By Sameer Arshad Khatlani
When Anwar Ibrahim was making his name as a promising student leader and the founder of the youth movement Angkatan Belia Islam Malaysia (ABIM) in the 1970s, the works of Indian economist Muhammad Nejatullah Siddiqi were among those the future Malaysian Prime Minister immersed himself in. Siddiqi’s enigmatic thinking drew Anwar and his ABIM colleagues to his works. A critic of the capitalist system and its banks, Siddiqi investigated its shortcomings, shaping many of the perspectives of Anwar and ABIM functionaries.
Anwar Ibrahim recalls his ‘exceedingly pleasant meeting’, as an ABIM representative, with Siddiqi at the Aligarh Muslim University, in his foreword to Mohammad Ahmadullah Siddiqi and Imtiyaz Yusuf’s book ‘Muhammad Nejatullah Siddiqi: A Mujaddid and Pioneer of Islamic Economics and Finance’ (2026). Anwar suggested Siddiqi (1931–2022) read the works of socialists to uncover the faults of capitalism, emphasising that analyzing arguments of both sides could offer a more viable alternative system. Siddiqi did not say much in response at that time.
Three decades later, when the two bumped into each other in Saudi Arabia’s Jeddah, Siddiqi exclaimed, ‘Yes, you [Anwar] were right, young man.’ In the intervening period Siddiqi wrote books such as Muslim Economic Thinking (1981), Banking Without Interest (1983), Partnership and profit-sharing in Islamic law (1985), Insurance in an Islamic Economy (1985), Role of State in Islamic Economy (1996), and Dialogue in Islamic Economics (2002), making him one of the pioneering thinkers and developers of the Islamic economics, banking, and finance.
Muhammad Nejatullah Siddiqi and Intellectual Roots of Malaysia MADANI
In the 2000s, Siddiqi was among the prominent Muslim scholars from across the globe whom the Malaysian government roped in to raise the level of intellectual discourse in Malaysia in line with Anwar’s idea of benefitting from their wisdom, which he floated when he became the education minister in the 1990s. Years later, themes of Siddiqi’s work, such as ethical economics, social justice, human dignity, and holistic well-being, resonated in Anwar Ibrahim’s MADANI policy framework.
In January 2023, Anwar Ibrahim unveiled the framework two months after becoming prime minister. The framework seeks to draw upon the Islamic concept of falah or success, happiness, and well-being. Anwar Ibrahim emphasises pursuing falah by ensuring sustainable economic growth, empowerment, and inclusivity for the spiritual, holistic well-being of individuals, communities, and the nation.
Siddiqi, who was appointed as Distinguished Professor at the International Islamic University of Malaysia in 2006, championed a structural and axiological rectification of an economic system increasingly characterized by wealth concentration and growing inequality. The 2008 financial crisis, originating in the US financial system, mortgage markets, and subprime lending, and the lopsided mitigation measures reinforced the criticism of the system. Instead of tens of thousands who lost their jobs, the US prioritised salvaging corporations with the $700 billion bailout package.
Alternative to Capitalism and Communism
The 2008 crisis was a major reality check for those who proclaimed the capitalist system as the only way to progress, following the collapse of communist regimes. It highlighted the profound disparity and inequality that the system entailed. For Anwar Ibrahim, Communism was never a viable alternative to capitalism, as it is prone to dictatorship by concentrating power in bureaucracy and controlling and regulating markets. This prompted proponents of Islamic economics to seek a viable alternative for a just and more equitable society, universal need fulfilment, human dignity with basic freedoms for all, and a distribution of income and wealth, while keeping inequality in check.
The Quran emphasises the defense of the oppressed, the weak, and the downtrodden. Justice, equity, elimination of corruption and oppression should be the hallmarks of a humane economy based on Islamic ideals, which prohibit monopolistic practices, oppression of the working class, corruption, extortion, and abuse of power. These ideals have been systematically codified and expanded within the corpus known as Maqasid al-Shari’ah, the higher objectives of Islamic law, for justice across all strata of society.
