Islamic finance revisited: conceptual and analytical issues from the perspective of conventional economics

Ajit Singh and Andrew Sheng

MPRA Paper from University Library of Munich, Germany

Abstract: After a brief recent empirical sketch of Islamic finance, the paper turns to its main theoretical and conceptual purpose. It seeks to relate the concepts of Islamic and conventional finance, and to examine certain important questions which arise from the interaction between these systems. The paper is written from the perspective of conventional modern economics, as the authors are students of the latter. The paper discusses the main tenets of Islamic finance, as well as those of modern economics, including the implications of zero interest rates and those of Modigliani and Miller theorems. The most notable finding of this paper is that John Maynard Keynes’ analysis of employment, interest and money provides, inadvertently, the best rationale for some of the basic precepts of Islamic finance. The paper concludes that there is no inevitable conflict between the two systems and cooperation between them is eminently desirable and feasible.

Keywords: Islamic Finance; Moral Hazard; Keynes; Zero Interest Rates; Usuary (search for similar items in EconPapers)
JEL-codes: A13 B41 E40 (search for similar items in EconPapers)
Date: 2011-11-14, Revised 2012-04-10
New Economics Papers: this item is included in nep-ara, nep-cwa, nep-hpe and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Cambridge University CBR Working Paper Working Paper 430.2012(2012): pp. 1-35

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Related works:
Working Paper: Islamic Finance Revisited: Conceptual and Analytical Issues from the Perspective of Conventional Economics (2013)
Working Paper: Islamic Finance Revisited: Conceptual and Analytical Issues from the Perspective of Conventional Economics (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39007

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