Islamic banking at the crossroads: theory versus practice

Zubair Hasan

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the reasons for a widening gap between the conventional theory and current practice of Islamic banks. It finds fault at both the ends. ’No risk, no gain’ is inadequate as a general principle for organizing Islamic finance. It is also not always valid to say that Islam is averse to granting of a time value for money. The overuse of deferred contracts in Islamic finance threatens to violate the juristic principle of sadd al-dhara’i i.e. controlling the potential avenues for circumvention of the law. Some structural changes in Islamic financial arrangements are suggested to create a balance in the use of PLS and deferred contracts in Islamic banking.

Keywords: Islamic; banking; theory; Malaysia (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (31)

Published in Rodney Wilson and Munawar Iqbal (Ed.): Islamic perspectives on wealth creation, Edinbourgh University Press, UK (2005): pp. 11-25

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/2821/1/MPRA_paper_2821.pdf original version (application/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:pra:mprapa:2821

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().