Siddiqi acknowledged the complexities involved in bridging ideals with practice and the gaps between idealism and reality, and tradition and present-day policies. He criticised the focus on the market rather than the family. Siddiqi focused on ethics, welfare, and Maqasid al-Shariah. He lamented the failure of Islamic financial institutions in adequately addressing inequality and poverty. Siddiqi criticised ‘the greedy whims of the free market’ that governed Islamic finance ‘like their conventional counterparts’.
Siddiqui argued that Islamic finance should have, at the outset, incorporated microfinance and cooperatives, calling these institutions fundamental to small enterprises and self-employment, the mainstay of Muslim economies. Siddiqi believed microfinance and cooperatives were critical for Islamic finance to live up to its spirit of poverty alleviation. He stressed that commercial banks should not be the sole vehicle for financial intermediation in Islamic finance and advocated liberation from the capitalist worldview. Siddiqi called for a return to humanity’s natural predisposition based on the perfection of ethics (li utammima makarim alakhlaq) in charting the Shariah-based economy.
Why Good Governance Matters for Islamic Economics
Anwar Ibrahim emphasises the need for clarity in policy and governance, and preventing leakage and corruption. He argues that Islamic economics and finance cannot function without good governance. An economic model cannot flourish in the absence of an appropriate legal framework. Anwar underlines that the Global South, including many Muslim-majority nations, is not inherently poor. Poverty often is a result of corruption and the squandering of wealth. Islamic instruments under poor governance will also hinder the fulfilment of Maqasid al-Shari‘ah.
Anwar calls for the need to address the fundamentals and establish good governance for the economic framework, policies, instruments, and institutions to work efficiently and successfully. He believes Islamic banking has been successful, but it constitutes little more than a stunted, minor reform, particularly within the broader framework of Maqasid al-Shari’ah.
Anwar Ibrahim advocates moving beyond interest-free banking, noting Islamic banks should be more than just conventional banks without usury, augmented by profit-sharing arrangements. He argues this limited reform of the conventional model, which has failed to fulfil its developmental promise, owing to inherent weaknesses in its practical application. He emphasises this does not represent the entire ideals of Islamic economics. It is a critical beginning, but it must evolve through islah mastata’tu, reform to the best of one’s ability.
Beyond Interest-Free Banking: Anwar’s Call for Reform
Anwar warns lucrative Shariah advisory allowances may induce a conflict of interest in quid pro quo. He argues the players often resort to legal stratagems to circumvent the Shariah, tilting toward the interests of capital. Anwar notes products are designed or endorsed to satisfy client demand, such as bay‘ al-‘inah, commodity murabahah, and tawarruq, whereby complex contracts are tailored to accommodate investors’ risk appetites. He adds they produce results similar to interest-based contracts in conventional banking without technically violating the usury prohibition.
For Anwar, four decades of experience call for a thorough postmortem to unravel the complexities and contradictions, partly because of being unknowingly subdued by a capitalist worldview and policies filtered through a lens of profit when ideals such as honesty, justice, and social welfare should be pursued. Anwar argues that the current ecosystem of Islamic banking has paid scant attention to the welfare of the poor and downtrodden.
Anwar Ibrahim remains optimistic, saying the idée force of scholars such as Muhammad Nejatullah Siddiqi, Umar Chapra, Zubair Hasan, Monzer Kahf, Khurshid Ahmad, and political will could help establish new financial infrastructure and products. The scholars have sought to transcend interest-based transactions rooted in the economy that critics argue allows creating money from money, enriching the wealthy and impoverishing the poor.
If you liked the article, share it with someone who needs to read it. The article draws on the foreword by Malaysian Prime Minister Anwar Ibrahim to the book Muhammad Nejatullah Siddiqi: A Mujaddid and Pioneer of Islamic Economics and Finance (2026). Analysis, contextualization, and conclusions in this article are the author’s own. You can reach us at mypluralist.plu@gmail.com
