articles, seminars, volumes of research paper and also recognizable seats in International forums, Khurshid couldn’t succeed in completely achieving his objective and eliminating riba. The economy of Pakistan is still not completely what he desires. Even now, majority of the economy runs on interest and the usage of the concepts of mixed economy (a combination of public and private sector).

The possible answer to this question lies in a quotation of Moulana Mawdudi. He said, “Calling to Truth and working for an Islamic Revival are time-consuming job, and a true believer should work not only with great passion, but also constantly and patiently, just as a farmer does …then after the years of waiting the tree will bear fruit” [Mawdudi 1950]. (Hassan, 2010)The Islamic Republic of Pakistan was the objective of Muslims to live their life in a land where they had autonomy. The dream of having a separate country did come true, but due to human nature, the nation has gone astray. Greed and corruption has filled our hearts to an extent where it is evident in even ordinary individuals, let alone those in power. Furthermore, due to illiteracy and usage of Islam as a tool just to achieve power, the true vision of Islam has never been fulfilled.


  1. Bhat, N. (2016). The economic thought of Khurshid Ahmed. Retrieved from
  2. Esposito, J., & Voll, J. (2001). Makers of Contemporary Islam. Retrieved from’%20the%20father%20of%20islamic%20economics&f=false
  3. Hassan, M. (2010). Islamic Approach of Economics: Some Discourses on Khurshid Ahmad’s Vision of Socio-Economic Order, Self- Reliance and Economic Development. Retrieved from
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