Derivation of Economic Principles from the Seerah of Prophet Muhammad ﷺ and a Critical Analysis of the Current Global Financial Crisis

Abstract

This research critically assesses the economic lessons from the Seerah of Prophet Muhammad ﷺ and their application as an alternative to the current global economic crisis of 2025-2026. The study demonstrates the pitfalls of the capitalist interest-based economy with rampant debt, speculative markets, income inequality, ethical degradation, and periodic financial bubbles, which have resulted in inflation, joblessness, poverty, and economic instability. By contrast, the Prophetic economic system prioritises justice, risk-management, ethics, moderation and real economic growth. The research draws on the Meccan and Medinan phases of the Seerah to identify key principles such as the prohibition of usury (riba), prohibition of hoarding (ihtikar), encouragement of profit-loss sharing (mudarabah and musharakah), zakat-based wealth redistribution, fair trade practices, and state regulation of markets. The principles are juxtaposed with modern economic aberrations such as interest-based debt cycles, scarcity, consumerism and moral decay. The study also examines the implementation of these principles in contemporary Islamic finance, takaful, zakat-based social welfare and ethical finance. The study shows Islamic finance has excelled during the 2025-2026 crisis, far better than conventional finance due to its asset-based and risk-sharing structures. The research concludes that the Seerah provides a holistic, ethical and sustainable economic model that can resolve current issues such as inequality, financial crises and environmental sustainability. It recommends embracing Prophetic principles to create a just global economic system in the interests of humanity and sustainability.

Keywords: Seerah of Prophet Muhammad ﷺ, Islamic Economics, Global Financial Crisis 2025-2026, Interest-free Banking, Zakat and Wealth Circulation, Ethical Finance, Profit-Loss Sharing, Sustainable Economy