Islamic capitalism - AbsoluteAstronomy.com

Proto-capitalist economies and free market

Free market

A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

s were active during the Islamic Golden Age

Islamic Golden Age

During the Islamic Golden Age philosophers, scientists and engineers of the Islamic world contributed enormously to technology and culture, both by preserving earlier traditions and by adding their own inventions and innovations...

and Muslim Agricultural Revolution

Muslim Agricultural Revolution

The Arab Agricultural Revolution is a term coined by the historian Andrew Watson in his influential 1974 paper postulating a fundamental transformation in agriculture from the 8th century to the 13th century in the Muslim...

, where an early market economy

Market economy

A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...

and form of merchant capitalism

Merchant capitalism

Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economic and social system. Early forms of merchant capitalism were developed in the medieval Islamic world from the 9th century, and in medieval Europe from the 12th...

took root between the 8th–12th centuries.

A vigorous monetary economy was based on a widely-circulated currency

Currency

In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

(the dinar

Dinar

The dinar is the official currency of several countries.The history of the dinar dates to the gold dinar, an early Islamic coin corresponding to the Byzantine denarius auri...

) and the integration of monetary areas that were previously independent.

Business techniques and forms of business organisation employed during this time included:
contract Contract A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific... s
bills of exchange
long-distance international trade International trade International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
forms of partnership Partnership A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace... (mufawada) such as limited partnership Limited partnership A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,... s (mudaraba)
forms of credit Credit (finance) Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
debt Debt A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
profit Profit (accounting) In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
loss Income statement Income statement is a company's financial statement that indicates how the revenue Income statement (also referred to as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations) is a company's financial statement that...
capital Capital (economics) In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process... (al-mal)
capital accumulation Capital accumulation The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money... (nama al-mal),
circulating capital Circulating capital Circulating capital refers to physical capital and operating expenses, i.e., short-lived items that are used in production and used up in the process of creating other goods or services. This is roughly equal to Intermediate consumption. It includes raw materials, intermediate goods, inventories,...
capital expenditure Capital expenditure Capital expenditures are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year...
revenue Revenue In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
cheque Cheque A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account... s,
promissory note Promissory note A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or... s,
trusts (see Waqf Waqf A waqf also spelled wakf formally known as wakf-alal-aulad is an inalienable religious endowment in Islamic law, typically denoting a building or plot of land for Muslim religious or charitable purposes. The donated assets are held by a charitable trust... )
savings account Savings account Savings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return... s
transactional accounts
pawning
loan Loan A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.... ing
exchange rate Exchange rate In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency... s
bank Bank A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:... ers
money changer Money changer A money changer is a person who exchanges the coins or currency of one country for that of another. This trade is thought generally to be the origin of modern banking in Europe.... s
ledger Ledger A ledger is the principal book or computer file for recording and totaling monetary transactions by account, with debits and credits in separate columns and a beginning balance and ending balance for each account. The ledger is a permanent summary of all amounts entered in supporting journals which... s
deposits Deposit account A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
assignments Assignment (law) An assignment is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party—the assignor—to another party—the assignee...
lawsuit Lawsuit A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint... s.

Organization

An organization is a social group which distributes tasks for a collective goal. The word itself is derived from the Greek word organon, itself derived from the better-known word ergon - as we know `organ` - and it means a compartment for a particular job.There are a variety of legal types of...

al enterprises

Business

A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

independent from the state

State (polity)

A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...

also existed in the medieval Islamic world, while the agency

Agency (law)

The law of agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when a person, called the agent, is authorized to act on behalf of another to create a legal relationship with a third party...

institution was also introduced.

Many of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.

Further reading