The Interest-free Financial System

Paul S. Mills and John R. Presley
Additional contact information
Paul S. Mills: HM Treasury
John R. Presley: University of Loughborough

Chapter 3 in Islamic Finance: Theory and Practice, 1999, pp 15-33 from Palgrave Macmillan

Abstract: Abstract The devout Muslim with disposable wealth has always faced a dilemma. Qu’ranic opposition to interest is clear, but so too is the condemnation of hoarding and wasteful consumption. The impasse is that of having wealth to save, but few legitimate financial instruments with which to do so. Suspicion of conventional banks, and a dearth of alternative savings outlets, resulted in hoards estimated to be of the order of $80 billion in Muslim countries in the early 1980s (Wöhlers-Scharf, 1983, p. 76). The problem is to devise financial intermediaries that operate without resorting to interest but which still yield a return to depositors, for: if a banking structure could be evolved in which the return for the use of financial resources would fluctuate according to actual profits made from such use, the resulting system would be in conformity with Islamic rules and guidelines. (M. S. Khan and Mirakhor, 1987a, p. x) The achievement of Islamic economists and bankers has been the conception and implementation of such a structure.

Keywords: Monetary Policy; Moral Hazard; Agency Cost; Islamic Bank; Debt Contract (search for similar items in EconPapers)
Date: 1999
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-28847-8_3

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230288478

DOI: 10.1057/9780230288478_3

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().