UNDERSTANDING AND ELIMINATING RIBA: CAN ISLAMIC FINANCIAL INSTRUMENTS BE MEANINGFULLY IMPLEMENTED

Shamim Ahmad Siddiqui ()
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Shamim Ahmad Siddiqui: Head Department of Economic, Unversity of Brunei Darusalam

IBT Journal of Business Studies (JBS), 2005, vol. 1, issue 2, 187-203

Abstract: Elimination of Riba has been one of the most important issue in Islamic Banking and Finance.BankInterest is almost unanimously regarded as Riba, However, all so called Islamic banks and other Islamic Financial Institutions have largely used debtlike Islamic Modes of Finance to replace interest.This situation has created confusion among general Muslims, Ulema, theorists and pactitioners.This paper attempts to clarify some of the issues and asserts that only a profit and loss sharing Islamic Banking can Remove the negative effects of interest and provide the real benefit of Islamic System.The paper then discusses the problem associated with a Profit and loss sharing banking with special refence to the agency problem mudarabah highlighted by Bacha.Finally, Some suggestions are provided for a geniune movement of establish a Profit and loss sharing Islamic banking.

Keywords: Riba; Mudarabah; musharakah; bai muajjal; gharar; mysir (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:aib:ibtjbs:v:1:y:2005:i:2:p:187-203

DOI: 10.46745/ilma.ibtjbs.2005.12.5

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