Trade in the Muslim World—Then and Now

15.07     Trade—and its financing—has always been central to the economy of the Muslim world.

As land was mostly unfit for agricultural production in southern Arabia, Arabs tended to become traders, manufacturers, navigators, transporters, and middlemen.

historical account indicates that prior to the advent of Islam, the trade activities of the Arabs had acquired significance as the agropastoral economy had merged with the commercial economy of the market towns.^[1583] Therefore, Islam likely originated in a dynamic trading culture, which at the time was ruled by a wealthy tribe known as the Quraysh. The Qur'an itself has been described as the embodiment of the relations between man and God of a ‘strictly commercial nature'. Allah is the merchant and the universe his reckoning, where all is counted, and everything measured. His institution is the Qur'an and He establishes a pat­tern of honest dealing. Life is a business in which man gains or loses.^[1584] Indeed, the sharia is highly attuned to the benefits of trade. The Qur'an states, ‘let there be among you traffic and trade by mutual good will'^[1585] and a number of prophetic traditions attest to the merchant's exalted role in the afterlife, such as Muhammad's proclamation that: ‘the merchant who is sincere and trustworthy will (at Judgment Day) be among the prophets, the just and the mar­tyrs’^[1586] Indeed, the Prophet Muhammad is to have been the agent of a qirad investment with his future wife Khadija and is considered to have been a successful trader in his own right.^[1587] Furthermore, it is estimated that over 75% of jurists that lived during the ninth and tenth centuries engaged in commerce or handicrafts or had family who did.^[1588] In fact, the founder of the Hanafi school of Sunni Islam, Abu Hanifah, was a partner in a venture involving the export of silk from Kufa to Baghdad.^[1589]

15.08

The commercial impulse of Islam, which may distinguish the religion amongst the mono­theistic faiths, was evidenced in the practice of medieval trade.

15.09 In the modern world, trade within the Muslim world has only grown in importance, with over 20% of all trade between Organisation of Islamic Cooperation (‘OIC’) countries in 2015 being with other OIC states.^{[1594] [1595]} In 2005, such trade only constituted 15% of the total,^[1596] which demonstrates that intra-OIC trade is of ever-increasing importance to the Muslim world. Yet, contrary to its historical prominence, the Middle East and North Africa (‘MENA’) region has generally been seen as one which under-trades with other countries, relative to its GDP and a number of other factors.^[1597] In 2017, the MENA region contributed only 5% of global exports and 4.3% of total imports.

15.10 Islamic trade finance is seen as having great potential in this context, but it is important not to overstate the current importance of sharia-compliant trade finance to intra-OIC trade. While the International Islamic Trade Finance Corporation was set up by the Islamic Development Bank to facilitate sharia-compliant trade finance and has successfully used sharia-compliant trade financing in projects from Kazakhstan^[1599] to Burkina Faso,^[1600] sharia- compliant trade finance accounts for only 1.14% of intra-OIC trade according to a 2018 article.^[1601] Therefore, while the Islamic finance industry—including Islamic trade finance— is growing, it remains a niche market in all economies apart from those which have fully Islamised their banking systems or in which Islamic banking and finance have become sys­temically important.^[1602] Nonetheless, the industry provides a useful case study for examining modern Islamic trade-finance mechanisms, their classical roots, and the implications of technological development.

III.