Why study Islamic business today?

In the 21st century there is rarely major debate about the philosophical and theoretical underpinnings of contemporary economic strategy and practice. The theories of Adam Smith, David Ricardo and other major contributors to the classical school of economic thought, dominate the paradigm that shapes the study of economics and business in most western countries. This is particularly the case in the field of International economics, business and trade.

While in Western countries this may be the most relevant solution when looking at the future of the global economy, in many developing countries, in particular those with significant Muslim populations, there is a revival of discussion and debate about possible alternatives, in particular the relevance of the study and application of Islamic economic theory. In recent years, several countries have adopted new laws that allow the legal implementation of Islamic banking practice alongside other national banking systems and laws, for example in Indonesia and Pakistan.

International Economics theory and international business practice requires ongoing research and development in order to understand our complex global economy. In general, the basic tenets of Western economic thought do not include discussion or analysis of philosophies of Islamic economics.

Why should people be studying Islam in Indonesia?

Contrary to popular belief, the majority of the world's 1.6 billion Muslims actually live outside the Middle East. In fact, Indonesia - the fourth most populous nation in the world - has more Muslims than any other country. Religion in Indonesia has a far-reaching impact on its society - from the level of people's day to day lives to the level of government policy making. Today, Islam is the most influential religion in the political and social life of most Indonesians. Islam has been accepted, in many social forums, as an essential part of people's daily lives as well as an important factor influencing political and economic policies. At the same time there is a great diversity of religion, ethnicity, language and culture and the Indonesian people have always demonstrated an extraordinary capacity for tolerance and acceptance of these differences. The Islamic business and economic system has been an item of concern for pious Muslim academicians as well as businessmen for centuries. It is not a philosophy investigated only by Muslim academicians, but has also become a field of great interest to non-Muslim academicians. More recently, Islamic economic theory and practice has been viewed as a key part of a broader movement to achieve a more just Islamic order, in many different aspects of social life, not only in the field of economics.

Over the last few decades there has been a wide ranging discussion of the possibility of applying Islamic approaches to business and financial policy which has culminated in recent years in the adoption of new laws that have begun to integrate Islamic economic theory (particularly that influencing financial and banking policy) into mainstream finance and banking practice. The Indonesian government introduced new laws in 1992 that allowed the possibility of a dual banking system, that is the introduction of an Islamic banking system alongside the regular banking system. In 1998, the Indonesian government introduced the Islamic Banking Act. Subsequently, Islamic banks have grown rapidly. This growth has encouraged the development of non-bank Islamic financial institutions, including in the field of Islamic insurance, Islamic capital market, Islamic mortgage and Islamic microfinance institutions. More than 2000 Islamic microfinance institutions have emerged throughout last decade. The development of Islamic economics and business studies has been rapid in many Muslim countries. However, this development is different in every country, as each different has its own unique culture, social and political history and circumstances. Islamic studies in Middle Eastern countries make a contribution, mostly on a practical level, to developments in Islamic culture and society. Studying Islamic economics in Indonesia is very different. As the largest Muslim country in the world, you have the opportunity to access the developments in Islamic thought and knowledge, as well as the practical developments of South Asian Muslim cultures, and more specifically to understand Indonesia's role in Islamic economic developments.

The development of Islamic economics and its application in Indonesia have experienced rapid growth and had a far-reaching effect on Indonesian economic developments. It is expected to increasingly influence the economic and business relationship between Indonesia and other countries, especially between Indonesia and their nearest neighbors. It should be emphasised that there is a need for mutual understanding between academicians both in Australia and Indonesia, in particular about developments in the Islamic movement, and those pertaining specifically to economics matters. The Islamic Studies program provides a framework to study and understand the complexity of this modern Muslim society.

Australian academic Rebecca Meckelburg – a political scientist who has been living in Indonesia for a number of years – is the former manager of international program development at UII. She says that there are many differences between Islamic economics and western economics:

"Many developing countries with growing Muslim communities have large reserves of natural resources and significant potential for growth and development of their human resource base. Many are seeking collaborative partners for the development of their economies, infrastructure, technology and management practices. Australians and other people trained in western philosophies, in particular in the field of Economics, need to have a good understanding of Islamic business practices. As business extends further into Islamic countries, the next generation of business executives needs to know more about a country than its GDP figures. They need to have an understanding, for example, of syariah accounting and banking practice and Islamic business ethics."

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