Private Investment: It's Determents and it's Directors in an Islamic Economy

In an effort to explore an Islamic conception of the fundamental relationships between macroeconomic variables—foremost among them private investment—this paper adopts an abstract and theoretical approach as a modest contribution to formulating an economic theory consistent with the Islamic economic paradigm. Within this framework, the study analyzes the effects of relevant rulings and values in a hypothetical Islamic economy. It highlights the implications of prohibiting interest, imposing zakat, and forbidding hoarding, all of which necessitate the mobilization of idle capital.
The paper also observes the effects of the distributive system and consumption controls in expanding market size, thereby generating effective and growing demand that stimulates and sustains investment. It further considers the impact of these dynamics on aggregate supply elasticity. Moreover, Shariah rulings and the system of values direct private investment—first through the incentive of profit within the boundaries of legal rulings, and second through the broader framework of Shariah-oriented policy.
A preliminary assessment of these rulings and values in an Islamic economy indicates higher levels of private investment, greater stability, and closer alignment with the genuine needs of society, provided that the Islamic economic paradigm is upheld.