Can Islamic Banking Survive? A Micro-Evolutionary Perspective

Mahmoud El-Gamal

Working papers from Wisconsin Madison - Social Systems

Abstract: Islamic banking is a growing phenomenon which came into existence to satisfy the financial needs of devout Muslims who observe the prohibition of interest-based transactions. Many economists have studied the macroeconomic properties of this institution in the framework of an isolated and ideal Islamic economy. In this age of integrated global financial markets, the instantaneous transformation of an entire financial sector to profit-and-loss sharing is very unlikely. I present an evolutionary game-theoretic model in which devout Muslims, regular interest- based banks, and "weak" (hybrid) muslims/banks interact. The third type of agents is intended to represent the behavior of current Islamic banking, which is commonly criticized for mimicking interest-based systems. It is shown in this model that a critical initial mass of the "weak" types is necessary for the survival of the devout agents in a heterogeneous environment. Moreover, it is shown that the survival of the devout agents is predicated on the islamically-"weak" agents acting among themselves in an Islamic way.

Keywords: BANKING (search for similar items in EconPapers)
JEL-codes: G20 P51 (search for similar items in EconPapers)
Pages: 16 pages
Date: 1997
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.ssc.wisc.edu/econ/archive/wp9705.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ssc.wisc.edu/econ/archive/wp9705.pdf [301 Moved Permanently]--> https://www.ssc.wisc.edu/econ/archive/wp9705.pdf [301 Moved Permanently]--> http://econ.wisc.edu//archive/wp9705.pdf [301 Moved Permanently]--> https://econ.wisc.edu:443//archive/wp9705.pdf [301 Moved Permanently]--> https://econ.wisc.edu/archive/wp9705.pdf)

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:att:wimass:9705

Access Statistics for this paper

More papers in Working papers from Wisconsin Madison - Social Systems UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A..
Bibliographic data for series maintained by Ailsenne Sumwalt ().