Religion and the Economy

How religious beliefs, institutions and practices influence economic life, from finance rules to charitable giving and pilgrimage economies.

Religion shapes the lives of billions of people, and with them, many economic choices. Economists study how religion affects behaviour and how religious institutions function economically.

Religious rules and finance

Some religious traditions have rules about money:

Islamic finance follows principles that prohibit charging or paying interest, called riba, and require risk-sharing. Islamic banks use contracts based on profit-sharing, leasing and cost-plus sales instead of interest-bearing loans. Islamic finance assets have grown to several trillion dollars worldwide.
Historically, Christian and other traditions also restricted lending at interest, called usury.

Charitable giving

Many religions encourage giving: zakat in Islam, tithes in some Christian traditions, daan in Hindu and other Indian traditions, and dasvandh in Sikhism, where followers are encouraged to give a tenth of their income. Religious institutions run schools, hospitals and food programmes. Sikh gurdwaras’ langar, free community kitchens, serve free meals to anyone, with the Golden Temple in Amritsar serving very large numbers of people daily.

Religious institutions as economic actors

Temples, churches, mosques and gurdwaras own property, employ people, receive donations and run services. Some Indian temples, such as Tirupati, receive very large donations and are major economic institutions in their regions.

Pilgrimage and tourism

Pilgrimages create large economic activity. Religious tourism in India, to places like Varanasi, Vaishno Devi and Tirupati, supports hotels, transport and local businesses.

Research on religion’s effects

Economists have studied links between religion and education, health, trust, saving and work. Findings are mixed and depend on context. Religious participation can provide social support and insurance through community networks.

Langar at the gurdwara

At a gurdwara, volunteers cook and serve free meals to anyone who comes, regardless of religion, caste or wealth. Ingredients are donated and labour is voluntary. The langar provides food security for many people at very low cost, showing how religious institutions can deliver large-scale social services.

Thinking religion and economics are separate worlds

Religious beliefs and institutions influence saving, giving, finance, education and social support. They are an important part of many economies.

Key takeaways

Religious rules shape economic behaviour, such as Islamic finance's ban on interest.
Many religions encourage charitable giving, and institutions run schools, hospitals and kitchens.
Temples and other institutions are significant economic actors.
Pilgrimages and religious tourism create large economic activity.