Synopses & Reviews
This book reviews the Islamic opposition to interest and assesses the feasibility of a non-interest financial system in the light of current economic theory. The Islamic critique of interest is set against a discussion of the methodology of Islamic economics and the opposition to interest within the Judeo-Christian tradition. The range of Islamic non-interest financial contracts is then detailed along with a review of the performance of Islamic banks to date; a model of the allocation of finance within a non-interest system is then presented. Assessment of the issues raised is made within the context of economic literature concerning debt versus equity finance; this includes an examination of banking instability and the business cycle, the determinants of levels of saving and the implications for public finance. The conclusions outline the advantages and disadvantages of a theoretical case for the prohibition of interest, and draws practical lessons for contemporary Western economies.
Synopsis
Given the propensity of the world financial system to crisis, this book explores the radical alternative put forward by Islamic (and Western) theories of non-interest banking. The Islamic critique of interest and early experiments with non-interest banking are assessed against the conventional theories regarding banking, company finance and macroeconomic stability. Whilst the experience of Islamic banking has proved inconclusive thus far, the theoretical model provides a cogent alternative to a financial system made fragile by debt contracts.
Description
Includes bibliographical references (p. 142-164) and index.
About the Author
Paul S. Mills is an Economist and is Manager at UK Debt Management Office at the HM Treasury.
John R. Presley is Professor of Economics at Loughborough University and Chief Economic Advisor at Saudi British Bank.
Table of Contents
Islamic Economics and Banking: The Background * The Islamic Critique of Interest * The Interest-Free Financial System * Modeling Profit and Loss Sharing * Non-Interest Banking in Practice * Non-Interest Finance and Macroeconomic Stability * Key Issues in the Islamic Financial System * The Prohibition of Interest in Western Literature * Conclusions