In The Name of Allah

Dr. Mohamed Elgari

A study of history reveals that Muslims have a rightful claim to be called the orginators of the practice of marketing as well as the theory of marketing .

Current attempts to identify marketing as a twentieth century discovery , and the west , especially the USA, as the country of its origin is incorrect.

Muslim Literature reveals the identification of marketing and its various function by the muslims nearly a thousand years ago . In fact , had it not been for Islam marketing would probably have been an undesirable activity and the subject of marketing and its teaching and study banned in the civilized world .

Wherever the progress of civilizations is discussed unbiased scholars accept the contributions of Islam as undisputed .

However , modern students of business management and economics  are brainwashed (there is no other appropriate word) into believing that modern civilization started after the industrial revolution . for them economics starts with the wealth of nations . In fact the literature available to a university students in the normal course of his studies practically never mentions any thing earlier than Adam Smith , or if any , in a perfunctory manner . Students have a vague idea of pre-Smithian economics . Mostly  it is Greek thought . A vast chasm of a thousand years then intervenes till St. Thomas Aquinas (1225-1274, and another gap of five hundred years till Adam Smith appears on the scene . The period immediately before Smith id characterised as chaos and confusion , and Adam Smith is presented as having brought enlightenment into economic thought and , later , order in the chaotic economies .

Subsequently , students are taught , as progress was made , and nearly after a century and a quarter , when the productivity and production of the industries improved beyond a certain level , the impotance od sales was realised , and later still the concept of marketing crystalised in America during the middle of the present century .

The result is that a student bred on these ideas develops a narrow and biased view of marketing and economics as western discoveries . and marketing as purely a modern and American invention . Consequently , the practitioner of marketing as well as its student always turn to the West to discover the latest developments in practice as well as theory , and often try to follow these to the best of their ability . The Muslim marketing practioner , as well as the student , is unable to stand on his own feet . When the relationship between Islam and economics or marketing is discussed , even a Muslim students is at a total loss and fails to comprehend the relation between religion and a wordly subject like economics . When it comes to marketing , for him there is no relationship , and if any , he would believe it to be probably a negative one , or at the most concerned with ethical aspects such as correct measure and weighing , fair dealing , etc.

This unfortunate approach prevents the appreciation of the true contribution of Islam and distorts the perspective about the future . By developing an image of the West as the creator of the modern world, it makes the Muslim student feel that he has neither the philosophy nor the concepts suitable for the twentieth century , and that if he wishes to survive and make progress, he has to borrow his philosophy as well as the concepts and tools from the west . Not surprisingly , even though amongst religions only Islam has ordered acquisition of knowledge as compulsory , it is the well educated ones who question most the contribution of Islam to human progress, and the relevance of Islam in a modern enlightened world . This is because the real contributions of Islam in restructuring society , especially in the economics sphere , on modern foundations have not been discovered or discussed at all .

The purpose of this article is to briefly present the true role of Islam in restructuring     human society , then to show that the practice of marketing have their foundations in the philosophy offered by Islam , and then present some thoughts of Ibn Khaldun on marketing though writers earlier than Ibn Khaldun had also significant ideas on economics and marketing, I have limited the scope of this article to only Ibn Khaldun.  

By the birth of the specialization era and division of work, many  profitable activities have changed into institution with specific functions. The same thing can be said about the financial inter-mediation that had been practiced within the framework of social relationship, when monks working at their monasteries, Pharaoh, tribal sheikhs and senior traders etc, undertook the role of financial inter-mediation.

However, things had evolved to specialized institutions conducting financial inter-mediation, namely the banks. Traditional banks had therefore been set up to offer financial inter-mediation through loan (from surplus category) and lending (to deficit category). Conditional profit in loans evolved in order to cover the expenses and achieve profits to depositors. Banks in the beginning were maintaining deposits free of charge.

When fierce competition surfaced between banks, they were unable to attract savings without stipulating terms of profits to the depositors. Therefore, traditional bank became a loan seeking and lending institution whose underlying source of income is the difference between positive and negative interest. But, was it possible for the depositors to give loans directly to the investors without the services of the bank?

Contemporary analysis look at the bank as specialized information institution. Securing of true information, follow up and collection of data are indeed a highly expensive processes, yet such banks apart from individual are enjoying the characteristic of economies of large scale which enables such banks to pursue the above processes in a relatively low expenses.

Therefore the conventional work of the bank had been based on isolation of depositors (surplus category) from investors and those seeking finance for their projects (deficit category), as depositors normally do not give attention to the risks of end lenders, as they only take the risk of depositing their monies at the bank, if there is any.

However, the bank takes the risk of end lenders whom it had separated from sources of money. Though, if the lender fails to cover payment of its debts, then the risk will be borne by the bank itself and in normal cases should be indemnified from its profit or capital. However, observers to development of banks in recent days, see clear debility of the role of commercial banks which are based on the concepts of loan giving and lending in sophisticated economies, mainly because improvements relating to maintaining the information and methods of surveillance have led creditors to lean directly towards contacting the investors. Money markets have therefore played an increasing role in financial inter-mediation because they give the creditors the opportunity of bearing direct risks on behalf of the users of money, while the function of banking institution is management on behalf of others, maintaining service charge and arrangement of deals … etc, are seen by many observers as a trend which will prevail for long time over the contemporary financial development and will lead, as time passes to a further deterioration in the traditional role of the commercial bank (i.e. isolation of risks).

We would see for example, that the revenues acquired by banks such as service charge are increasingly growing in relation to revenue from profit. For the purpose of illustration, the share of commercial banks decreased in the last twenty years in the total U.S financial assets from 40% to 25%, because they were directed towards management of monies instead of lending. As a result of this different mode, securitisition were widely spread, giving the depositors the chance of bearing the responsibility of direct risk of money.

Islamic bank is best known for its financial inter-mediation function which operates without interest. Since about one century ago, Muslims had reached the conclusion that the interest given by banks is the core of forbidden usury, because the increase in the loan which is the fundamental function of traditional banks is considered as part of usury and for this reasons banks were not widely known between Muslims except during colonial periods – despite its long rooted practice by the Europeans, since many hundreds years go. Muslims had therefore strived, after maintaining independence by their respective countries to establish banking systems that will be harmoniously coherent with the rules of Shari’ah (Islamic law).

They realized that financial inter-mediation is deemed to have been a basic function in the life of human societies and that Muslims, had adopted long time ago certain arrangement which would fulfill the need of financial inter-mediation. Transfer of money from the surplus category (i.e. the number of individuals and institutions that owned financial resources surpassing their immediate demand) to the deficit category (i.e. those who require financial resources over-exceeding what they now acquired) were conducted in the past in accordance with the Mudaraba mode.